This Article originally provided by The State Journal

July 31, 2008

Dominion Plans $1 Billion Natural Gas Project

Proposed pipeline could help companies move natural gas to other states.

Story by Pam Kasey

As West Virginia's natural gas industry grows, producers want to move more gas across and out of the state.

Now, Dominion Transmission is proposing a $1 billion project to help get that gas to eastern markets.

The utility presented its Appalachian Gateway proposal at a July 22 meeting for natural gas producers at Stonewall Resort and Conference Center.

Marc Halbritter, Dominion Transmission's managing director for commercial activities, illustrated growth in the state's industry by referencing topics that recently have been in the news: growth in production in general and the anticipated development of the Marcellus Shale formation.

"Local producers are faced with the potential that we won't have the infrastructure that we need in West Virginia to get gas to the point where we can take it out of state," Halbritter said.

Seeing this coming, Dominion asked producers in April how much gas they'd like to be able to move.

The response, Halbritter said, was "overwhelming."

"The requests for potential service were nearly three times the volume of gas Dominion currently handles," he said.

"Based on what they told us, we are presenting to them the facilities we would build to move their gas from West Virginia out of state to Pennsylvania," he said. That would get it to a southwestern Pennsylvania hub where Dominion can send it east.

The proposal includes 122 miles of new pipe in West Virginia and about 40,000 horsepower of compression, according to Halbritter.

"This is more than a 50 percent increase in the current volume," he said.

It's a large investment, too.

"We are talking about investing, in just the pipeline facilities, in the neighborhood of $660 million," Halbritter said.

Unlike the "interruptible" transmission that West Virginia producers have lived with in the past, this new transmission would be "firm": under contract and dedicated.

Dominion's proposed investment doesn't stop there.

"We have planned as a result of producer interest as much as $87 million in what we call gathering facilities: smaller diameter, lower pressure pipes that we use to get production to larger diameter, higher pressure pipes," Halbritter said. "And over $275 million in processing facilities ... to make the gas of a quality that people can burn in their homes or industrial plants."

In all, the investments would total more than $1 billion in natural gas processing and transmission facilities.

"This is a big deal for Dominion," Halbritter said. "We do billion dollar projects but we don't do a lot of them, so this is one of our largest projects."

The next step is for producers to make commitments. They have to let Dominion know by mid-September exactly how much transmission capacity they're willing to lease under 10-year contracts.

Those commitments will come from the state's biggest producers such as Dominion Exploration & Production, Equitable Production, Cabot Oil & Gas, Chesapeake Energy Corp. and others. In fact, the biggest seven companies account for about 70 percent of the state's production.

But Halbritter said smaller producers will not be overlooked. He said he expects commitments to come from some of the state's hundreds of smaller producers.

Once the producer commitments are in place, it will take about a year to apply to the Federal Energy Regulatory Commission about a year for the FERC to make a decision, and a little under a year to build the facilities.

If all moves as Dominion proposes, Halbritter expects the project to be in place by the end of 2011.

To expand the natural gas transmission infrastructure, Dominion in some places will replace smaller pipes with larger ones. In others, it will need to lay new pipe, and that will require the purchase of rights of way.

Some of the work will be done by Dominion employees and some will be bid out, Halbritter said. Without producer commitments yet in place, he was unable to say how many people will be required to construct the new pipeline.