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Millennium Ruling ‘Instructive’ for Constitution, Says Williams

As it moves forward with plans to complete the Atlantic Sunrise expansion by next year, which would bring some relief to the still-constrained Appalachian Basin, management at Williams and the pipeline partnership have renewed hope for the embattled Constitution Pipeline.

"We were very encouraged by the DC Circuit ruling” regarding Millennium Pipeline Co. LLC, CEO Alan Armstrong said during a conference call Thursday to discuss 2Q2017 results. The U.S. Court of Appeals for the DC Circuit ruled that the New York Department of Environmental Conservation “had waived its right and they should go to FERC for their permit.

“That was very instructive, I would say, relative to Constitution. And so we're excited about that and continue to work with the staff in the White House to move things along, because we think they have the rights to move things along on that project...We continue to push on that. Nothing moves very fast on that front, but we continue to be encouraged by what we're seeing there."

Constitution has been awaiting a decision from the U.S. Court of Appeals for the Second Circuit, management for Cabot Oil & Gas Corp., which has reserved 500 MMcf/d on the project, said recently.

If Constitution, a joint venture that would deliver an additional 650 MMcf/d of Pennsylvania natural gas into New England, were to receive a favorable court decision and move past New York state's rejection of its water quality permits, the project could see a 2019 in-service date, Williams management said.

As for Atlantic Sunrise, an expansion designed to deliver an additional 1.7 Bcf/d of Northeast Pennsylvania production south on Williams' Transcontinental Gas Pipe Line (Transco), management expects to begin offering mainline service by next month. Construction has been underway on reversals at existing compressor stations on the Transco mainline as well as a brownfield compressor addition.

Tulsa-based Williams expects to secure the remaining regulatory approvals and begin construction on the greenfield portion of the project this fall, including the proposed Central Penn Line and compression in Pennsylvania. That would put Atlantic Sunrise on schedule to offer service to northeastern Pennsylvania producer customers including Cabot by mid-2018.

The mainline service coming online this fall will "not get us capacity all the way back into the northeast Pennsylvania basin," COO Michael Dunn said. "What we would anticipate, once we get the Central Penn Line completed, and that would be about two months ahead of the greenfield compression, we will have two months there of about 1.2 Bcf/d of capacity that would come out of the basin there. That would certainly create an outlet for our customers."

Once the greenfield compression comes online, the project could grow to the full 1.7 Bcf/d designed capacity, Dunn said. "Assuming that we get a construction start date this fall, we think it's about a 10-month construction for the entire project. Optimistically we could get the pipelines in service a few months before that."

Dunn said Atlantic Sunrise still needs a permit from the U.S. Army Corps of Engineers and two from the Pennsylvania Department of Environmental Protection (DEP).

"All of these are water-related permits, we've finished all the public comment periods and we do expect these permits to be in hand in August. That would allow us to start construction shortly thereafter" once the Federal Energy Regulatory Commission issues a notice to proceed, Dunn said.

Regarding the performance of Williams’ Northeast gathering and processing assets during the quarter, Armstrong said, "Infrastructure constraints continue to limit the Northeast volume growth. Certainly, we're anxious to see a lot of these big projects come on, because we really think that's going to unlock a tremendous amount of growth.

"We've seen some pretty soft pricing" in the Appalachian Basin since the end of June, "and certainly that could have an impact and cap the growth in our volumes here in the short-term."

Aside from Atlantic Sunrise, Williams has been busy adding to its Transco system in 2017, bringing the Dalton, Gulf Trace and Hillabee Phase 1 expansions online to date.

"We continue to deliver on project execution as planned for 2017," Armstrong said. The line of sight to future growth “is evident as well as we are targeting second-half 2017 in-service dates for three more fully-contracted growth projects, including Virginia Southside II, New York Bay and Garden State Phase 1."

Williams reported a net income of $81 million (10 cents/share) for the quarter, versus a net loss of $405 million (minus 54 cents) in the year-ago period. Williams Partners reported net income of $320 million (33 cents/unit), versus a year-ago net loss of $90 million (minus 49 cents).

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