$1B Marcellus pipeline proposed

Since the Marcellus Shale boom took off, much of the natural gas produced in Pennsylvania has been shipped through existing pipelines to Northeastern markets such as New York City.

But a partnership of three companies on Thursday proposed building a $1 billion pipeline that would transport fuel from Northern Pennsylvania to markets in Central and Eastern Pennsylvania, as well as Philadelphia, Baltimore, and Washington.

"We think it would be beneficial to Pennsylvania to have gas produced in the state consumed in the state," said Hugh J. Gallagher, a spokesman for UGI Corp. of Valley Forge, one of the partners in the proposed project.

The proposed 200-mile, 30-inch Commonwealth Pipeline would transport at least 800 million cubic feet of gas a day - 800,000 dekatherms - if it goes into service in 2015.

A pipeline that could connect local markets to the Marcellus would reduce transportation costs for customers, who now buy most of their fuel from producers on the Gulf Coast.

The project is expected to announce a nonbinding "open season" this month for customers interested in acquiring capacity on the proposed pipeline. The location of potential customers would determine the pipeline route, Gallagher said.

The pipeline would start in Lycoming County, where one of the partners, Inergy Midstream L.P., is building a pipeline connecting Marcellus wells in Bradford and Sullivan Counties.

The route would travel "due south through Central and Eastern Pennsylvania," according to a news release.

UGI's three gas-distribution companies, which have the state's largest customer base, are likely customers.

So is Washington Gas - the utility serving the nation's capital - a sister company of the third partner in the project, Capitol Energy Ventures Corp. They are owned by WGL Holdings Inc. of Washington.

Inergy Midstream, based in Kansas City, Mo., would build and operate the pipeline. The three partners would own equal interests in the project, which would be an interstate pipeline regulated by the Federal Energy Regulatory Commission.

Though the pipeline would not directly connect to Philadelphia, its sponsors say it would provide access to markets "across Southeastern Pennsylvania and the Philadelphia, Baltimore, and Washington, D.C., metropolitan areas" by connecting with "a number of interstate pipelines along its route."

The proposed Commonwealth Pipeline represents the latest effort to build new infrastructure to exploit the vast quantities of natural gas expected to be produced from the Marcellus, which is reshaping the nation's energy landscape.

The Marcellus is the largest of several shale formations that have gone into oil and gas production in recent years because of advances in controversial hydraulic-fracturing techniques.

So much natural gas has come into production in recent years that the commodity has dropped to its lowest price in a decade, causing some gas producers to slow plans for drilling more wells until prices rebound.

"Gas production in the region has been limited by the lack of take-away capacity in existing interstate pipelines, most of which currently serve markets outside of Pennsylvania," Bradley Hall, president of UGI Energy Services Inc., said in a statement. "Our goal in participating in this project is to bring gas produced in Pennsylvania directly to the major markets in Central and Eastern Pennsylvania."

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