Thursday, June 20, :06 AM ET Gas pipelines assemble to deliver Northeast from supply woes

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1 Thursday, June 20, :06 AM ET Gas pipelines assemble to deliver Northeast from supply woes By Sean Sullivan Pipeline companies said they are ready to build projects to help increase the flow of natural gas into New England and eastern Canada, but the question is with the earliest of the major projects not due in service until 2016 will they get there in time. A major theme at the LDC Gas Forums Northeast in Boston was that there is a lot of gas in the Marcellus Shale, but choke points in pipeline infrastructure and a decline in LNG imports mean the Northeast still can starve for gas during the winter and other peak periods. Gas buyers on a June 12 panel said they were concerned about constraints in the region's infrastructure. "Definitely the big project is the [Spectra Energy Corp's Algonquin Incremental Market project or] AIM project, to alleviate the bottlenecks in the [Algonquin Gas Transmission LLC] pipeline," said Dan Caravetta, senior gas trader for NRG Energy Inc., who manages supply for the company's Northeast assets. "The other New York projects that are going into service are obviously going to find a home for that additional shale gas coming in. But nothing is going to alleviate that Algonquin problem until we get that project to alleviate the bottlenecks from west to east, and that is slated for September So we'll see what happens." Craig Adams, director of gas supply for Calpine Corp., noted that Spectra and Kinder Morgan Inc. projects were giving hope to the lower half of New England. However, he said, "we are arguably one of the largest consumers of natural gas [in northern New England], and we have grave, grave concerns about supply availability capacity availability up there, because, as we all know, the infrastructure on Maritimes and Portland cannot be reversed to move gas from the Boston area north into upper New England and into Atlantic Canada. And that is probably one of two areas in the country where we have some serious concerns about long-term gas supply." We have grave, grave concerns about supply availability. Craig Adams, Calpine Corp. director of gas supply At two project panels the day before, representatives of pipeline companies with systems in the region covered their plans to bring relief to New England. "On a peak day, when Algonquin is hitting $30 plus [per MMBtu], it is not only the most expensive market in the United States, it is the most expensive market in the world, and it's very close to some of the least expensive supplies in the world," said Greg Crisp, Spectra Energy's director of Northeast business development. "So there's an obvious solution to that, and that is the infrastructure needs to be expanded back to where the supply is plentiful." "The good thing is we have a project for that, and that's called the AIM project," Crisp said. "The binding precedent agreements we have are sufficient to move forward with the project. The question is just how big will it be." Crisp said current agreements would allow the approximately $1 billion project to boost capacity by about 300,000 to 350,000 Dth/d, but the customers are mostly LDCs, and Spectra has begun a supplemental open season ending June 25 in an attempt to get more power generators to sign up for firm transportation. Source: SNL Financial Page 1 of 5

2 "We have had interest from those guys but we haven't been able to reach agreement," Crisp said. Spectra hopes to get commitments up to a more economic volume, which he said is "400,000 to 450,000 a day." Observing that the AIM project is an expansion of the current Algonquin system between New York City and Boston and not a greenfield pipeline, Crisp said "this appears to be the quickest solution in the market right now." Crisp said Spectra Energy has about $4 billion of infrastructure investment opportunities in the Northeast from 2013 to These include AIM; the $1.2 billion New Jersey-New York expansion due to be in service in November; the TEAM 2014 project due in the second half of 2014; the OPEN project due in the second half of 2015; and the NEXUS project due sometime between late 2016 and Ryan Savage, vice president and general manager of Williams Cos. Inc.'s gathering and processing business in Pennsylvania and New York, said gas demand in the U.S. is growing, but Marcellus gas producers will need infrastructure to sustain markets and economics. He said the Constitution pipeline project is an important part of the solution. Constitution a limited liability company owned by subsidiaries of Williams Source: SNL Financial Page 2 of 5

3 Partners LP, Cabot Oil & Gas Corp., Piedmont Natural Gas Co. Inc., and WGL Holdings Inc. applied to FERC for a certificate to build the 122- mile pipeline on June 13. Iroquois Gas Transmission System LP applied for a connected project the Wright interconnect project, or WIP on the same day. Iroquois Director of Business Development and Transportation Services Todd White mentioned the WIP project. He also talked about the Iroquois Southto-North project and the Iroquois Zone 2 expansion. The SoNo project would reverse traditional flow on the Iroquois pipeline and take gas from interconnects with the Algonquin, Constitution and Dominion Transmission Inc. pipelines Source: SNL Financial Page 3 of 5

4 north to Canada, taking advantage of changes in gas flow dynamics brought about by Marcellus production and changes in the Canadian markets. The Zone 2 project would use additions of compression to bring gas from the new supply points from the Marcellus to markets in Connecticut, Long Island and New York City. Dan Fowler, director of business and facility planning for Dominion Resources Inc.'s DTI and Dominion Cove Point LNG LP, talked about many projects already put in place, and more projects to come. Dominion's "next projects," which have proposed in-service dates in 2016, would increase deliveries to Iroquois and Niagara Mohawk's east gate in the north, move gas to power generation customers and the proposed Cove Point export project, improve gathering and processing facilities in the Utica and other shales and increase transportation to the Midwest. Sital Mody, vice president of marketing, origination and asset optimization for Kinder Morgan's Tennessee Gas Pipeline Co., said the pipeline will continue to provide markets with diverse supplies and provide producers with access to markets. The Northeast expansion project is the company's answer to the demand for more infrastructure. The project includes compression and 171 miles of loop and line running from supply sources at Wright, N.Y., to Dracut, Mass., where it could feed gas into Boston and other New England markets, including interconnects with Portland Natural Gas Transmission System and Maritimes & Northeast Pipeline. The project has an incremental design capacity of 0.5 Bcf/d, which the company said could be easily expanded to 1.2 Bcf/d. Kevin Dixon, managing director for optimization and measurement for NiSource Inc.'s Columbia Pipeline Group, talked about its $4 billion to $5 billion investment opportunity to modernize its system that not only would increase safety but also would help its pipelines increase reliability for customers and earn consistent returns on investments. The rise of the Marcellus Shale has changed the flow of gas on the Columbia Pipeline Group systems from a historical Gulf-to-Northeast stream to a pattern that sends gas in all directions from the shale formation. Columbia Gas plans to increase liquidity on the west side of its system through the West Side expansion and a Utica project, and to establish liquidity on the east side through its East Side expansion and the formation of an eastern market pool. Through projects across its system, including a $1 billion to $1.5 billion investment in midstream facilities and a $3 billion to $4 billion investment to link new gas supplies to markets, the group plans to increase market access, moving gas to power generators and to LNG export terminals such as the Cove Point facility in Maryland and Cameron LNG facility in Louisiana. The East Side expansion project would provide incremental firm service to growing Northeast and Mid-Atlantic markets. The project, due in service in September 2015, would provide 312 MDth/d of incremental capacity through pipeline looping and increased compression at existing stations, and it would install new interconnects. Dixon included Millennium Pipeline Co. LLC under the Columbia Pipeline Group. Stan Brownell, senior vice president of commercial operations for Millennium, talked about the pipeline's Minisink and Hancock compression station projects, its proposed Upstate pipeline and a proposed lateral to Competitive Power Ventures Holdings LLC's Valley Energy Center project. The Upstate pipeline, with two possible configurations to be decided by customer interest, has a proposed in-service date of early Portland Natural Gas Transmission System's Continent-to-Coast project, or C2C, would improve gas flow into the company's New England and Atlantic Canada markets. Cynthia Armstrong, PNGTS director of marketing and business development, said the project would offer an incremental 132,000 to 182,000 MMBtu/d of capacity. The project has a bid period that ends June 28, and it is due in service in November Source: SNL Financial Page 4 of 5

5 David Hooker, vice president of midstream business development for Inergy LP, talked about the proposed Commonwealth pipeline being developed by Inergy Midstream LP, UGI Energy Services Inc. and WGL Holdings Inc. He also mentioned a couple of Inergy projects being considered: an expansion of the recently completed MARC I pipeline and a North-South pipeline expansion that would run between MARC I and Millennium. Source: SNL Financial Page 5 of 5