WGL Holdings Inc. subsidiary Washington Gas has agreed to buy 22 producing natural gas wells and reserves in Pennsylvania for $126 million from privately-owned Energy Corporation of America (ECA).

Washington Gas said the deal secures a long-term supply of natural gas for the customers it serves in Virginia. The assets are located in Greene County in southwest Pennsylvania and Clearfield County in the central part of the state.

WGL said it would file the proposal with the Virginia State Corporation, which needs to approve the deal before it can close. Washington gas serves more than one million utility customers in Washington D.C., Maryland and Virginia.

"This opportunity to invest directly in low-cost natural gas supplies will help gas price volatility impacts and provide expected savings to our Virginia customers," said WGL CEO Terry McCallister.

The company's agreement with ECA is the first announced under a Virginia law passed last year aimed at reducing customer costs, price volatility and supply risks by allowing natural gas utilities to recover investments in natural gas fields and  facilities (see Shale Daily, April 4, 2014).

The law encouraged the state’s utilities to embrace shale gas. It’s designed to encourage utilities to build pipelines and other infrastructure in order to bring shale and coalbed methane gas into the state’s markets, preferably under long-term arrangements to help reduce supply costs.

WGL has taken an interest in Appalachian pipeline projects, including a 7% ownership stake in EQT Corp and NextEra Energy Inc.’s Mountain Valley Pipeline, which will help move Marcellus and Utica shale gas to the Southeast (see Shale Daily, June 12, 2014).

ECA, which has Marcellus acreage in Pennsylvania and West Virginia, would continue to operate the wells. If approved, WGL would have access to the supplies for 20 years.