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Wyoming Pipeline Authority Seeks State Incentives for Firm Shippers

Having had some success in encouraging producers to sign on for firm long-term commitments for the Rockies Express (REX) Pipeline, the Wyoming Pipeline Authority (WPA) is working to convince the state legislature to incentivize shipper support for other pipeline projects to export gas out of the state, thereby contributing to state revenues.

Except for Alaska, the state of Wyoming gets a greater percentage of its revenue from the production of natural gas than any other state. "Over 90% of the gas produced in Wyoming is sent out of state. It's our biggest crop," Brian Jeffries, executive director of the WPA, told NGI recently. "Roughly 50% of state revenue derives from the value of natural gas," which explains why lower prices for Rockies gas that has trouble getting out of the basin are important to state officials. Lower Rockies gas prices "have a particularly negative impact on Wyoming."

"If we can get a pipeline built sooner, rather than later, the cost of incentives will pale beside the revenues increased prices can bring to the state," Jeffries said. This is why officials of WPA have been holding discussions with members of the state legislature on a measure to provide state incentives for shippers to sign up for long term capacity on proposed new pipelines. Jeffries said WPA is suggesting a direct state appropriation fund that would partially reduce the cost of transportation for the first two to three years of a shipper's contract.

"We're not trying to talk producers into doing something they otherwise wouldn't do. We just want to help those producers who are considering it to get off the fence." Jeffries explained that a shipper might think he will need the capacity in the future, but he can't be sure exactly when because of delays in permitting or drilling plans. "It would lessen the risk of a timing error if the producer had a reduced shipping rate for the first few years." He said the incentive would only be offered for a viable project worthy of consideration. And there would be a time limit on it to encourage speedy action.

"We are hoping the legislature will consider this. We're the only state that has even thought about it." The Wyoming legislature doesn't meet again until next February.

Capacity out of the Rockies is growing, according to Jeffries. Using the Trailblazer Expansion in 2001 as the starting date of the analysis and continuing through the most recent expansion of Cheyenne Plains Gas Pipeline and the eventual completion of REX, the quantity of pipeline export capacity out of the Rockies added will be 3.9 Bcf/d. The subtotal of all of the new additions minus REX is 2.1 Bcf/d. REX will move 1.8 Bcf/d when construction to Ohio and related compression additions are completed in 2009. The contributions by pipeline are:

The WPA can claim some of the success in lining up producer infrastructure support. According to a WPA study prior to REX of the 20 largest shippers out of Wyoming, producers and their affiliates had about 40% of the capacity, with marketers taking 20% and utility, electric power and industrial customers signing on for 40%. Post-REX the producers have 50% of the enlarged pipeline capacity, marketers 19% and the consumers 30%. WPA had taken 200 MMcf/d of firm capacity on REX-West initially to show its support for the project and then dealt the capacity off to others.

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