Tallgrass to Buy Bankrupt Ruby Pipeline for $282.5 Million

Tallgrass has agreed to purchase bankrupt Ruby Pipeline LLC for $282.5 million, the company announced on Dec. 16.

In a court-ordered auction on Dec. 13, Tallgrass beat out a $276 million bid by EP Ruby LLC, a Kinder Morgan Inc. entity, according to court documents. EP Ruby also served as the auction’s stalking horse bidder with an initial offer of $236 million.

Tallgrass said the acquisition of Ruby Pipeline will provide access to established markets with an additional 1.5 Bcf/d of natural gas capacity to its portfolio and would provide “immediate and strong cash flow to the company.”

The investment will provide Tallgrass a platform to enhance natural gas service to West Coast markets, the company said. The acquisition also provides Tallgrass an opportunity to utilize Ruby’s 683-mile existing infrastructure network to advance its initiatives to offer decarbonized energy solutions such as responsibly sourced and renewable natural gas to customers across the U.S.

In March, Ruby Pipeline filed for bankruptcy citing “significant cashflow shortage” when two-thirds of its long-term contracts expired in mid-2021 without any substantive replacements, according to Fitch Ratings. 

The 42-inch transmission pipeline began service in July 2011, transporting natural gas from the Opal Hub in Wyoming west through Utah and Nevada and terminating at pipeline interconnects near Malin, Oregon. The line increased the regional capacity to move gas from the Rockies region to the west by over 50%, according to the Energy Information Administration.

“Ruby’s capabilities maintain our nation’s energy security and provide long-term opportunities in the transportation of the molecules that will be required in the energy transition,” said Matt Sheehy, president and CEO of Tallgrass. "In addition to gaining new teammates, this acquisition further advances our track record of optimizing existing infrastructure to lead energy solutions.”

The transaction is expected to close in the first quarter of 2023 subject to customary regulatory approvals and closing conditions.

Tallgrass’ outstanding equity interests are owned by an investor group led by Blackstone Infrastructure Partners, which includes Enagás SA, GIC, NPS and USS.