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Southern Star Receives FERC Nod to Sell Oklahoma Pipe Assets

FERC last Monday gave Southern Star Central Gas Pipeline the green light to sell part of its regulated natural gas pipeline system in Oklahoma to unaffiliated gatherer Keystone Gas Corp. for an estimated $250,000. Following the sale, the pipe facilities would become nonjurisdictional gathering.

The pipeline, which has a diameter raging from 12 to 16 inches, extends from Southern Start's existing Oklahoma City line in Logan County, OK, continues for approximately 46 miles through Payne County, and terminates at Southern Star's existing Drumright Compressor Station in Creek County. The line is called the Mulhall-Drumright pipeline. It has a throughput of 750 Mcf/d.

Cushing, OK-based Keystone Gas is buying the Mulhall line in order to integrate its 14 subsystems of gathering laterals into one system to allow for more efficient gas flow to the interstate market. The Mulhall line will connect directly with five of Keystone's gathering subsystems and will link with the remainder indirectly, according to Owensboro, KY-based Southern Star.

The subsystems include 1,106 miles of highly reticulated pipeline, ranging from 2 to 12 inches in diameter, that connect with 6,000 natural gas wells and oil wells producing casing-head gas.

"Keystone is exclusively in the natural gas gathering and related businesses. After acquisition by Keystone, the Mulhall line's primary purpose will be to carry natural gas purchased by Keystone from the region's many independent oil and gas producers to the interconnection with Southern Star at the Mulhall end of the line for interstate market transmission and utilization. Accordingly...the Mulhall line will perform primarily a gathering function and thus will be exempt from Commission jurisdiction" under the Natural Gas Act, the order said [CP05-371].

FERC dismissed a protest in which TAG Petroleum Inc., a local gatherer, claimed that the applicants, among other things, had not provided for continuity of service for the 29 customers served solely by Southern Star or by a combination of Southern Start and Oklahoma Natural Gas (ONG), a local distribution company.

"We disagree [with TAG's claim]. Southern Star and ONG have agreed to transfer to Keystone the facilities necessary to continue service to existing customers," the order noted.

Southern Star owns and operates a 6,000 pipeline mile that transports gas from the Rocky Mountain and Midcontinent regions to major metropolitan areas in Kansas and Missouri.

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