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Spectra, Chesapeake, AEP Plan Pipeline From Utica Shale

Spectra Energy Corp. plans to spend about $500 million in Ohio to expand shipping capacity on its Texas Eastern pipeline system to handle rising natural-gas production from the Utica and Marcellus shale formations.

American Electric Power Co. and Chesapeake Energy Corp., the largest holder of Utica Shale leases, signed an agreement to develop 70 miles (113 kilometers) of new lines, Houston-based Spectra said today in a statement. The addition in Ohio will raise shipping capacity by 1 billion cubic feet a day, or about 18 percent, Wendy Olson, a Spectra spokeswoman, said in an e-mail today.

Production from U.S. shale deposits, where water and chemicals are pumped underground at high pressure to break apart dense rock and release gas, more than doubled from 2007 to 2009, according to Energy Department data.

American Electric, the largest U.S. coal burner, is pursuing pipeline capacity for gas-fired power plants, Spectra said. The utility owner, based in Columbus, Ohio, has estimated that tighter U.S. air-pollution restrictions may force it to close some coal-burning plants.

“We do anticipate more than one plant will attach” to the new gas lines, Olson said.

Chesapeake is pursuing additional shipping capacity for its production, Spectra said. The Oklahoma City-based company is the largest oil and gas leaseholder in the Utica shale with 1.4 million net acres.

Spectra rose 1.6 percent to close at $30.50 in New York, the highest since it was spun off by Duke Energy Corp. in January 2007. American Electric shares rose 2.3 percent to $40.85, its highest since July 9, 2008. Chesapeake shares rose to $22.99.

The project is slated to begin operating in November 2014, according to the statement.

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