Tallgrass Energy said it has secured anchor shippers for a potential 2.4 Bcf/d pipeline that will connect Rockies Express Pipeline (REX) to Permian gas supply. The project would overbuild the Permian and further tilt the playing field toward producers, according to our basin forecast.
Tallgrass provided scant details in the May 12 announcement, but said the precedent agreements are already sufficient to move forward with construction. The company plans an open season to offer additional capacity for up to 2.4 Bcf/d of total egress available by late 2028.
The new pipeline would add to an overbuild by the end of the decade, according to East Daley Analytics’ Permian S&D Model. WhiteWater Midstream is building the 2.5 Bcf/d Blackcomb Pipeline, and Energy Transfer (ET) has taken a final investment decision on the 2.2 Bcf/d Hugh Brinson project. Taken together, we estimate the Permian will have ~6 Bcf/d of excess egress capacity in 2029 and 2030 with the Tallgrass pipe (see figure).
On the supply side, Permian gas production continues to grow, but the pace slows over time. Several producers have pulled back on 2025 spending plans given recent volatility and lower WTI prices, which has dampened growth in the forecast.
The significant excess pipe capacity would flip the normal dynamics of tight takeaway from the Permian. This means more runway for supply growth, and higher in-basin prices as shippers have more flexibility to move gas.
The Tallgrass announcement could intensify rate pressure on other Permian routes. Permian Highway Pipeline has 12 contracts expiring before 2030 at average tolls near $0.51/MMBtu-day, while Gulf Coast Express sees most of its capacity roll off in 2029 at $0.40–0.46/MMBtu-day. With up to 7 Bcf/d of capacity set to come online, both pipelines could face downward pressure on volumes and tolls, impacting equity owners such as Kinder Morgan (KMI) and Kinetik (KNTK). – Zach Krause Tickers: ET, KMI, KNTK.
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