On February 22, Kinder Morgan and Brookfield sold a 25% stake in their Chicago-to-USGC NGPL pipeline to ArcLight Capital Partners for $830 million. In this article, we discuss two key drivers behind NGPL’s current and future demand: natural gas demand in the Midwest and the USGC.

NGPL distributes gas to two key markets: the Midwest, one of the largest heating markets in the U.S. (which we’ve defined, for NGPL’s purposes, as comprising Illinois, Missouri, Iowa, Wisconsin, Michigan, and Indiana), and the USGC, the fastest growing baseload market in the U.S. due to growth in LNG exports. NGPL’s Gulf Coast Leg has developed into a large “header” with large and growing markets on both ends (only ANR is in similar position amongst MW pipes).

Let’s start with the Midwest market. About 50% of total Midwestern natural gas demand is determined by residential & commercial (R&C) consumption, 30% is attributable to industrial demand, and most of the remainder is used for power generation. NGPL is critical to meet heating demand in this market: NGPL’s last mile advantage is significant compared to its peers (ANR, Alliance, Midwestern). We expect Midwest natural gas demand to grow by about 2 Bcf/d between 2020 and 2027, largely due to higher gas-fired generation at expense of coal and nuclear retirements. Growth in intermittent wind generation could open more revenue opportunities for baseload natural gas – and NGPL.