Rex zone 3 reversal to reach full capacity by 2017

OREANDA-NEWS. May 04, 2016. Tallgrass Energy said the Rockies Express (Rex) pipeline is on schedule to reach full capacity for the zone 3 reversal project by 1 January 2017 to send Marcellus and Utica gas west.

The final phase of the Rex zone 3 reversal project will add 800mn cf/d (23mn m?/d), increasing west bound capacity to 2.6 Bcf/d.

"Rex's zone 3 east-to-west project is fully contracted, operational and flowing at its 1.8 Bcf/d capacity in most days," Tallgrass chief operating officer Bill Moler said on an earnings call.

In addition, Rex west-to-east flow had also operated up to 1.7 Bcf/d in in early April, indicating the pipeline's questionable east bound flow is also being utilized, Moler added.

Rex's zone 3 reversal project went into service on 1 August and is operating at 1.8 Bcf/d capacity, providing shippers east-to-west capacity to deliver natural gas from Monroe county, Ohio, to markets in the midcontinent, including Chicago and Detroit, as well as Gulf coast and southeast markets.

Tallgrass Development, a subsidiary of Tallgrass Energy, in late March announced that it has agreed to pay \\$440mn cash for the 25pc ownership in Rex from Sempra US Gas & Power, which was one of the initial partners in the pipeline.

The acquisition would increase Tallgrass' ownership stake in Rex to 75pc.

Phillips 66 which also had the option to purchase about 8pc of Sempra's available share, has waived their right for first refusal to acquire any additional shares and will remain a 25pc owner.

Tallgrass operates the 1,698-mile (2,733 km), 1.8 Bcf/d pipeline that stretches from northwestern Colorado and Wyoming to eastern Ohio.

The US Federal Energy Regulatory Commission (FERC) has accepted a rate case for the Tallgrass Interstate Gas Transmission (TIGT), Moler said during the call.

The rate case will allow TIGT from 1 May update its rate structure, tariffs and implement rates increase for firm and interruptible transportation and storage services.

Tallgrass has agreed upon a mutually agreeable settlement with all its shippers in spite of the 1 May implementation for new rates.

The settlements would increase revenue for TIGT and avoid time consuming costly litigation for both side, Moler said.