Marcellus Natural Gas Pipeline Projects to Primarily Benefit New York and New Jersey

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Multiple pipeline expansion projects are expected to begin service this winter to increase natural gas takeaway capacity from the Appalachian Basin's Marcellus Shale play, where production has increased significantly over the past two years. These new projects are largely focused on transporting gas to the New York/New Jersey and Mid-Atlantic regions and would have limited benefit for consumers in New England, where price spikes during periods of peak winter demand appear likely to persist.

Expansion projects with expected in-service dates between 2013 and 2015 would add at least 3.5 billion cubic feet per day (Bcf/d) of additional capacity to New York/New Jersey and Mid-Atlantic markets. More than 2.0 Bcf/d of expansions are expected for this winter alone. The largest of these is the 0.78 Bcf/d New York-New Jersey Expansion project on a portion of Spectra Energy's Texas Eastern Transmission Company (TETCO) pipeline from Linden, New Jersey, to Manhattan, New York. On October 17, the Federal Energy Regulatory Agency (FERC) authorized the start of initial service on these expansions.

New England consumers, however, would not significantly benefit from currently planned pipeline expansions until 2016. The Algonquin Gas Transmission (AGT) pipeline, which takes gas from Marcellus and other sources to consumers in New England, has traditionally operated at near-full capacity during periods of peak winter demand. The next planned expansion on AGT is the Algonquin Incremental Market (AIM) project, which would enable the pipeline to flow north an additional 0.42 Bcf/d of gas received at its interconnect with Millennium Pipeline in Ramapo, New York. The target in-service date for the AIM Project is November 1, 2016.

The difference in construction activity for New York and New England markets is reflected in market prices for natural gas (see graph). Monthly forward prices for gas purchased at AGT continue to spike in winter months compared to the nationwide benchmark price for gas purchased at Henry Hub in Erath, Louisiana. By contrast, the forward price at the Transco Zone 6-New York (TZ6-NY) trading hub is similar to the Henry Hub forward price.

In addition to TETCO's New York-New Jersey Expansion project, a number of projects are expected to increase the takeaway capacity of Marcellus gas this winter to consumers in the New York/New Jersey and Mid-Atlantic regions, or were planned for this winter but have experienced delays.  (EIA-DOE)