The Constitution Pipeline has caught the eye of President Trump, who said in February that he wants to see it built in the Northeast. Sponsor Williams (WMB) is non-committal for now and may face questions in upcoming 1Q25 earnings. From our view, East Daley is hard-pressed to see a path forward for the defunct project.
Proposed 13 years ago, the 121-mile Constitution was designed to transport 650 MMcf/d through a 30-inch pipe from Susquehanna, PA north into western New York, interconnecting with the Tennessee Gas Pipeline (TGP) and Iroquois Pipeline (see map). The project included a strategic lease agreement for capacity on Iroquois, and at the time carried an estimated $683MM cost and ~7.0x build multiple. It stalled out after New York state regulators denied a water quality permit in 2016, leading to years of court battles.
The recent supportive comments from President Trump have renewed interest in the Constitution project. In a statement, WMB said it would be interested in pursuing the pipeline if it earned the approval of regional governors and had market support.
Despite the positive spin, East Daley sees many challenges ahead. For one, several of the original project backers have changed hands, including Cabot Oil & Gas (now part of Coterra Energy (CTRA)) and Duke Energy, which sold its midstream assets to Enbridge (ENB). Williams may need to start from scratch finding customers if the new owners have lost interest.
Finding a downstream outlet for the supply is another obstacle. The figure above shows flows and capacity through Compressor Station 249 on TGP, downstream of where Constitution would deliver supply. Station 249 now operates at average throughput of 76% and runs 98% full at peak times. Similar data for the Brookfield segment of Iroquois Pipeline shows it is running at about 91% utilization now, and peak flows frequently exceed the stated segment capacity. These pipelines would need to coordinate additional expansions to efficiently route the additional gas to New England markets.
Constitution also faces a high hurdle for competing investments. WMB is already managing a robust backlog of lower-risk projects that deliver at build multiples around 5.0x. Marcellus producers, the potential backers of a project like Constitution, also have moved on. Many are backing southbound expansions to meet LNG demand growth on the Gulf Coast, including several WMB projects.
Assuming TGP and Iroquois also expand, Williams could source volumes from the Susquehanna Supply Hub gathering system. Using the WMB Financial Blueprints in Energy Data Studio, we estimate a 2027 EBITDA gain of ~$165MM for the Susquehanna asset if Constitution is built, in addition to incremental earnings from the pipeline itself. But we are not holding out hope as recent setbacks, such as the challenges encountered by Mountain Valley Pipeline, cast serious doubts on new greenfield projects in the Northeast. – Zach Krause Tickers: CTRA, ENB, EXE, WMB.
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