Following a dispute lasting more than three years with the state of Louisiana, AGL Resources subsidiary Jefferson Island Storage & Hub LLC (JISH) has negotiated a tentative agreement with the state, which if approved would resolve the pending lawsuit between the parties over a disputed Lake Peigneur mineral lease that would allow the company to expand its existing natural gas storage facility.
A public hearing on the subject will be held by the Louisiana Department of Natural Resources in Iberia Parish on Sept. 24. The state’s mineral board must approve the agreement in order for it to be valid, and a decision could come as early as this fall. The parties also have jointly requested that the trial court delay the pending Sept. 28 trial date while the parties work through this approval process.
“To resolve the pending lawsuit, the state of Louisiana and JISH have negotiated an operating agreement by which JISH will have the right to proceed with its efforts to mine salt and create new natural gas storage caverns below its existing surface lease,” said Dana Grams, president of JISH. “If the mineral board approves the settlement, we can resume the permitting process to ensure that our project satisfies all environmental, safety and other regulatory requirements.”
Located near the Henry Hub, JISH currently consists of two salt dome storage caverns with 7.5 Bcf of working gas capacity, along with capacities of 720,000 MMbtu/d for withdrawal and 360,000 MMbtu/d for injection. JISH provides storage and hub services through direct connection to the Henry Hub via Sabine Pipe Line and eight other pipelines: Texas Gas Transmission, Columbia Gulf Transmission, Sea Robin Pipeline, Tennessee Gas Pipeline, Trunkline Gas Company, Gulf South Pipeline, NGPL and CrossTex Energy Pipeline. The two existing JISH caverns have operated since 1994.
In September 2006 JISH filed a lawsuit against the state of Louisiana for canceling a lease at Lake Peigneur that would have allowed the company to expand its facility (see Daily GPI, Sept. 7, 2006). Louisiana’s then-Gov. Kathleen Blanco pulled the company’s lease and halted the expansion following several missed royalty payments to the state and local concerns about possible contamination of the lake and the aquifer that provides water to the local community (see Daily GPI, Aug. 9, 2006).
Locals were also concerned about safety. On Nov. 21, 1980, the 1,300-acre lake collapsed after a drilling rig operated by Texaco punctured a salt dome that was being used for salt mining by Diamond Crystal Salt Mine. Once the salt dome was penetrated, lake water began to drain into the salt dome, forming a giant whirlpool that sucked down the drilling rig, 11 barges, 1.5 billion gallons of lake water, 70 acres of a nearby botanical garden, a parking lot, and reversed the flow of the Delcambre canal, temporarily creating the biggest waterfall in Louisiana.
At the time Blanco told AGL in a letter that the mineral lease obtained for mining salt at the lake in 1994 was no longer valid, and therefore there could be no additional mining of salt to create additional caverns for natural gas storage.
In its lawsuit, which was filed in the 19th Judicial District Court in Baton Rouge, JISH acknowledged that payments were missed in 2005 by the previous owner of the property, American Electric Power, and again in 2006 by AGL. However, the company said it eventually paid the overdue amounts in April 2006 and the state accepted them.
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