Major Dominion pipeline made possible by producer subscriptions - Business, Government Legal News from throughout WV

Major Dominion pipeline made possible by producer subscriptions

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The new Lightburn processing plant in Lewis County is part of Dominion Transmission's Gathering Enhancement Project. The new Lightburn processing plant in Lewis County is part of Dominion Transmission's Gathering Enhancement Project.

Dominion Transmission's new Appalachian Gateway Project, a pipeline that will carry natural gas gathered into Marshall County to points east and northeast, followed a business model that is a shift for the industry.

"The different thing about Appalachian Gateway is that the customers are producers," said Dominion spokesman Daniel Donovan of the pipeline Dominion placed in service Sept. 1. Dominion Transmission is the natural gas transportation subsidiary of Richmond, Va.-based Dominion Resources.

"Traditionally, the buyers of natural gas — the utilities and the power plants — contracted for pipelines that would bring their natural gas to them," Donovan said. "In this case, the producers contracted for us to build a pipeline to take their natural gas to market."

The pipeline was conceived about four years ago in response to producer need for additional capacity to gather gas in the emerging Marcellus fields of West Virginia and southwest Pennsylvania and transport that gas to customers.

"There was, as we said at the time, a bottleneck that prevented West Virginia natural gas from getting to market," Donovan said.  "So we began proposing a complete project from wellhead to market."

In the end, the solution was two separate projects: one for gathering and one for transmission.

The Gathering Enhancement Project added gathering pipelines and compression, Donovan said. It added processing in Lewis and Pleasants counties. And it expanded the Hastings natural gas liquids processing plant in Wetzel County by 60,000 gallons per day.

"It has increased efficiency and reduced the high pressures in Dominion's gathering system," he said. "That means more gas can enter the system and be processed."

To address transmission needs, Dominion conceived the Appalachian Gateway Project: 110 miles of 20-, 24- and 30-inch pipe stretching northeast from Marshall County, near the Hastings plant.

The project will send naturally dry gas as well as wet gas processed to dry gas at Hastings to a market point in Pennsylvania called Delmont, east of Pittsburgh — in all, about 485,000 dekatherms per day in firm capacity for gas extracted almost entirely in West Virginia.

Although there is a spur in Pennsylvania to bring in gas from southwest Pennsylvania, the main object of the Appalachian Gateway was to get more West Virginia gas to market, Donovan said.

The gateway project also added four new natural gas compressor stations as far south as Kanawha County and upgraded two others, all in West Virginia. 

The projects together cost more than $750 million and will allow wells that have been drilled but shut in to begin to flow — freeing up royalty payments to mineral owners in the state.

Eighteen customers of "all shapes and sizes" subscribed to the gateway pipeline, Donovan said, with no one dominant shipper.

It may be the way of the future.

"I don't know that you're ever going to see a situation like you had maybe in the 1950s and 1960s and probably up into the 1970s and 1980s where if you build it they will come," said West Virginia Oil and Natural Gas Association Executive Director Nicholas "Corky" DeMarco. "Given the fact that it costs probably $2 million to $3 million a mile to build pipelines today, you're not going to build a pipeline and then hope that you have subscription to that line."

He recounted the example of the Greenbrier Pipeline Project, partially owned by Dominion, planned a decade ago to run from near Charleston south into North Carolina.

"They were working on both ends of it — they were working on the subscription end from the producer standpoint as well as on the end user in North Carolina," DeMarco said. "When the end user in North Carolina bailed, that pipeline was never built."

Producer subscriptions up front prevent that problem.

"That is happening more on Dominion lines and industry lines," Donovan said. "We think it is a very responsible investment made by the producers of West Virginia, and will result in more production, more jobs and more income in West Virginia."

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