Federal regulators have sided with Williams (WMB) in a dispute with Energy Transfer (ET) over authority for the Louisiana Energy Gateway (LEG) project, breaking a logjam that had stalled a key pipeline to meet new LNG export demand.
On September 27, the Federal Energy Regulatory Commission (FERC) determined that LEG is an intrastate system and not subject to federal jurisdiction under the Natural Gas Act, denying a show cause petition filed by Energy Transfer. The company had argued the Haynesville egress pipe should be regulated by FERC as an interstate transmission line, rather than as a gathering extension as claimed by WMB.
The FERC decision is another win for Williams in its dispute with ET over the LEG project. In June, Louisiana district courts ruled for WMB over LEG rights-of-way that cross ET’s pipelines in the state.
With these major regulatory fights out of the way, the risk significantly declines of capacity constraints out of the Haynesville in 2025. In the Southeast Gulf Supply & Demand Forecast, East Daley Analytics currently sees about 6.1 Bcf/d on average (~86% utilization) flowing from the Haynesville to the Louisiana Gulf Coast through June ’25, when egress capacity tightens briefly as Haynesville supply ramps to meet incremental LNG demand from Plaquemines LNG. We have delayed the in-service for Golden Pass LNG Train 1 until January ’26 following the recent bankruptcy of contractor Zachary Holdings, so any potential Haynesville egress constraint will be independent of Golden Pass LNG demand.
Along with LEG, Momentum Midstream’s New Generation Gas Gathering (NG3) project was challenged by ET over pipeline crossings, but ET and Momentum settled that dispute in June ’24. Assuming LEG and NG3 come online in July ’25, the region should have sufficient latent capacity to meet incremental LNG demand until late 2027.
But to meet demand after 2027, developers will need to reach a final investment decision (FID) on other projects (see figure). NG3, DT Midstream’s (DTM) LEAP, and ET’s Gulf Run Pipeline have announced potential expansions that could ease constraints on this route, in excess of 5 Bcf/d across all three pipes.
If either LEG or NG3 are delayed past 2H25, expect to see NGPL-TXOK prices weaken significantly until new capacity opens up. In 2027, EDA sees NGPL-TXOK basis at risk of trading at a significant discount (-$0.90/MMBtu) until additional pipeline capacity comes online connecting Haynesville production to LNG export demand. See our Southeast Gulf Supply & Demand Report for basis forecasts and more information. – Oren Pilant Tickers: DTM, ET, WMB.
NEW Webinar – The Volatility Super-Cycle: How Natural Gas Will Behave Over Next 18 Months
Join East Daley and IIR Energy for our latest natural gas webinar on October 10th at 10 am MT. In “The Volatility Super-Cycle: How Natural Gas Will Behave Over Next 18 Months,” we will look at the causes for gas volatility:
- Where US operators are cutting production and which regions are declining the most.
- Growth in LNG exports and power generation demand
- Gain insights into the outlook for 4Q24 and beyond.
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