Shippers of Northern Natural Gas Co. have attacked the pipeline’s proposal to sell 419 miles of pipeline facilities and compression assets in Texas, Oklahoma and Kansas to Duke Energy Field Services LP (DEFS), and to reclassify the transmission facilities as non-jurisdictional gathering following the spin-off.

In November, the MidAmerican Energy pipeline signed a binding sales agreement for DEFS to acquire a portion of its pipeline assets — known as the Beaver Transmission System — located at the southern end of its system. The sale includes assets that flow unprocessed gas upstream of Northern Natural’s Beaver compressor station and the B line from Beaver to Mullinville, KS. In mid-December, Northern Natural filed an application at the Federal Energy Regulatory Commission to abandon the pipeline facilities, which range in diameter from two to 30 inches, and include 62,420 horsepower of compression, as well as other associated facilities [CP06-39, CP06-40].

The Beaver Transmission System, along with Northern Natural’s Hugoton facilities that also are up for sale, have a net book value of more than $100 million, according to the pipeline.

“Northern’s application reflects a serous lack of candor with the Commission about the scope of authority [it] needs…in order to close its deal with Duke,” said Mewbourne Oil Co., a Tyler, TX-based gas producer that is a shipper on the pipeline system that Northern is seeking to sell to DEFS. It noted that Northern Natural failed to tell FERC that it and DEFS have agreed to complete their transaction “as long as the Commission does not find…more than 265 miles of pipeline out of the 419 miles” to be jurisdictional gas transmission.

“Duke and Northern obviously have serious concerns about whether the Commission is likely to grant all of the relief they have requested; otherwise, they would never have agreed to complete their sale and purchase even if the Commission finds adversely to their requests on more than 60% of the pipeline included in the application,” Mewbourne Oil said.

FERC “is entitled to know in its deliberations that the applicant has determined that the public convenience and necessity can be served even if the Commission denies more than 60% of the requested relief,” the Texas producer said. It urged FERC to dismiss Northern Natural’s application “without prejudice,” and direct Northern Natural in a refiling to indicate which segments of pipeline Duke would be willing to operate as a jurisdictional pipeline if the Commission so determines.

In voicing its opposition, PVR Midstream LLC, a major gas gathering, processor and shipper on Northern Natural’s Beaver Transmission System, said it “will find its gas supplies and the supplies of its customers stranded behind DEFS’ newly-reclassified ‘gathering’ facilities, with no meaningful access to PVR’s own processing facilities and, importantly, with no outlet to gas consumers on Northern’s system.” It called for Northern Natural’s project application to be “rejected in its entirety, or significantly circumscribed.”

PVR noted that it competes actively for business with DEFS in the region served by the Beaver Transmission System. Its ability to continue providing service to its existing customers, as well as to compete effectively with DEFS for new gathering and processing customers, is wholly dependent upon PVR’s continued access to transportation capacity on the Beaver Transmission System at reasonable terms, rates and conditions, the company said.

“The Northern/DEFS spin-off application, if approved, would put PVR in the wholly untenable position of having the rates, terms and conditions of services it provides to its customers dictated by its largest competitor, who is inappropriately seeking to leverage its already-dominant position in the gathering and processing markets on Northern into a monopoly position,” PVR Midstream charged.

Texas Gas Service Co.(TGS), a division of Oneok Inc. and shipper on the Northern Natural System, noted that the sales agreement between Northern Natural and Duke was executed more than two months ago. Yet, Northern Natural has not yet notified TGS as to its options in light of the proposed abandonment, nor has Duke contracted TGS in an effort to reach “mutually agreeable” terms and conditions of service.

TGS urged FERC to deny Northern Natural’s spin-off application, or set the proceeding for a full evidentiary hearing before an administrative law judge.

Affiliate Oneok Energy Services Co. LP. (OESC), which is considered one of the largest customers on the Northern Natural system, contends that Northern Natural has failed to meets it burden under the NGA to demonstrate that the proposed asset abandonment is consistent with the public interest. “In fact, the record is clear that the ‘public loss’ to OESC would be significant if the requested abandonment were granted.”

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