Q&A on Bluegrass Pipeline

What is the status of the Bluegrass Pipeline project?
You said all along there was great need to move NGLs to market but now you are saying there is not – why the change?
Now that you’ve closed your local offices is the Bluegrass Pipeline project dead?
What happens to your community grant program?
What happens to right of way payments to landowners?
Can you transfer the easement agreement to another party?
Did the eminent domain issue in Kentucky have an impact on your decision?
Did those who opposed the project have an impact on your decision?
Why are you still planning to remain active in the communities along the proposed path of the Bluegrass Pipeline?
Will you end up paying taxes on property on the easement you have acquired?

What is the status of the Bluegrass Pipeline project?

Although we continue to believe the Bluegrass Pipeline project is the best long-term solution in the marketplace, it has not received the necessary customer commitments to move forward.  As such, we are exercising capital discipline and not proceeding with the proposed project at this time. Williams and Boardwalk will continue to have discussions with potential customers to determine their needs, the needs of the market and our project.

 

You said all along there was great need to move NGLs to market but now you are saying there is not – why the change? 

The need to move NGLs from the liquids-rich natural gas production in the Utica and Marcellus shale plays to markets is still valid. According to the Energy Information Administration, by 2016, production of NGLs from the Marcellus and Utica shales is expected to reach at least 650,000 barrels per day (bpd), marking an all-time high for U.S. NGL production records.

We continue to have discussions with potential customers on their needs and timing.

 

Now that you’ve closed your local offices is the Bluegrass Pipeline project dead?

No. While we are not investing additional capital in this project at this time, we continue to seek customers for this project and still believe the Bluegrass Pipeline project is the best long-term solution in the marketplace for moving this resource to market. As mentioned, we have closed a number of offices that housed our land acquisition teams. Because we are no longer actively pursuing easement acquisitions, we did not need the office space.

 

What happens to your community grant program?

Our current cycle deadline for applications is April 30. Grants will be awarded by June 15. The fourth project development grant cycle is still planned but it is unclear when the application cycle will begin.

 

What happens to right of way payments to landowners?

In most cases, we made agreements with landowners called options – Bluegrass Pipeline has the option to purchase and ultimately build the pipeline using the landowner’s granted easement within three years of the agreement. Landowners with whom we have agreements in place received an upfront, nonrefundable payment upon signing the agreement. If we exercise our easement option to build the pipeline before the option expires (typically within the three-year timeframe), we will pay them the remainder of the amount in the agreement.

If we do not exercise the easement option within the three-year timeframe, the option will expire and the landowner will not receive the remaining payment. The land rights revert back to the current landowner.

 

Can you transfer the easement agreement to another party?

Yes. A transfer/assignment of the easement agreement is allowed as part of the standard contract. In some cases landowners may have requested rights of approval for transfer/assignment.

 

Did the eminent domain issue in Kentucky have an impact on your decision?

No.  Our decision to stop investing capital in this project is based upon the lack of customer commitments at this time.  As we have stated throughout the easement acquisition process, we prefer to work one-on-one with landowners in good-faith negotiations to acquire easements, and successfully acquired two-thirds of the route in Kentucky using this approach.

 

Did those who opposed the project have an impact on your decision?

We spent more than a year listening and talking with communities all along the route.  We learned much about each and every community we interacted with.  That is why we know that this project while ahead of its time is needed to advance the manufacturing revolution in this country, which is creating thousands of jobs and advancing energy independence.

Our decision was based on the need to have customers shipping natural gas liquids on the pipeline. Without firm agreements from customers, we could not justify continuing to spend capital on this project. If our discussions with customers lead to agreements to ship on the pipeline and it makes economic sense to pursue the project at a later date, we will.

 

Why are you still planning to remain active in the communities along the proposed path of the Bluegrass Pipeline?

We value the relationships we have built and plan to stay connected to the communities, providing updates on the project as needed and keeping an open door for continued dialogue.

 

Will you end up paying taxes on property on the easement you have acquired?

No. Bluegrass Pipeline does not owe taxes as we have not yet improved the property. Because the easements we’ve acquired to date are options, there are no ad valorem taxes due until such time as the options are exercised.