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Pentex Seeking Utility Status for Marcellus Gathering System

A small midstream outfit with utility status in Pennsylvania is looking to add some Marcellus Shale business.

Pentex Pipeline Co., a Dallas-based company with operations in Pennsylvania, recently asked the Pennsylvania Public Utility Commission (PUC) for permission to expand its gathering system to add Marcellus Shale wells in the northeast corner of the state.

The PUC first gave Pentex a certificate of public convenience in 1988 to operate a transmission system in Bradford County. Pentex built a pipeline to connect the Tennessee Gas Pipeline (TGP) to a Taylor Packing Inc. plant in Bradford County. The food processing giant Cargill Inc. bought the plant in 2002. Cargill is currently Pentex's sole customer, although Pentex is allowed to bring on additional customers up to the capacity of the existing system.

But now Pentex wants to expand that gathering system. It's proposing to connect Marcellus Shale producers in six townships in the southeast corner of the county to the Cargill plant and to ship any excess volumes to TGP. Pentex wants the PUC to expand the service area of its utility status to match that proposed gathering system.

In its application to the PUC Pentex did not detail the size or scope of the system but said it has "discussed this project with several well drillers that are interested in using the proposed gathering system to get their gas to market."

Bradford County produces more natural gas than any other county in Pennsylvania, 65.8 Bcf in the second half of 2010, but the lack of high-pressure pipelines in the region means producers sometimes drill, stimulate and then cap wells.

Laser Northeast Gathering Co. LLC is seeking utility status to operate a gathering and transmission system in neighboring Susquehanna County, but it hit an obstacle in December when an administrative law judge recommended that the PUC deny the application, saying that the project wouldn't provide a public service (see Shale Daily, Dec. 3, 2010). Despite the regulatory uncertainty, Laser recently broke ground on the project (see Shale Daily, Feb. 3).

With utility status, a pipeline becomes rate-regulated but also gets the ability to exercise the right of public domain. Pentex believes its project would serve the public good.

"Given the dramatic increase in natural gas production in Pennsylvania as a result of the Marcellus Shale development and the corresponding need for gathering and transmission services, Pentex's proposed service will provide the public with a substantial benefit," the company wrote in its March 8 application to the PUC.

The PUC has not yet scheduled a hearing on the matter.

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