Topsy-Turvy Week in FL Ends with Gulfstream Sale
While the political battleground in Florida grew bloodier with
each passing day last week, natural gas pipelines eager to serve
the growing market reached a truce agreement of sorts that calls
for Duke Energy and Williams to purchase the proposed Gulfstream
Natural Gas System from The Coastal Corp. and ditch their competing
Buccaneer Pipeline project for the state.
Duke Energy and Williams refused to discuss the specifics of the
deal, except to say that they were purchasing 100% of Coastal's
interest in the Gulfstream project, and that the transaction was
subject to federal regulatory approvals and the Coastal/El Paso
Energy merger being finalized. They expect the merger to be final
before the end of the year. The cost of building the Gulfstream
project has been estimated at $1.6 billion.
Coastal approached both Duke and Williams with the Gulfstream
offer after the Federal Trade Commission (FTC) conditioned its
approval of the pending merger on Coastal divesting its assets in
Florida, said Robert B. Evans, president of Duke Energy Gas
Transmission. The agency ordered the asset divestiture because El
Paso already owns 50% of Florida Gas Transmission, the sole gas
pipeline currently serving the Sunshine State.
"Until the merger is complete, Coastal will continue to develop
and market Gulfstream, will ensure that the project moves forward
as scheduled and will remain fully committed to its many
stakeholders in Florida," said Coastal Chairman and CEO David A.
Arledge. At the same time, Duke and Williams said they will
maintain their Buccaneer application on file at FERC until the
While Williams and Duke obviously were "very happy" about their
plans to acquire Gulfstream, Evans expressed remorse about Coastal
being forced to exit the Florida gas market. "They would have been
a good partner if we could have eventually become partners with
them," he noted.
"We're going to step into Gulfstream's shoes at FERC," said
Evans, explaining that Duke and Williams won't be required to file
a new application at the Commission. Nor, he added, do the
companies plan any immediate changes for the pipeline project that
would serve Central Florida.
"We have no planned changes at this time. They [the Gulfstream
sponsors] have got a good route laid out, and have moved along very
well on contracting for construction of the pipe, in getting things
done right away and, of course, [in negotiating] contracts with the
customers," he told NGI.
Gulfstream has precedent agreements with 10 large Florida
utilities and power-generation facilities for the majority of the
1.1 Bcf/d capacity of the proposed pipeline.
Evans acknowledged that Duke and Williams will have a better
chance in the Florida market with Gulfstream than Buccaneer. "At
this point in time, the market appears to be ready for this
pipeline. And Gulfstream has done a good job of positioning
themselves to make that happen...It gives us entrance into the
market quicker than we would have had if we'd have stayed with our
The opposition of Florida landowners to the Buccaneer project
did not factor into the companies' decision to go with Gulfstream
over Buccaneer, Evans said.
Evans said he expects FERC to certify the Gulfstream project by
early next year, and it will be in service by June 2002. The
744-mile pipeline wound run under the Gulf of Mexico and come
ashore at Tampa, providing 1.1 Bcf/d of new gas supplies to the
middle region of Florida.
The state forecasts that about 10,000 MWs of new gas-fired
generation capacity will be built in Florida between now and 2010,
which would boost gas demand by 1.6 Bcf/d, according to Evans.