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Major gas pipelines face over 4 MMDth per day of expiring contracts in Q1

Major U.S. natural gas pipelines have millions of dollars in the balance with over 4 million Dth/d of firm transportation contracts scheduled to roll off during the first quarter, according to an analysis of S&P Global Market Intelligence data.

While Columbia Gas Transmission LLC — which has contracts totaling approximately $5.1 million in monthly revenues — could take the biggest hit in terms of total dollars, those agreements only account for 4.8% of the 12,000-mile system's capacity. Columbia Gas Transmission carries gas to customers from New York to the Gulf of Mexico.

Representatives of TC Energy Corp., which owns the pipeline system, declined to comment on whether the capacity set to expire had been recontracted.

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Dominion Energy Inc.'s Dominion Energy Overthrust Pipeline LLC, meanwhile, could see 21.4% of its contracted capacity roll off when agreements with Occidental Energy Marketing Inc. and EnCana Marketing (USA) Inc. worth a combined $680,400 in monthly reservations end. Dominion representatives declined to comment on whether that capacity, which supplies eastern and western markets with Rockies gas, had been recontracted.

Midcontinent Express Pipeline LLC risks losing 15% of its firm reservations as a contract with driller Chesapeake Energy Corp., which faces de-listing from the NYSE amid potential bankruptcy, rolls off during the first quarter. The pipeline running from Oklahoma to Alabama is owned by Kinder Morgan Inc.

Lower natural gas production in Oklahoma and north Texas — along with expiring contracts on a Wyoming-to-Oregon pipeline — prompted the pipeline giant to take more than $1 billion in impairments on its assets for the fourth quarter of 2019, including a $650 million impairment on its investment in the Ruby Pipeline LLC that connects the Opal, Wyo., hub with the U.S. West Coast at Malin, Ore. CEO Steven Kean said Jan. 22 that Ruby, which could see 8.2% of its contracted volumes roll off during the first quarter of 2020, is a "challenged" asset.

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Ruby is "coming from the Rockies — the Rockies is over-piped in terms of export capacity basis," he said. "That's been the case for a while now, and there are alternative sources from Canada, for example, to serve the market in the Northwest. So that's just that challenged asset."

Kinder Morgan declined to comment on whether those Midcontinent Express and Ruby pipeline volumes had been recontracted. The four Ruby contracts scheduled to expire during the first quarter are worth a combined $3.3 million in monthly revenues.

S&P Global Market Intelligence's analysis, which used the Index of Customers and tariff data, covered U.S. interstate gas pipeline contracts with maximum daily transportation of over 100,000 Dth and their estimated reservation charges, if available. Pipelines provide transportation to shippers such as gas producers, utilities, industrial customers, power generators and energy marketers, often under firm contracts. Most of these agreements feature fixed reservation charges that are paid monthly regardless of the actual gas volumes moved or stored, plus a tariff component based on volume to compensate pipelines for their variable costs. Monthly reservation revenue estimates use the maximum revenue because negotiated rates are often not disclosed.

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