The Constitution Pipeline, whose 30-inch diameter natural gas pipe would traverse close to 125 miles from Pennsylvania into New York, is being delayed not by federal regulators but by the New York Department of Conservation (DEC), Williams CEO Alan Armstrong said Thursday.

The Federal Energy Regulatory Commission (FERC) earlier this month issued a draft environmental impact statement (EIS) for Constitution and the associated Wright Interconnect Project (see Shale Daily, Feb. 13). Some adverse environmental impacts could be mitigated, the Commission said. The projects together are designed to carry up to 650,000 Dth/d to the Iroquois and Tennessee Gas Pipeline systems for eventual delivery to markets in New York and New England.

“The only real issue we are facing right now is a regulatory issue that relates to the New York DEC, not FERC,” Armstrong told analysts during a conference call. None of the other proposed ventures between Williams and partners are facing such delays.

“On the FERC side, they are continuing to push it through, with the Constitution draft EIS…They are doing their part to accelerate it…We have to have discussions with New York [regulators] to find the right answers and the right solutions there as well.”

To the contrary, the delay is not related to landowner protests, Armstrong assured analysts. However, the DEC remains concerned about mitigation issues and other aspects of the project. Eventually, those concerns should be allayed, he added.

Constitution is the only proposal in the Northeast today that would require a significant amount of newbuild pipe. Williams Partners LP, Cabot Oil & Gas Corp., Piedmont Natural Gas Co. and WGL Holdings are partners (see Shale Daily, June 3, 2013).

Takeaway capacity already is fully subscribed, Armstrong noted. Two years ago Cabot agreed to ship 500,000 Dth/d and Southwestern Energy Services Co. has taken 150,000 Dth/d (see Shale Daily, April 27, 2012).

If all of the approvals are received as expected, Constitution and the Wright projects could begin service by March 2015, said the CEO.

Meanwhile, the prospective Bluegrass Pipeline project, launched last year to carry natural gas liquids (NGL) from Appalachia to Gulf Coast markets, is being delayed to mid-2016 to better align with producer interests, Armstrong said.

It’s not a signal that the project isn’t viable, he assured investors. In fact, far from it.

Bluegrass, launched last October with Boardwalk Pipeline Partners LP, would carry 200,000 b/d of mixed NGL capacity from Ohio, West Virginia and Pennsylvania (see Shale Daily, Nov. 1, 2013). Sponsors also are offering a liquefied petroleum gas export terminal near Lake Charles, LA, that offers export and petrochemical options.

It will take “chronic constraints to bring adequate shipper support” for Bluegrass, said Armstrong. “Consider that, as an example, it takes more than $400 million in annual revenue and strong credit support to underwrite a project of this size. The market is recognizing that it’s going to have to invest and support these kinds of projects.”

Williams Pipeline’s Atlantic Sunrise project, which would carry gas to to the Eastern Seaboard markets, has received binding commitments for 100% of 1.7 million Dth/d of firm transportation capacity (see related story).

“Atlantic Sunrise is one of the first major investments to connect supplies with demand,” said Armstrong. Bluegrass is “on the backs of three smaller projects, but it’s a…very large-scale project. We certainly believe Bluegrass will be the next chapter in how this story plays out in the NGL segment of the market. As supplies become more evident, customers will look for more solutions.”

The delay in Bluegrass is designed to “better align with the needs of producers..We continue to see tremendous appetite for additional firm natural gas transportation capacity from a range of industry participants…”

Several smaller projects now are competing with Bluegrass for customers (see Shale Daily, Nov. 11, 2013). Rumors have circulated that Bluegrass will prove a no-go, but that’s far from the truth, said the CEO.

“As to the smaller projects, I think those are great projects,” said Armstrong. “They are needed. But they don’t provide the kind of long-term underground storage opportunities from the Gulf Coast or diversity of markets. There is a growing petrochemical business, export opportunities, that are large-scale in nature” now proposed for the Gulf Coast region. I think we’re excited that other projects exist, but I think the growth in volumes will be dictating those kinds of solutions. We haven’t seen as big a deterrent to committing to Bluegrass.”

Boardwalk’s participation has been in question after it recently cut its quarterly distribution by 81% following a disappointing quarterly performance (see Shale Daily, Feb. 11). General partner Loews Corp. “stands behind the capital commitment,” said Armstrong. “You need not worry about the recent distribution cut or the impact on the company…We don’t see any issues there because of the strong backing from Loews…”

As to the timing of Bluegrass, the monumental commitments by producers, requiring 15-year contracts, are a bit tough to absorb at this point.

“If look at what it costs for a producer to make the kind of commitment…it has to be someone that has 30-70 barrels a day of commitment on 30 cents a gallon to pay for transportation, fractionation,” said Armstrong. “That piles up for 15 years. That’s a very, very large commitment…If you do the math, I really think that’s the practical issue we’re dealing with. We have very engaged customers,” including interest from international players interested in the petrochemical opportunities the takeaway would provide. “We see this as an opportunity…that’s an essential piece of infrastructure.”