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UGI expands Marcellus Shale gas pipeline network

The Valley Forge company will pay $190 million to acquire Stonehenge Appalachia, a 47-mile natural gas pipeline in Western Pennsylvania.

A Pennsylvania pipeline under construction. A subsidiary of UGI Corp. will pay $190 million to acquire a 47-mile pipeline in Butler County to expand its Marcellus Shale network.
A Pennsylvania pipeline under construction. A subsidiary of UGI Corp. will pay $190 million to acquire a 47-mile pipeline in Butler County to expand its Marcellus Shale network.Read more

In another sign of the ongoing demand for fossil fuels, UGI Corp., the Valley Forge energy company, is expanding its natural gas pipeline network in Pennsylvania’s Marcellus Shale region.

UGI Energy Services LLC announced Tuesday that it will pay $190 million to acquire Stonehenge Appalachia, a 47-mile pipeline in Butler County that transports natural gas produced from local wells to interstate pipelines.

The acquisition is UGI’s third deal in recent years that has expanded its footprint in the shale-gas region northeast of Pittsburgh. The largest deal was the $1.3 billion acquisition in 2019 of Columbia Midstream Group LLC, a 240-mile system in Butler, Armstrong, and Indiana Counties that includes the Big Pine pipeline. UGI last year also bought a 49% interest in the Pine Run Midstream system, which like the Stonehedge pipeline, is interconnected with the larger Big Pine system.

Together, the three pipelines form what is known as a “midstream system,” which connects gathering pipelines linked to individual wells to big interstate pipelines, which deliver fuel to distant, large customers, including power plants and local utilities.

“When we acquired the assets of Columbia Midstream Group in 2019, we committed to additional investments to build or buy quality systems in the region,” Robert F. Beard, UGI’s executive vice president of natural gas, global engineering, construction and procurement, said in a statement. He said the Stonehenge acquisition “demonstrates our commitment to the Appalachian basin,” which produced record volumes of natural gas in the first half of 2021.

Midstream pipeline systems, which have long-term customers under contract and largely operate outside public view, are stable generators of cash flow for companies such as UGI.

“This investment is consistent with our strategy of delivering reliable earnings growth while continuing to rebalance our business activities with increasing investments in natural gas and renewables,” Roger Perreault, UGI’s president and chief executive, said in a statement. UGI also owns several gas and electric utilities, and distributes propane through its AmeriGas subsidiary.

Its UGI Energy Services subsidiary operates about a dozen gas pipelines in Pennsylvania, Ohio and West Virginia, as well as several liquified natural gas production plants, gas power plants, a gas storage facility and 21 solar farms. It was also the operator and 20% owner of the unsuccessful $1 billion PennEast Pipeline project, which was scuttled last year after public opposition and New Jersey regulators’ vow to block its construction to its terminus near Trenton.

» READ MORE: Operators of contentious PennEast shale gas pipeline declare a retreat

Despite pressure on policymakers to transition away from production of fossil fuels to curtail emissions of greenhouse gases, Pennsylvania operators have continued to produce prodigious amounts of natural gas from shale formations since the development of hydraulic fracturing technology, or fracking.

Pennsylvania produces about one-fifth of the nation’s natural gas, and is the second largest gas producer behind Texas. Its wells produced a record 7.1 trillion cubic feet of natural gas in 2020, and were on pace to set a new record last year, according to production reports posted through October by the U.S. Energy Information Administration.

The shares of oil and gas companies have been strong in recent months, driven by a resurgent economy, among other factors. UGI’s stock has risen 31% in the last year and closed Tuesday at $45.75.