The Daley Note: January 19, 2023
Williams (WMB) received approval from federal regulators to build the Regional Energy Access Expansion (REAE). The expansion of the company’s Transcontinental Gas Pipe Line (Transco) will add takeaway for Appalachian producers to the mid-Atlantic region and create a rare opportunity for growth out of the constrained basin.
The Federal Energy Regulatory Commission (FERC) granted approval last Wednesday (Jan. 11) to Transco’s application for a permit. The REAE project would loop a segment of the Transco system in Monroe County, PA with 42-inch pipe and add a 22-mile lateral in Luzerne County, PA connecting to Marcellus shale producers in northeastern Pennsylvania. Transco also plans to modernize existing compressors and meter stations in Pennsylvania and New Jersey and add a new electric-driven compressor in Gloucester, NJ.
Transco aims to begin service on the REAE project prior to the winter of 2024. It will provide ~830 MMcf/d of firm service from the Northeast-PA producing region to multiple delivery locations in Pennsylvania, New Jersey and Maryland. The REAE project is fully contracted by eight shippers including regional utilities and WMB’s Williams Energy Resources subsidiary (see table).
FERC approval is no guarantee of project success in the Northeast, as demonstrated by the long-delayed Mountain Valley Pipeline (MVP). But the REAE project has some advantages going for it. WMB has planned the project along existing rights-of-way, and pipeline construction would be relatively modest at only 36 miles of new pipe. WMB said the compressor upgrades also will benefit system reliability and lower regional emissions.
Management has said previously it expects the pipeline expansion to fill quickly. In our Blueprint Financial Model for WMB, East Daley estimates the REAE project will begin service in 4Q24 and add ~$124 million in annual EBITDA by 2025. Another planned Transco expansion, the Southside Reliability Enhancement project, is due to come online around the same time frame. That project will bring Appalachian gas further south to North Carolina and create more market access for Northeast producers. We will keep an eye out for any FERC filings as these projects make progress. – Alex Gafford Tickers: WMB.
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