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Settlement Agreement Reached on Midla Pipeline

American Midstream Partners LP notified FERC on Thursday that it has reached a settlement over plans to abandon its 88-year-old Midla pipeline system in Louisiana and Mississippi.

According to the settlement, American Midstream will file a certificate application with the Federal Energy Regulatory Commission to construct, own, operate and maintain a new 12-inch diameter pipeline called the Natchez Line, after the company completes an environmental review and prepares the necessary documents for the project.

The new pipeline will run 52 miles and have interconnections with the Tennessee Gas and Columbia Gulf pipelines near Winnsboro, LA. It will traverse Louisiana's Franklin, Catahoula and Concordia parishes before going under the Mississippi River and entering Adams County, MS, where it will end in the area of Natchez, MS. For most of its length, about 39.25 miles, the new pipeline will use the existing right-of-way of the Midla pipeline system.

Atmos Energy Corp., the Louisiana Municipal Gas Authority (LMGA) and BASF Corp. will serve as anchor shippers for the Natchez Line. The agreement stipulates that Atmos can use a maximum daily quantity (MDQ) of 20,400 Dth/d, while LMGA can use an MDQ of 3,825 Dth/d and BASF can use 1,300 Dth/d. Atmos and LMGA will have the right to take up to one-sixteenth of its MDQ in any hour, while BASF will have the right to take up to one-eighteenth.

Rates on the Natchez Line will generate about $8.1 million per year for American Midstream, with Atmos agreeing to pay $6.48 million/year, LMGA $1.215 million/year and BASF $364,000/year. Atmos and LMGA also agreed to 15-year terms from the start of the pipeline's service, while BASF agreed to a 10-year term.

Under the agreement, all of the settling parties request that FERC approve American Midstream's application to abandon the Midla system [No. CP14-125], with some changes. Specifically, the agreement calls for abandonment of the T-15, T-17, T-24 and T-49 laterals; the Desiard Compressor Station; a regulator station near Clinton, LA; the Midla mainline between Crew Lake and Alto, LA; approximately 18.5 miles of mainline between an interconnection with the Tunica Pipeline and Griffin & Griffin Exploration LLC's connection at the Spillman Field in West Feliciana Parish, LA; and other facilities.

In its letter to FERC, American Midstream said it believes the settlement will not be contested by any of the parties involved in the proceedings. Consequently, the company requested a waiver so that initial comments would be due by Dec. 19, and reply comments by Dec. 30.

"The settlement is a complex and finely-tuned compromise among Midla and the other supporting parties in these proceedings," said Dennis Kelly, senior counsel for American Midstream. "The settlement provides for continuity of gas and, in some cases, propane service to all shippers currently having natural gas delivered through the Midla facilities which are proposed to be abandoned.

"Midla and the other supporting parties therefore request that the Commission approve the settlement without modification or conditions, other than those agreed-upon in the settlement, as soon as reasonably possible."

Last October, ArcLight Capital Partners, a Boston-based hedge fund, agreed to a preliminary deal to build the new pipeline (see Daily GPI,Oct. 8).

In March, American Midstream, one of the midstream companies in ArcLight's portfolio, said it had started decommissioning the Midla system after customers had broken off negotiations over repairs and there was no interest to an open season (see Daily GPI, March 13). That unleashed the wrath of several key lawmakers, including U.S. Rep. Bill Cassidy (R-Baton Rouge) and U.S. Sens. David Vitter (R-LA), and Mary Landrieu (D-LA), chairman of the Senate Committee on Energy and Natural Resources (see Daily GPI, April 11; April 7).

American Midstream filed an application with FERC to abandon the Midla system on March 28. Despite Landrieu's calls for FERC to reject the company’s proposal, the regulatory agency agreed to its request for a rehearing for further consideration (see Daily GPI, Sept. 16).

The 370-mile Midla system was built in 1926, traverses Louisiana and Mississippi, and was designed to move gas from the then-prolific Monroe Gas Field in Ouachita Parish, LA, to a Standard Oil (now ExxonMobil Corp.) refinery in Baton Rouge, LA. In the early to mid-1970s, the system carried up to 300 MMcf/d. The mainline consists of 16- to 22-inch diameter pipe.

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