Energy Transfer advances $5.3B pipeline expansion to serve Arizona and New Mexico, supporting rising energy demands with U.S. steel and labor.
Energy Transfer LP has announced a final investment decision (FID) to move forward with a major expansion of its Transwestern Pipeline system. The project, titled the Desert Southwest pipeline expansion, is aimed at increasing the supply of natural gas from the prolific Permian Basin to the rapidly growing markets of Arizona and New Mexico. This strategic expansion comes in response to the region's rising energy demands, driven by increasing population, a surge in high-tech industrial activities, and growing power needs from data centers.
The planned Desert Southwest expansion will involve constructing approximately 516 miles of 42-inch diameter pipeline and building nine compressor stations across Arizona, New Mexico, and Texas. Once completed, the system will have a design capacity of 1.5 billion cubic feet per day (Bcf/d). The project is scheduled to be operational by the fourth quarter of 2029.
This infrastructure development will significantly boost Transwestern Pipeline’s ability to deliver reliable and economical natural gas, reinforcing its long-standing service to the Southwest region since its inception in 1960. With this expansion, Energy Transfer aims to enhance the overall reliability of its pipeline system and offer increased flexibility to accommodate growing energy needs.
The estimated capital cost for the project is $5.3 billion, which includes $0.6 billion in Allowance for Funds Used During Construction (AFUDC). The financial viability of the initiative is underpinned by strong, long-term contractual commitments from investment-grade customers. Additionally, Energy Transfer plans to initiate an open season later this quarter, during which it anticipates securing full subscription for the remaining pipeline capacity. Depending on market interest and subscription outcomes, the company may consider further expansions to accommodate additional demand.
In a move to support domestic industry and labor, Energy Transfer intends to source steel from U.S. manufacturers for the pipeline and expects to employ up to 5,000 local workers, including union labor, during the construction phase. This initiative will not only enhance local employment opportunities but also align with broader national priorities of infrastructure development and energy independence.
Energy Transfer operates one of the most extensive natural gas pipeline networks in the United States, connecting to nearly 200 natural gas-fired power plants and serving all major U.S. supply basins. The company’s widespread network and deep market access provide it with significant strategic advantages, allowing it to efficiently expand its infrastructure, meet surging energy demands, and increase earnings through scale and operational flexibility.
