El Paso Corp. announced Tuesday a major new pipeline to transport Rocky Mountain natural gas eastward – a move that likely would raise prices for Colorado consumers.
El Paso’s 1,000-mile pipeline, named the Continental Connector, is one of at least two proposed competing projects to take natural gas from production fields and smaller pipelines in the Rockies to major markets in the Midwest, South and East.
What’s driving the proposals is a big gap between relatively plentiful, cheaper gas in the Rocky Mountains and more expensive gas east of the Mississippi River.
Natural-gas producers and pipeline companies seek to take advantage of the price gap, but they’ve been constrained by lack of carrying capacity.
That lack of capacity has worked to the advantage of consumers in Colorado and other Rocky Mountain states by keeping local prices lower.
While neither of the proposed pipelines would open before 2008, concern is rising over record natural-gas prices and their impact on winter heating bills.
Xcel Energy is forecasting that bills will rise at least 35 percent from last winter’s record levels.
Analysts said the prospect of higher prices from the pipelines is not certain but is potentially troubling for consumers.
“We’re at the point where natural-gas prices are oppressive,” said Glenn Cooper, manager of Colorado’s Low Income Energy Assistance Program. “With any more price increases, it could be devastating. We have people living on the edge who will fall off the edge.”
Natural-gas prices have soared everywhere over the past two years, but the blow has been less severe in the gas-rich West. For example, Tuesday’s price on the New York Mercantile Exchange closed at a record $14.22 per million British thermal units, compared with $11.44 at a regional trading hub in southwestern Wyoming.
That price gap is likely to diminish if either El Paso or a joint venture by Kinder Morgan Energy Partners LP and Sempra Energy succeeds in building 42-inch pipelines to carry away natural gas from fields in Colorado and Wyoming.
Energy analysts say the pipelines are a vital development in the Rockies’ stature as the nation’s fastest-growing natural-gas region. Almost every other gas-producing area in North America is experiencing gradual to moderate declines.
Brian Hassler, executive director of the Wyoming Pipeline Authority, acknowledged that prices for Western consumers might rise because of the new pipeline, although he said the line would stimulate more gas production, thus benefiting residents of Western states with more severance-tax revenues.
Kinder Morgan’s proposed $3 billion, 1,500-mile pipeline would carry gas from southern Wyoming to eastern Ohio for distribution throughout the upper Midwest and eastern U.S.
El Paso’s estimated $2.7 billion pipeline would run from southern Kansas to northern Louisiana.
The gas from Colorado and Wyoming fields would be transported to southern Kansas via a series of existing pipelines. The new line would serve markets in the South, East and Midwest.
At times, the Rockies’ natural- gas price advantage has been huge. In 2002, for example, Rocky Mountain gas was selling for just $1 per million BTUs, compared with a national average price of about $4 per unit.
But then came the $1.3 billion expansion of the Kern River pipeline, sending Rockies gas westward to Nevada and Southern California. Soon after the line’s 2003 opening, Rockies prices soared, and the price differential narrowed to 27 cents.
El Paso Corp. this year completed the $393 million Cheyenne Plains pipeline, which ships natural gas from Colorado and Wyoming to southern Kansas.
Staff writer Steve Raabe can be reached at 303-820-1948 or sraabe@denverpost.com.
