Williams (WMB) has started service on Phase 2 of the Regional Energy Access (REA) pipeline expansion in the Mid-Atlantic despite a US appeals court vacating permits for the project.
On August 2, WMB’s Transcontinental Gas Pipe Line (Transco) filed notice with the Federal Energy Regulatory Commission (FERC) that it had started service on facilities built as part of the REA expansion. The move follows approval by FERC on July 26 for Transco to start the new project. REA Phase 2 adds 379 MMcf/d of capacity from the Leidy storage hub to serve customers in Pennsylvania, New Jersey and Maryland.
The in-service came just days after the US Court of Appeals for the District of Columbia vacated permits issued by FERC for the REA expansion, on the grounds that FERC did not adequately address market studies showing the project isn’t needed. The agency also failed to consider state laws targeting lower future natural gas consumption when it certificated the project, the appellate court ruled.
On the company’s 2Q24 earnings call, Williams executives expressed confidence that Transco could obtain temporary approval from FERC to keep the new facilities in service. WMB also believes it can successfully litigate the decision by the appeals court.
East Daley includes the REA projects in the Northeast Supply & Demand Forecast. Transco placed Phase 1 of the REA expansion in service in October ’23. The latest Phase 2 work includes a new electric-driven compressor in Gloucester, NJ (Station 201); modifications to Compressor Station 505 in Somerset County, NJ; plus several new metering stations on the Transco system.
When WMB started REA Phase 1 last October, pipeline samples showed flows on Transco's Leidy line jumped immediately to fill the new capacity. The effects of REA Phase 2 have been more muted, likely due to lower seasonal demand in the Northeast (see figure).
The value of the REA project will come into focus this winter when heating demand is in full swing. Winter weather in the Northeast creates demand spikes that have exposed bottlenecks in the pipeline network, such as between Transco Zone 6 and the Ledy hub in northern Pennsylvania. In recent winters, Transco Zone 6 has traded at a premium to Leidy-Transco, at times upward of $1.00/MMBtu. The REA expansion adds 829 MMcf/d of total capacity and should narrow the spread between Transco Zone 6 and Leidy spot prices this upcoming winter. – Zach Krause Tickers: WMB.
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