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EnCana Signs Agreement for 500 MMcf/d on Proposed Rockies Express Pipeline

EnCana Marketing USA last week signed a binding agreement for 500 MMcf/d of natural gas capacity on the proposed 2 Bcf/d Rockies Express Pipeline with project partners Kinder Morgan Energy Partners LP (KMP) and Sempra Pipelines & Storage. In addition, KMP and Sempra entered into a purchase and sale agreement with EnCana Corp. for its KMP-operated subsidiary, Entrega Gas Pipeline Inc. Financial details of the transactions were not disclosed.

The 1,350-mile, 42-inch pipe, which would be the largest one built in the United States in more than 20 years, would originate at the Cheyenne Hub in Weld County, CO, and extend to the Clarington Hub in eastern Ohio. Entrega is in the process of constructing the first segment of its 330-mile project, which extends from the Meeker Hub in Rio Blanco County, CO to the Wamsutter Hub in Sweetwater County, WY. Depending on regulatory approvals and additional shipper commitments, the pipeline would begin service in late 2007.

"The commitment from EnCana, one of North America's largest natural gas producers, demonstrates the necessity and viability of the Rockies Express Pipeline project, which will provide a solution for delivering long-life, domestically produced, natural gas to the Midwest and Northeast, thus maximizing the value of growing Rockies production," said KMP CEO Richard D. Kinder. "We are confident that EnCana's support, along with previously announced conditional commitments for another 400 MMcf/d from the Wyoming Natural Gas Pipeline Authority and an affiliate of Sempra Pipelines & Storage, will help drive the Rockies Express project forward and result in additional firm capacity commitments during the open season."

Under the terms of the purchase and sale agreement for Entrega, which is expected to close in 1Q2006, the KMP-Sempra team will construct the second segment of the project, which extends from the Wamsutter Hub to the Cheyenne Hub, where it will ultimately connect with Rockies Express. The entire Entrega system from the Wamsutter Hub to the Cheyenne Hub is expected to be placed into service by the end of 2006.

KMP and Sempra launched two separate binding open seasons this month to test market interest in expanding and extending the Entrega pipeline system (see NGI, Nov. 14). One open season seeks shipper support for an extension of Entrega from the Wamsutter Hub to the Opal Hub in Lincoln County, WY, which will make up to 1 Bcf/d of additional capacity available on Entrega. Shipper support also is being solicited for a proposed expansion of the currently certificated Entrega facilities. The expected in-service date of the extension or expansion is late 2007; however, interim service could be available prior to that date.

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