Tallgrass Energy Partners LP said it will launch an open season for an additional 150 MMcf/d of capacity along a recently expanded portion of the Rockies Express Pipeline LLC (REX) system and is considering adding bi-directional capacity elsewhere.

Last month, Tallgrass and REX announced the completion of the 800 MMcf/d Zone 3 Capacity Enhancement Project, and that they were beginning to accept shipper nominations. During a conference call Wednesday to discuss 4Q2016, COO Bill Moler said Tallgrass would launch an open season “in the next month or so” for an additional 150 MMcf/d along the expanded section.

“As REX continues to refine and operate the facilities, we will make available any incremental capacity we have and we believe this 150 MMcf/d represents the vast majority of any expected additional capacity,” Moler said. “To the extent any additional capacity is available above the 150 MMcf/d open season, we will also make it available to the market.”

During the Q&A portion of the call, CEO David Dehaemers explained that REX was designed “for the worst-case scenario in terms of receipt and delivery points,” and that the pipeline “was over-designed by that 150 MMcf/d. We’ve been running tests on the equipment during the month of January and it has proven true that we can move that incremental capacity.”

Moler said the company expects the additional capacity to be available in May. The capacity is in excess of the 2.6 Bcf/d of currently contracted capacity, and will increase the volume by 5.5%. He added that the preceding 800 MMcf/d expansion is sold out for 15 years at an average rate of about 50 cents/Dth.

Later in the call, Dehaemers said Tallgrass would “start re-plumbing Zones 1 and 2,” adding that once the project is completed “there’s a lot of possibilities relative to where the gas originates, where it goes and what the transportation rates might be.”

When asked to clarify Dehaemers’ statement, Tallgrass spokeswoman Phyllis Hammond told NGI on Thursday that the company is “looking at possibly making [the pipeline system] bi-directional on Zones 1 and 2, as in Zone 3, but it’s not anything that we’re working on today.”

NGI‘s REX Zone 3 Tracker for Thursday’s flow date showed the pipeline transporting at 100% of a total 2.65 Bcf/d capacity.

During the quarter, Tallgrass settled a $303 million breach of contract claim with Ultra Resources Inc., which filed for bankruptcy protection last April. The settlement included a commitment by Ultra to sign a seven-year firm transportation agreement for 200,000 Dth/d of west-to-east service on REX. That agreement will begin Dec. 1, 2019 and total about $26.8 million a year.

“This settlement provides clarity for all parties involved and allows us to continue focusing our commercial efforts on signing new contracts on REX,” Moler said. He added that “with two contracts that extend beyond 2019…we now have nearly 40%, or 700 MMcf/d, of west-end volumes pre-contracted at average rates of 67 cents/Dth.”

In a statement Wednesday, Tallgrass said it expects adjusted EBITDA (earnings before interest, tax, depreciation and amortization) to range from $620-680 million in 2017, with distributable cash flow of $570-630 million and distribution coverage of 1.3-1.5 times.

“In addition, we continue to expect about 20% in distribution growth for 2017 at Tallgrass,” CFO Gary Brauchle said during the earnings call. He added that at Tallgrass Energy GP LP (TEGP), “we expect Class A distribution growth in excess of 30%, potentially even in excess of 40% depending on several factors.

“Any cash flow received by Tallgrass Equity, it is not distributed, would likely be used to reduce the borrowings on Tallgrass Equities’ revolving line of credit, and we have about $146 million drawn today on that revolver.”

The board of directors at Tallgrass’ general partner declared a quarterly cash distribution of 81.5 cents/common unit in 4Q2016. Meanwhile, the board of TEGP’s general partner declared a quarterly cash distribution of 27.75 cents per Class A share in the fourth quarter.

The 1,712-mile REX pipeline, consisting of 42-inch and 36-inch pipe, stretches from the Rockies to Ohio. Since adjusting to offer east-to-west flows through its Zone 3 segment, the pipeline — originally conceived for west-to-east transmission — has become an important takeaway route for constrained Appalachian Basin producers.

Tallgrass and its affiliates own a 75% stake in REX, and a subsidiary of Phillips 66 owns the remaining 25%.