Southwest Gas Holdings' Great Basin Expansion: A Strategic Bet on Energy Resilience and Regional Growth

The energy transition era has intensified demand for reliable infrastructure to support both traditional and renewable energy systems. Among the key players positioning themselves for long-term growth is Southwest Gas Holdings (SWX), whose Great Basin Expansion Project promises to bolster natural gas capacity in Nevada and Northern California at a critical juncture for regional energy resilience. With a $800 million to $1.2 billion capital commitment, the project is poised to deliver 1.25 billion cubic feet per day (Bcf/d) of incremental capacity, underpinned by 20-year firm contracts. However, its success hinges on navigating FERC's regulatory timeline and environmental scrutiny—a challenge that could either unlock significant value or introduce delays.

A Pipeline to Long-Term Revenue Stability

The Great Basin Expansion comprises two phases: the 2026 project, currently under FERC review, and the 2028 phase, which secured strong shipper demand during its Binding Open Season. The 2026 initiative focuses on upgrading 4.7 miles of pipeline in Nevada's Washoe and Lyon counties, adding 8,129 Dekatherms per day of capacity to serve existing customers. The larger 2028 phase aims to nearly double this capacity, targeting 1.25 Bcf/d to meet growing demand from industrial, commercial, and power generation sectors.

The project's financial foundation lies in its 20-year firm transportation agreements, which lock in steady cash flows. With proposed rates between $14 and $17 per Dth/month, the 2028 project alone could generate hundreds of millions in annual revenue. The scale of capital investment—spanning pipeline construction, meter stations, and valve facilities—reflects Southwest Gas's confidence in sustained demand.

Regulatory Momentum and Shipper Demand as Catalysts

The project's most immediate catalyst is FERC approval. The 2026 phase is in the environmental review's scoping phase, with public comments due June 26, 2025. A decision on whether to proceed with an Environmental Assessment (EA) or the more extensive Environmental Impact Statement (EIS) will follow. Assuming no major setbacks, FERC could issue its certification by early 2026, aligning with the company's target to finalize shipper agreements by Q3 2025.

The 2028 phase has already cleared a major hurdle: its Binding Open Season, extended to May 28, 2025, attracted capacity requests exceeding expectations. This signals strong demand from industrial and utility customers in Nevada's booming tech and renewable energy sectors. For instance, the state's geothermal projects—a clean energy boom—could indirectly benefit from the pipeline's reliability, as geothermal facilities often rely on natural gas for backup power.

Risks: Regulatory Delays and Environmental Crosscurrents

While the project's fundamentals are compelling, risks persist. FERC's environmental review could stretch timelines if an EIS is required, adding months or even years to the process. Additionally, the project's proximity to Nevada's geothermal developments raises the specter of overlapping environmental lawsuits. For example, the U.S. Fish and Wildlife Service's concerns over habitat disruption for endangered species, such as the greater sage-grouse, could lead to mitigation demands or delays.

Another risk is the broader energy market's shift toward renewables. While natural gas remains a critical “bridge fuel,” overcapacity in gas infrastructure could pressure margins if demand growth slows. That said, Nevada's geothermal projects and California's power grid—still reliant on natural gas for grid stability—mitigate this risk.

Investment Thesis: A Play on Regional Energy Resilience

Southwest Gas Holdings is positioning itself as a beneficiary of two secular trends: 1) the need for reliable gas infrastructure to support both traditional and renewable energy systems, and 2) the economic growth of Nevada and Northern California. The Great Basin Expansion's 20-year contracts and scale make it a low-risk, high-reward bet for investors seeking stable cash flows.

While regulatory and environmental risks are present, the project's strong shipper demand and FERC's prioritization of critical infrastructure suggest upside potential. If approved on schedule, the project could boost SWX's earnings by 15–20% by 2028, assuming full capacity utilization.

Final Considerations

Investors should monitor two key milestones: 1) FERC's environmental document decision post-June 26, 2025, and 2) progress on shipper agreements by Q3. Meanwhile, the company's exclusion of the project from 2025 financial guidance underscores its conservative stance, which could be revised upward as approvals materialize.

For a portfolio focused on infrastructure resilience and regional economic growth, SWX offers an attractive entry point. The Great Basin Expansion isn't just a gas pipeline—it's a lifeline for industries and communities navigating an energy landscape that demands both reliability and adaptability.

Disclosure: This analysis is for informational purposes only and not a recommendation to buy or sell securities.