New Jersey Resources' Unit Seeks Permit For 84-Mile Pipeline

New Jersey Resources Corporation’s (NYSE:NJR) subsidiary, Adelphia Gateway, LLC, filed an application with the Federal Energy Regulatory Commission (“FERC”) for a certificate of public convenience for authorizing the operation of an existing 84-mile natural gas pipeline and related facilities in Pennsylvania.

With the help of this pipeline, Adelphia Gateway will transport an excess of 250,000 dekatherms of natural gas per day (91 million dekatherms per year) to cater to growing demand in Pennsylvania. The unit expects the aforementioned project to come online by early 2019, subject to pending receipt of permits and regulatory actions.

Adelphia Gateway had purchased the 84-mile pipeline with a view to repurpose the southern 50-mile portion for supplying natural gas to customers in Philadelphia region. The northern 34 miles of the pipeline, extending from western Bucks County to Northampton County, was already converted to deliver natural gas in 1996.

The unit intends to utilize existing infrastructure to meet the growing market demand with minimal new construction and impact to the environment.

Is Natural Gas Demand Rising in Pennsylvania?

Per a report released by the U.S Energy Information Administration (EIA) as of Nov 09, 2017, Pennsylvania currently accounts for 19% of total U.S. natural gas production. The area is seeing an increase in permitting and drilling activity as new pipelines come online.

The Pennsylvania Department of Environmental Protection issued 1,371 natural gas drilling permits in 2016 and 1,447 permits in 2017. Permission and drilling activity in Pennsylvania is concentrated to a few counties with the state’s most productive wells. Further, pipeline projects are being developed in Pennsylvania’s southwest and northeast regions to transport natural gas to areas experiencing high demand.

Natural Gas’s Popularity among Utilities

The fundamentals of natural gas seem favorable, considering the universal shift to cleaner burning fuel for power generation globally, over the long run. The EIA predicts global demand for the commodity to grow from 340 billion cubic feet(Bcf) per day in 2015 to 485 Bcf per day by 2040.

It is evident that to make the most of the rising demand for natural gas as a source of energy, New Jersey Resources and subsidiaries are stepping up to cater to the rising use of natural gas.

The U.S. natural gas companies see a big opportunity in selling cheap U.S. production at higher prices to rest of the world. In fact, more than 50% of the domestic volume growth in the near future will be used for export in the form of liquefied natural gas (LNG).

Notably, the growing use of LNG and higher consumption from industrial projects is likely to ensure strong natural gas demand. We may expect other natural gas-heavy upstream companies like Rex Energy Corporation (NASDAQ:REXX) , Chesapeake Energy Corporation (NYSE:CHK) , and Southwest Gas Corporation (NYSE:SWX) among others to benefit from rising demand of this energy source.

Price Movement

In the last three months, shares of New Jersey Resources have lost 8.1%, wider than the industry’s decline of 3.2%.

Zacks Rank

New Jersey Resources currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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