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Rockies Express to Lease 1.5 Bcf/d of Overthrust Capacity; Starts NEPA Process

Adding another significant supply component to its proposed 1,350-mile Rockies Express pipeline system, Kinder Morgan Energy Partners LP and Sempra Pipelines & Storage signed a new binding memorandum of understanding to lease 1.5 Bcf/d of capacity on Questar Corp.'s Overthrust Pipeline system in Wyoming to fill in the western end of the line. The deal came as FERC granted a request by Rockies Express sponsors to initiate the National Environmental Policy Act (NEPA) pre-filing process for the first segment of the project.

If finally approved by the Federal Energy Regulatory Commission, the $3 billion, up to 42-inch diameter pipeline project to carry Rockies gas east to Ohio would be the largest built in the United States in more than 20 years.

The pre-filing process will apply only to the first segment of the project extending 725 miles from Cheyenne, WY, to Audrain County, MO, where it would interconnect with the Panhandle Eastern Pipeline. FERC consideration of applications for the remainder of the cross-country line "will be conducted separately." Pending shipper commitments and regulatory approvals, the first segment of the proposed project is expected to be in service by late 2007. The second and third segments of the pipeline are expected to begin service in 2008 and 2009, respectively.

The Overthrust capacity lease announced last Monday will effectively extend the Entrega Pipeline system -- which Kinder Morgan and Sempra are buying from Encana and which is under construction upstream of the Rockies Express pipeline -- by about 140 miles from the Wamsutter Hub in Sweetwater County, WY, westward to the Opal Hub in Lincoln County, WY.

"The capacity lease agreement between Rockies Express and Overthrust provides access to significant sources of existing and future natural gas production in western Wyoming, and moves us another step forward towards making the Rockies Express Pipeline a reality," said Scott Parker, president of KMP's gas pipelines group.

Questar Pipeline COO Allan Bradley noted that Rockies production will continue to grow, but existing pipelines out of the region are full. "We need more pipelines, to move more gas -- and they need to be built soon. Questar intends to do its part to ensure these pipelines get built."

The agreement with Overthrust will accommodate shipper commitments received in a binding Entrega open season that currently is under way. Overthrust will transport gas received from the Opal Hub and from numerous pipeline interconnects and processing plants along its route, and deliver it to Entrega at the Wamsutter Hub.

Overthrust plans to construct new interconnections from its existing 88-mile, 36-inch diameter pipeline to various receipt points in the area of the Opal Hub, and from the current terminus of the Overthrust system at the Kanda Station near Rock Springs, WY, to physically connect with Entrega at Wamsutter. The pipeline concluded an open season last week that was held to determine customer interest in an expansion and extension project to Opal and Wamsutter (see NGI, Oct. 31).

The 330-mile Entrega system is being built from the Piceance Basin in western Colorado north to Wamsutter and then east to the Cheyenne Hub in northern Colorado, where it would connect with Rockies Express which would extend to Clarington, OH, at a connection with Dominion Gas Transmission, Dominion East Ohio and Texas Eastern. Rockies Express also would have interconnections to more than 10 other major interstate pipeline systems.

As part of the agreement announced last Monday, Overthrust plans to add compression to handle the capacity lease quantity. The current capacity of Overthrust is about 500 MMcf/d. The expected in-service date of the new facilities and capacity lease operation would coincide with the anticipated start of operations on the first segment of Rockies Express.

In its order issued Nov. 18 [PF06-3] FERC said "your intention is to file a certificate application on May 2006...You requested that the Commission approve the Rockies Express Pipeline project (Segment 1) by March 2007. We believe that it will be possible to coordinate with other agencies, complete the process of producing the (environmental impact statement) and present our recommendations to the Commission in that timeframe."

Entrega already has been approved by FERC and is under construction from the Meeker Hub in Rio Blanco County, CO, to the Wamsutter Hub. Under the terms of a recently executed sale by EnCana Corp., Kinder Morgan and Sempra will construct the second segment of Entrega that will extend from Wamsutter to the Cheyenne Hub in Weld County, CO (see NGI, Nov. 21).

For details on Rockies Express, go to http://www.kindermorgan.com/business/gas_pipelines/rockies_express/.

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