Enbridge Inc. wants to build a pipeline that would carry natural gas liquids from the Appalachian region of the United States to the Chicago area.
The project would provide an outlet for gas produced in southern Pennsylvania and northern West Virginia where the massive Marcellus shale formation spans the two states, as well as parts of New York and Ohio.
Energy development is relatively new to the Marcellus region, which is believed to hold vast amounts of natural gas trapped in the shale rock, which has the same look and feel as a classroom chalkboard.
"This proposed pipeline will provide an excellent long-term solution for development of this promising play, as it will enable [natural gas liquids]production to grow unconstrained for many years," said Stephen Letwin, executive vice-president of gas transportation and international at Enbridge.
"Enbridge has extensive knowledge and expertise in the areas of NGL fractionation, transportation and marketing. With this proposed pipeline, we are uniquely positioned to help Marcellus producers obtain greater value for their future NGL production."
There is already existing infrastructure to process the natural gas liquids near Chicago, including the Aux Sable plant, which now handles gas shipped from Western Canada along the Alliance pipeline.
Natural gas liquids, like butane and propane, track oil prices more closely than they do benchmark natural gas prices. They are often used to manufacture petrochemicals and plastics.
"Moving those Marcellus liquids to Chicago is almost a perfect strategic fit for Enbridge," said Edward Kallio, manager of gas consulting for Ziff Energy Group.
"Gas is highly undervalued compared to oil, and so having this liquids-rich natural gas in the Marcellus is one reason it's likely to go ahead, versus other shale or conventional plays that have less liquids content."
Other markets, like Ontario, can also be tapped from Chicago through existing infrastructure. Enbridge already operates a natural gas distribution network in Ontario.
Calgary-based Enbridge expects to solicit offers from companies wanting to participate in the project some time between the beginning of April and the end of June.
The company did not disclose a price tag for the project and said it is in the process of working out potential routes.
Canadian companies like Talisman Energy Inc. and Enerplus Resources Fund have begun to explore in the Marcellus, mainly in the Pennsylvania portion.
Activity on the New York side has been curbed by concerns over how the drilling could affect nearby water sources, including the watershed that provides drinking water to New York City.
Until recently, shale gas has been too costly and difficult to exploit. However, advances in horizontal drilling and multi-stage rock fracturing technology have unlocked ample supplies.
The Marcellus is attractive because it's close to densely populated urban centres in the United States. Other shale plays, like the Horn River Basin in northeastern British Columbia are farther away from market and have less infrastructure in place.