Where Does Your Gas Come From?

Where does your gas come from?  I use natural gas to heat my home in Waltham, Massachusetts.  The company that supplies the gas sources most of its natural gas from two pipelines, Tennessee Gas Pipeline (owned by El Paso Corporation) and Algonquin Gas Transmission (owned by Spectra Corp).  Those two large pipelines are interconnected to supplies as far south as the Eagle Ford shale in South Texas.

The long haul pipeline that takes the gas from Texas to New Jersey and connects to the Algonquin pipeline system is called the Texas Eastern Pipeline, but it originally went by the name “Big Inch” when it was built in 1943.  The Big Inch pipeline was built to ensure safe oil transport over land (as opposed to over sea), during World War II.

Texas Eastern Transmission Company bought the pipeline from the federal government in 1947, and converted it to transport natural gas, today it consists of 9,200 miles of pipeline.  The Tennessee Gas Pipeline System was originally constructed in 1943 as well, with additions that connected the pipeline to regions in the northeast completed in the subsequent 15 years.  Today the pipeline system has 14,000 miles of pipe.

Building a pipeline that large today would cost billions of dollars.  Just ask Kinder Morgan, Sempra Energy and ConocoPhillips.  They built the Rockies Express Pipeline (completed in 2009), a 1,679 mile pipeline that runs from the Rocky Mountains to eastern Ohio, for a total of $6.8 billion.  It was the largest pipeline project in more than 20 years.

As big as the pipeline system in the U.S. is, most of those assets are not owned by MLPs, but rather by large integrated energy companies.  MLPs can count on more of these pipeline assets migrating into the hands of MLPs over time.

Category MLP Market Post