Mountaineer Xpress ups rate on higher costs

Columbia Gas Transmission has increased by nearly 50pc the rate it charges new subscribers on its Mountaineer Xpress natural gas pipeline project to cover a $1bn hike in construction costs.

Increased scrutiny from environmental groups and concerned citizens has resulted in regulatory delays for multiple natural gas pipeline projects in the US northeast in recent years. These delays can result in midstream companies footing the bill for consultant, contractor and legal services to help navigate an increasingly complex permitting process or fulfill agreements with shippers.

The US Federal Energy Regulatory Commission (FERC) has approved Columbia Gas' request to increase to $14.66/dekatherm its monthly incremental recourse reservation rate for new subscribers on the pipeline in the Appalachian region. The rate allows pipelines to recover the costs of building more takeaway capacity from shippers who do not negotiate their own rate.

Shippers who had already contracted for capacity on the project prior to the rate change will remain at the original $9.83/dekatherm rate. Columbia Gas parent company TransCanada did not respond to an Argus inquiry on how much capacity was subscribed prior to the rate amendment.

Columbia Gas originally expected the 2.7 Bcf/d (76mn m³/d) project to cost $2.1bn, but that figure has since ballooned to $3bn, it said in its filing with FERC. Construction cost increases were driven primarily by rising contract labor costs and inspections. A boom in pipeline construction in the Marcellus and Utica shale regions since Columbia began the project has also led to increased costs for land acquisition and contractor services. The pipeline experienced unexpected permitting delays that further increased the cost of constructing the project in accordance with shippers' requested in-service dates, Columbia Gas' filing said.

The project is designed to transport gas from West Virginia, Ohio and Pennsylvania to Columbia Gas' Appalachia pool and to Columbia Gulf pipeline, which serves the southeast US and Gulf coast. The project includes 165 miles (266km) of new pipeline from Marshall County to Wayne County, West Virginia, three new compressor stations and modifications to three existing compressor stations.

Two-thirds of the project's capacity will supply the Columbia Gas, Appalachia pool, with the remainder of the capacity being delivered onto Columbia Gulf pipeline.

Columbia Gas expects the project to come on line in late 2018.