Intrastate Pipes - Another Drop in the Data Well
Shippers, especially those in production rich areas such as Texas, rely not only on interstate natural gas pipeline infrastructure, but also intrastate infrastructure to ensure the delivery of their gas. Rapidly growing gas exports to Mexico and increased gas supplies to reach Liquefied Natural Gas (LNG) terminals in the Gulf Coast are pulling Marcellus and Utica gas south, creating new opportunities for developers in the Lone Star state. As such, the issues involved with federal versus state pipeline regulation have become increasingly critical as analysts seek to accurately assess the fundamental landscape . Pipelines that are intrastate in nature, but operating in an "interstate fashion," which includes thousands of miles of Texas pipe, are, in fact, subject to detailed reporting requirements. So is there a way to efficiently assess these intrastate pipelines, including customers, rates, flows, and revenues? Yes!
Not all natural gas pipeline infrastructure can be neatly binned as interstate or intrastate. Some basics: these intrastate pipelines can be divided into two types, Hinshaw pipelines and Section 311 pipelines. Section 311 pipelines (so named because they are authorized under Section 311 of the Natural Gas Policy Act (NGPA)) provide transportation -- not gathering -- service within a single state, with service originating from gathering facilities to an interstate pipeline or local distribution company that itself takes service from an interstate pipeline. Hinshaw pipelines, on the other hand, are located downstream of the interstate pipeline system, but only deliver gas to local distribution companies within a single state.
In addition to flow changes in Texas that are driven by increased Marcellus and Utica production and declining production from conventional wells in the Eagle Ford, there's rising demand from U.S. power generators and the industrials sectors. And while the segment of pipeline that actually crosses the international boundary is the subject of FERC jurisdiction, which is typically measured in feet rather than miles, the remainder of the pipeline is considered intrastate. If the pipeline plans to only transport Texas-sourced gas over the border, and is consequently under the exclusive jurisdiction of the Texas Railroad Commission, then the pipeline will not be required to report quarterly intrastate flows, rates and revenues.
But while many of these intrastate export pipelines did not initially offer interstate transportation service, operators are increasingly seeking to expand their services by transporting non-Texas-sourced natural gas into interstate service, thereby triggering the reporting requirements of NGPA Section 311. For example, ONEOK's Roadrunner Gas Transmission, when constructing the Roadrunner Border Crossing Project, did not initially intend to provide transportation service, but in order to provide the flexibility to do so in the future, it made all necessary filings pursuant to the Commission's NGPA Section 311 regulations in order to enable it to provide such service. Similarly, Energy Transfer Partners' Comanche Trail Pipeline, LLC and NextEra Energy Partners' NET Mexico Pipeline Partners, LLC did not initially offer interstate, but both have suggested they intended to expand service, and NET Mexico has since expanded its offering and provides quarterly filings as a result.
Each quarter, these intrastate pipelines report flows, revenues, and rates. In the case of NET Mexico, last quarter it reported that it shipped 61,221,123 MMBtu. As a result, NET Mexico earned $26,779,002 in revenue by charging MexGas Supply S.L. a rate of $0.005/MMBtu shipped under a firm transportation agreement. Are other border crossing pipelines reporting or planning to report their returns in the near future? For example, many industry observers are closely watching Enbridge's 168-mile, 2.6 Bcf/d Valley Crossing Project, which will cross into Mexico. And what about the other nearly two hundred intrastate pipelines that connect to interstate service? If you're looking for greater visibility into intrastate pipeline fundamentals, let us know, and we can discuss adding it to your data.
