NiSource Gas Transmission & Storage (NGT&S) is in the latter stages of developing a 90-mile pipeline in western Pennsylvania to support increased Marcellus Shale natural gas production, NiSource Inc. officials said Wednesday.

The $145 million Pennsylvania Marcellus Pipeline Project project is expected to have initial capacity of about 300,000 Dth/d with interconnects to multiple interstate pipelines when it is placed in service late this year, CEO Bob Skaggs said during a conference call with analysts Wednesday.

An anchor service agreement is expected with "a major Marcellus shale producer" by the end of the first quarter and work on the project has already begun, Skaggs said. The Merrillville, IN-based company did not disclose the prospective anchor customer or exactly where the pipeline would be constructed.

"We still see robust activity [in the Marcellus and Utica shales]...we continue to see quite a bit of demand," Skaggs said. "The announcement we're representative of the kind of demand we're seeing: it's in the wet region, it's gathering, it's processing and, as this project reflects, providing interconnections to as many outlets as possible, that's the kind of activity we're seeing."

The project is part of NiSource's $1.4 billion 2012 capital program. NiSource plans to spend $430 million within its NGT&S unit this year, a 43% increase compared with 2011. "More than half of the program will be targeted at value-adding growth opportunities in and around the shale plays," Skaggs said.

NGT&S is considering the possibility of a long-term system modernization program "designed to enhance the reliability and flexibility of its infrastructure; respond to changing supply and market dynamics; and comply with developing pipeline safety and integrity requirements," NiSource said. The multi-billion dollar program, which is in the early stages of development, would also support ongoing rate base and earnings growth.

NiSource reported net operating earnings of $91.2 million (32 cents/share) in 4Q2011, compared with $93.6 million (33 cents) in 4Q2010. Earnings for full-year 2011 were $377.8 million ($1.35/share), compared with $338.2 million ($1.22) in 2010. NiSource announced 2012 net operating earnings guidance of $1.40-1.50/share.

NGT&S reported operating earnings of $89 million in 4Q2011, compared with $99.9 million in 4Q2010. NiSource Gas Distribution reported operating earnings of $144.9 million for 4Q2011, compared with $112.9 million in 4Q2010.