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FERC, in split votes, approves Cheyenne Connector, Eagle LNG projects

Highlights

2-1 vote resumes action on natural gas pipelines

New outlet for DJ Basin production

Tallgrass eyes Q1-20 in-service

Houston — Federal Energy Regulatory Commission Chairman Neil Chatterjee used his strengthened Republican majority Thursday to advance two stalled natural gas projects and a small-scale LNG facility.

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FERC voted 2-1 to approve Tallgrass Energy's Cheyenne Connector Project and Cheyenne Hub Enhancement Projects, which would provide 600 MMcf/d of outlet capacity for Denver-Julesburg production into Cheyenne Hub and access onto Rockies Express Pipeline for delivery to the Midwest.

The commission also voted 2-1 on certificate approval for Eagle LNG Partners' proposed project in Jacksonville, Florida, with a nominal capacity of about 1 million mt/year of LNG. Chatterjee highlighted the project's focus on small and midsize shipments to help islands in the Caribbean access US gas (CP17-41).

While the commission approved five major LNG projects earlier this year, action on a number of other natural gas projects had appeared to slow amid a 2-2 split over climate considerations. The departure from FERC of Democrat Cheryl LaFleur at the end of August left FERC with two Republicans and only one Democrat, potentially clearing the path for more approvals.

'SYSTEMATICALLY SCRUBBING'

In the votes Thursday, Commissioner Richard Glick continued his pattern of dissenting over the extent of greenhouse gas considerations in FERC's gas orders. At FERC's open meeting, Glick aired new concerns that the commission was beginning to "systematically scrub" mentions of climate change from its orders, now excluding language encouraging developers to participate in voluntary GHG emission reduction programs.

His Cheyenne project dissent also questioned whether FERC looked seriously at a Colorado Interstate Gas alternative to the project. Commissioner Bernard McNamee countered that under the National Environmental Policy Act, FERC is not required to pick an alternative. And the Natural Gas Act, he said, "doesn't allow us to coerce the shippers who didn't sign up for a non-existing project" to do so.

McNamee and Glick also clashed over FERC's authority to order mitigation of GHG gas emissions. McNamee Thursday insisted such mitigation is "far beyond" FERC's authorities and expertise. Glick said FERC has routinely exercised broad authority to impose conditions in natural gas project orders in areas where there may not be an express statutory authorization, such as on vegetation, soil or noise control.

"I don't understand why we continue to treat greenhouse gas emissions completely differently than all other environmental impacts," he said.

The votes Thursday could begin clearing a backlog of natural gas projects. As far back as April, Tallgrass had warned further delay threatened its in-service date of October 2019.

Tallgrass now expects Cheyenne Connector and Cheyenne Hub to be in service in the first quarter of 2020, said spokeswoman Phyllis Hammond in an email Thursday.

ROCKIES PRODUCTION

Cheyenne Connector would displace up to 600 MMcf/d of west-to-east flows on Rocky Mountain Express pipeline currently sourced from Western Slope producing basins, such as the Green River Overthrust and Piceance, according to S&P Global Platts Analytics.

Some of that displaced gas will likely find a home in the Southwest as current south-to-north flows into the Rockies should reverse to the traditional north-to-sound flow pattern once service starts on Kinder Morgan's Gulf Coast Express pipeline out of the Permian, according to S&P Global Platts Analytics. However, especially during lower demand periods, the increased supply that will remain in the western slope could place downward pressure on prices at Opal next summer.

Cheyenne Connector is fully subscribed by Occidental Petroleum and DCP Midstream at 300 MMcf/d a piece for 10 years. It would allow DJ production to gain access for the first time to REX, the main Rockies-to-Midwest transportation corridor.

The project ties in with four processing plants, three of which currently tie in with the CIG pipeline. It will likely pull some production off of CIG initially, until new production ramps up, according to Platts Analytics.

Cheyenne Hub entails a new 32,100 hp compressor station and enhancements to REX's existing Cheyenne Hub interconnect.

-- Maya Weber, maya.weber@spglobal.com

-- Jack Winters, jack.winters@spglobal.com

-- Edited by Gail Roberts, newsdesk@spglobal.com