PennEast Pipeline to Be Built in Two Phases, Announces Developer

As if there wasn't enough news on PennEast Pipeline lately, the company announced January 30 it is filing an amendment with FERC to construct the project in two phases. (Docket CP20-47)

The developer will build Phase One entirely in Pennsylvania and it would consist of a 68-mile stretch of 36-inch diameter pipe which would be placed in service in November 2021.

Phase Two would consist of the remainder of the project in Pennsylvania and the entirety of the New Jersey portion of the 118-mile project. That phase's targeted completion would be in 2023.

"Today's announcement is a big step forward for families and businesses in eastern Pennsylvania and the Greater Philadelphia region who will finally benefit from greater access to low-cost natural gas, by separating the certificated PennEast route into two phases," said Anthony Cox, chair of the PennEast Pipeline Company Board of Managers, in a press release.

"In the years since the initial announcement of the Project, demand for natural gas has continued to grow, yet the benefits of new job creation, economic development, air quality, and lower energy bills have been denied to all customers by short-sighted political interests," continued Cox. "Building the project in phases allows PennEast to meet the clear public need in the short term in Pennsylvania, and in the long term in New Jersey by affording sufficient time for permit and legal issues to be resolved."

The developer stated "robust interest from shippers" prompted the FERC filing as capacity will be upsized in Phase One, fingers crossed. "Precedent agreements for 338,000 Dth/d were filed as part of Phase One and additional precedent agreement negotiations are underway for a total capacity in Phase One of approximately 600,000 Dth/d. The initial 1,107,000 Dth/d that was filed at FERC for the full project remains unchanged."

New delivery points

The new plan will also change delivery points. "Under the phased approach, PennEast will have within Pennsylvania three delivery points: UGI Utilities, Inc. (to serve the Blue Mountain Ski Resort) and new interconnections with Columbia Gas and Adelphia Gateway to serve the growing demand in the southeast region."

The company added, "There are no new private property owners impacted by Phase One of the PennEast project, which would terminate in Bethlehem Township, Northampton County. The new interconnections, which will be located south of Route 22 and west of Route 33, will be constructed on property already owned by PennEast Pipeline Company LLC."

Tangled history

Although PennEast received its FERC certificate in 2018, it's been bottled up by regulators in New Jersey, where the pipeline will terminate. After delays in receiving state permits, the latest holdup has been New Jersey's unwillingness to accede to eminent domain proceedings on land for the route that is held by state conservation easements. The case could be taken up by the US Supreme Court and has been the source of many court briefings in the last two weeks (see articles).

Cox stated further, "Federal regulators determined in 2018 after years of expert reviews that the full PennEast Pipeline Project was in the public need and benefit, including three federal agencies and the Pennsylvania Department of Environmental Protection, which concluded it was also safe for the environment. Today's action again proves the PennEast partners are fully committed to the entire project and meeting the needs of its customers for safe, clean, reliable and affordable energy."

Businesses and labor hailed the two-phase approach. "Pennsylvania families and businesses shouldn't be pawns in a political game played in another state," said Gene Barr, president & CEO of the Pennsylvania Chamber of Business and Industry, referring to the New Jersey situation. "With key approvals at the federal and state level already, a phased approach for PennEast would allow Pennsylvania businesses to finally lower their energy costs, reduce carbon emissions and continue adding to their competitive advantage over nearby states like New Jersey. Pennsylvania's business community urges swift approval by the Commission for this phased construction plan."

Pennsylvania Manufacturers' Association CEO David Taylor remarked, "The continued build-out of energy infrastructure across the commonwealth is the most important step in benefiting industrial, commercial, and residential consumers with affordable, abundant, and clean-burning Pennsylvania natural gas.

Labor cheered the plan as well for the jobs the project will create. "Pipelines are lifelines," stated Dennis Martire, vice president and Mid-Atlantic Regional Manager of the Laborers' International Union of North America (LIUNA). "Right now, local Pennsylvania residents do not have access to these family-supporting energy jobs on PennEast, despite the fact that clean, affordable natural gas is the pathway to a renewable future. If completing the project in phases will allow hard-working Pennsylvanians to start accessing these jobs, then that's the path we need to take."

The $1.3-billion project is a joint project of AGL Resources, NJR Pipeline Company, a subsidiary of New Jersey Resources, South Jersey Industries, Spectra Energy Partners and UGI Energy Services, a subsidiary of UGI Corporation.

Reprinted from PointLogic News. For more natural gas news from IHS Markit, visit the PointLogic website.

Annalisa Kraft is a senior marketes reporter at IHS Markit.

Posted 17 February 2020.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.