Atlantic Coast Pipeline Back on Track With Supreme Court Ruling

June 16, 2020
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A major hurdle stopping progress on the Atlantic Coast Pipeline (ACP) was removed on June 15 in a 7-2 Supreme Court decision. 

Appalachia gas basis may see some support after the high court overturned a lower-court ruling, scoring a win for the Atlantic Coast Pipeline and handing a defeat to environmentalist opposition.

ACP connects southwest Appalachia to the Mid-Atlantic and supports Dominion South (and nearby basis locations) by increasing access to demand. A map showing the pipeline’s 600-mile route can be seen in our previous post here (Appalachia Pipeline Projects Face More Delays).

Lead partner for ACP, Dominion Energy, had expected a favorable ruling from the Supreme Court according to Dominion’s 1Q2020 earnings call. The company expected an in-service date of early 2022. The court’s ruling only removes only one hurdle standing in the way of ACP. Dominion still has a biological opinion, a Nationwide Twelve Permit, and a VA Air Control Board decision to resolve. The company believes these all should be done by the end of 2020.

Stakeholders in another, similar pipeline have had great interest in the Supreme Court’s ruling. Mountain Valley Pipeline (MVP) also plans to traverse the iconic Appalachian Trail. MVP, which follows a similar path to ACP, has faced delays due to comparable challenges to its federal permits. The court’s decision apparently clears the path for MVP, a pipeline that is already over 95% complete.

MVP’s developer EQM Midstream still believes the pipe could be in-service by late 2020 but has said early 2021 is more likely. MVP is a joint venture of EQM Midstream Partners, LP; NextEra Capital Holdings, Inc.; Con Edison Transmission, Inc.; WGL Midstream; and RGC Midstream, LLC.

Both ACP and MVP would provide an additional outlet for shale gas leaving the southwest Pennsylvania/West Virginia/Ohio production region. The pipes would send gas into the Mid-Atlantic region, where gas receives Transcontinental Pipeline (Transco) Zone-5 like pricing.

The additional outlet for Appalachian gas should not directly affect Henry Hub, as gas will mostly serve the Southeast (via Transco) and Mid-Atlantic. Because of this, the two pipes should remain mostly a basis issue, not a NYMEX one.

AEGIS view

Unless Appalachia production grows, the effect of more capacity out of the basin to the east supports basis, but only mildly. The chart above shows Cal ’21 and Cal ’22 Dominion South already on the high (least discounted) end of where it’s been in history (for more details see Appalachia Basis in 2021 Is Losing When Henry Hub Rises). More gas supplied into Transco Zone 5 in the Virginia area, will likely put some downward price pressure on that basis price, depending on what volumes reach that region.

We continue to monitor oil, gas, NGLs, and regional markets for hedging opportunities. To learn more and see AEGIS opinion and recommendations, go to AEGIS View publications, or contact info@aegis-energy.com. Like what you see? Share this article with the button on the bottom right of your desktop. Market questions or comments? Contact us at view@aegis-energy.com

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