NGI The Weekly Gas Market Report / NGI All News Access

FERC-Approved Projects Give Shale, LNG More Market Access

Following its August hiatus, FERC last Thursday approved three expansions -- for Midcontinent Express Pipeline (MEP), Transcontinental Gas Pipe Line (Transco) and Mississippi Hub LLC. The proposed facilities would give shale gas producers and liquefied natural gas (LNG) importers greater access to natural gas markets along the East Coast and in the Northeast.

The approval for a compression expansion of the 500-mile MEP system came only weeks after the entire Oklahoma-to-Alabama pipeline was placed into service (see NGI, Aug. 10). The order authorizes a 300,000 Dth/d expansion to 1,832,500 Dth/d of MEP's Zone 1, which extends 308 miles from an interconnection with Enogex at Bennington, OK, to an interconnection with Columbia Gulf Transmission near Delhi, LA [CP09-56]. The pipeline's Zone 2 spans about 200 miles from Delhi to Transco's Station 85 in Butler, AL. The compression expansion will boost takeaway capacity either directly or indirectly from the Barnett Shale, Woodford Shale, Fayetteville Shale, the Anadarko and Arkoma Basins, and Bossier Sands.

MEP, a joint venture of Kinder Morgan Energy Partners LP (KMP) and Energy Transfer Partners LLC (ETP), proposes to install one 6,135 hp compressor unit at its Lamar Compressor Station in Lamar County, TX; increase by a total of 4,090 hp the certificated level of operation of two previously approved compressor units for the Atlanta Compressor Station in Cass County, TX; and install one additional 6,135 hp compressor unit at the Vicksburg Compressor Station in Warren County, MS.

As a result of an open season in the summer of 2008, MEP said it entered into two long-term firm transportation precedent agreements with nonaffiliated shippers (Chesapeake Energy Marketing Inc. and National Fuel Marketing Co.) for the entire 300,000 Dth/d of expansion capacity. MEP anticipates the expansion project will go into service in 2010, according to the order.

The Commission granted MEP's request to roll in the costs of the expansion, which were pegged at $82 million, into expansion phase rates that were previously approved. "We are able, in this Section 7 proceeding, to approve initial rates for the Midcontinent Expansion Project service which reflect rolling the costs of that project into previously-approved, but-as-yet-to-be-implemented expansion phase rates," the order said.

The long-awaited MEP system went into operation in August, providing shale natural gas producers with a major route to eastern markets. The $1.3 billion pipeline begins in Oklahoma, runs through Louisiana and ends at an interconnection with Transco in Alabama.

KMP and ETP each own a 45% interest in MEP. MarkWest Pioneer LLC, a subsidiary of MarkWest Energy Partners LP, last year entered into an option agreement to acquire 10% of the equity of MEP once it is placed into service.

Over the strong protests of a Washington, DC-based utility, the Federal Energy Regulatory Commission (FERC) also gave the green light for Transco's proposal to construct two bidirectional interconnections to receive regasified LNG from the proposed Elba Express pipeline system.

The proposed facilities would allow Transco to receive up to 1,175 MMcf/d from the two interconnections with Elba Express, which still is being developed, and deliver gas into the Elba Express system. The 189-mile Elba Express will transport regasified LNG from Southern LNG Inc.'s Elba Island terminal at Elba Island, GA.

Washington Gas Light (WGL), which serves natural gas customers in parts of Washington, Virginia and Maryland, protested the Transco project, saying regasified LNG entering its distribution system from Transco's system could damage pipeline couplings in Fairfax County and Centreville in northern Virginia. WGL's argument mirrored the one it raised against Dominion Cove Point LP's expansion four years ago. The utility claimed that LNG from Cove Point terminal was responsible for leaks on its distribution system (see NGI, May 23, 2005).

"We find no merit in Washington Gas' protest. In the Cove Point Expansion Project, we addressed at length the same contention that Washington Gas makes here, i.e. that receipt of regasified LNG has caused damage to its system, resulting in an increased number of leaks on its system. In that proceeding we found that Washington Gas' leaks were caused primarily by other factors, namely the application of hot tar to the coupling seals as a means of corrosion control, the increase in operating pressures on Washington Gas' system, and colder temperatures...and we explained that these leaks would not occur on a properly maintained system," the FERC order said [CP09-88].

"The Transco interconnects with Elba Express are over 500 miles from the Washington Gas system and no one [other than WGL] raised an issue regarding the quality of the Elba Island gas supply...Nevertheless, Washington Gas suggests that the Commission require Transco (presumably at the expense of all its customers) "to make revisions to its compressors or other physical plant to permit the flow of LNG to less than all four of its lines' to protect Washington Gas from having to 'make substantial investments in its system in order to prepare to take receipt of gas' flowing in interstate commerce which meets the gas quality requirements of Transco and of all the pipelines with which Transco interconnects.

"Washington Gas gives no consideration to the potential impacts such a restriction on Transco's operations might have on other shippers and end-users; implementing Washington Gas' proposal might well reduce customers' supply choices and impede a competitive market," the order noted.

FERC gave Mississippi Hub the go-ahead to expand by nearly 5 Bcf the authorized capacity of its high-deliverability salt dome natural gas storage facility that is under development in southern Mississippi.

The certificate order would raise the authorized capacity of the two-cavern facility to 22.1 Bcf from 17.34, with each cavern having the working gas capacity of 7.5 Bcf and cushion gas capacity of 3.55 Bcf. Mississippi Hub, a subsidiary of EnergySouth Inc., also plans to add 15,800 hp of compression, raising the total storage field compression to 45,005 hp from the previously approved 29,205 hp.

The proposed facilities would increase the storage field's maximum delivery capacity to 1.4 Bcf/d from 1.2 Bcf/d and the previously approved maximum injection capacity to 0.8 Bcf/d from 0.6 Bcf/d. Mississippi Hub also proposes to construct 14.2 miles of 24-inch diameter pipeline and 22.6 miles of 30-inch diameter pipeline to connect its header system to Southeast Supply Header System's (SESH) and Transco systems, respectively.

"The proposed project will be located in a competitive market and is intended to serve new demand. Further, the [Mississippi] Hub expansion will increase the availability of high-deliverability natural gas storage capacity in the Gulf Coast area, thereby enhancing the interstate pipeline transportation system," FERC said in the order approving the expansion [CP09-110].

FERC approved Mississippi Hub's request to charge market-based rates for all firm and interruptible storage, hub and wheeling services.

The Mississippi Hub project, which FERC approved in February 2007, currently is under construction at the Bond Salt Dome in southeastern Mississippi (see NGI, Feb.19, 2007). The storage facility is being developed in close proximity to interstate pipelines and pipeline expansion projects that access major natural gas markets, including Southern Natural Gas, Crosstex Pipeline, SESH, Transco, Gulf South Pipeline and the MEP system. The facilities location also will allow access to traditional gas supplies in the Gulf of Mexico and along the Gulf Coast, as well as production from the Barnett Shale, East Texas and North Louisiana.

In January FERC granted Mississippi Hub a multi-year extension of the deadline to complete and place into service its previously authorized storage project (see NGI, Jan. 26). At the time the company told FERC it expected to complete construction of its first storage cavern during the first half of 2011, with remaining facilities to be finished and operable by early 2012. The agency gave Mississippi Hub until Feb. 15, 2012 to complete the project. Thursday's certificate order requires the expansion facilities to be completed and in service within three years.

Last year San Diego-based Sempra Energy acquired Mobile, AL-based EnergySouth, which has a 60% interest in Mississippi Hub (see NGI, Aug. 4, 2008).

©Copyright 2009 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

Comments powered by Disqus