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Marcellus Gas Could Battle Polar Vortex Via Transco Expansion, Study Says

Natural gas consumers served by Transcontinental Gas Pipeline Co. LLC (Transco) in the Southeast and Mid-Atlantic could have saved $2.6 billion from 2012 to 2014 if the pipeline's proposed Atlantic Sunrise project had been in service, according to researchers at The Pennsylvania State University.

Atlantic Sunrise would have given consumers access to lower-priced natural gas from Pennsylvania, said Andrew Kleit, Penn State professor of energy and environmental economics and the study's lead author.

"...[M]ore than 60% of the estimated benefits of Atlantic Sunrise in our period of study would have accrued in January 2014 alone because of the high level of gas demand associated with the polar vortex in that month," Kleit and his fellow researchers wrote. "This finding in particular needs to be projected forward with care. Consumer benefits during the wintertime will generally be higher than in other seasons because of increased heating demand, but we estimate that these benefits would be roughly six to 20 times larger during very cold winters than during normal winters."

Back in the polar vortex days of January 2014, gas markets served by Transco saw their share of the action. "...[G]as on Transco Zone 6 New York rocketed $104.73 to $121.68, easily surpassing the old NGI record of $88.00 set on Jan. 6," NGI reported on Jan. 21, 2014 (see Daily GPI, Jan. 21, 2014). "Other records were also posted on Transco Zone 6 non-NY and Transco Zone 5.  Transco Zone 6 non-NY changed hands at $121.22, up $110.50, well beyond the $95.00 seen by NGI on Jan. 6, and Wednesday deliveries on Transco Zone 5 jumped $109.55 to average $119.84, also above the Jan. 6 record of $99.00."

Besides the variability of Atlantic Sunrise's impact depending upon the severity of winter, geography also plays a role in how much consumers would benefit from Atlantic Sunrise, the study found.

"Consumers from Alabama to Virginia would be the recipients of additional Marcellus gas flowing south due to Atlantic Sunrise, and would nearly always benefit from the pipeline expansion project," the report said. "Because of the location of the constraints on the Transco system, we estimate that Virginia-North Carolina-South Carolina customers would benefit nearly three times as much as Alabama-Georgia customers. Pennsylvania-New Jersey-Maryland customers exhibit the highest benefits overall (across our 30-month estimation period), but will also be harmed during certain periods when exports from this region to Virginia cause prices north of Virginia to increase. These price increases, however, are far smaller than the price decreases that would occur due to Atlantic Sunrise during severe winter periods."

Atlantic Sunrise would provide service from various points along Transco's Leidy Line and from northern Susquehanna County, PA, to as far south as Transco's Zone 4 and 4A Pools at Station 85 in Choctaw County, AL. The gas carried would serve demand centers on the Atlantic Seaboard. The project would include incremental mainline facilities and a "substantial greenfield pipeline," referred to as the Central Penn Line. Firm service is expected to be available during the second half of 2017. In February 2014, Transco said it has binding commitments from nine shippers for 100% of 1.7 million Dth/d of firm capacity on the pipeline (see Shale Daily, Feb. 20, 2014).

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