FERC has issued a certificate to Gulf South Pipeline Co. LP for a second major expansion of its system that would give Texas, Oklahoma, Arkansas and Louisiana natural gas supplies greater access to Northeast, Florida and other Southeast markets.
The Southeast Expansion calls for the construction of an 111-mile, 42-inch diameter pipeline extending from the end of Gulf South's 1.7 Bcf/d East Texas-to-Mississippi Expansion project at Harrisville in Simpson County, MS, which the Federal Energy Regulatory Commission (FERC) approved in June, to a new interconnect with Transcontinental Gas Pipe Line in Choctaw County, AL (see NGI, June 25).
Gulf South also plans to build interconnects with Destin Pipeline, Tennessee Gas Pipeline and Southern Natural Gas along the pipeline route, as well as install a total of 45,080 horsepower of compression at its Delhi Compressor Station in Richland Parish, LA, Harrisville Compressor Station in Simpson County and Destin Compressor Station in Clarke County, MS.
The proposed expansion would increase Gulf South's capacity by 1.268 Bcf/d. The pipeline said it has entered into precedent agreements with customers to transport 660 MMcf/d at negotiated rates with terms ranging from five to 10 years, and expects to lease additional capacity to Gulf Crossing Pipeline Co. at a future date. Gulf South, a subsidiary of Boardwalk Pipeline Partners LP, estimates that the project will cost $406.3 million and anticipates a January 2008 in-service date.
As part of the Southeast Expansion, FERC approved Gulf South's request to lease 260 MMcf/d of capacity from Destin Pipeline. The lease agreement provides Gulf South with an option to increase the leased capacity to 700 MMcf/d. Gulf South says the leased capacity will enable it to provide access to Florida markets.
Gulf South, in justifying its project, said gas supplies from Texas, Oklahoma, Arkansas and Louisiana en route to the Perryville-Harrisville area currently have exceeded the capacity of existing pipelines to deliver those supplies further east. Absent additional pipe infrastructure from the Perryville-Harrisville area, it contends that capacity constraints will only get worse as more gas production comes on line.
The proposed Southeast Expansion would provide new takeaway capacity for these new gas supplies to be delivered to major pipelines serving the Northeast, Florida and other Southeast areas, Gulf South said. Moreover, it noted that the project would allow markets that have historically relied on offshore production to access competitive onshore supplies to meet their gas needs.
"The Southeast Expansion project...will benefit the public because it will provide an important new outlet to the interstate market for natural gas from capacity-constrained production areas that are expected to serve as rich supply sources. The project will likewise help create market alternatives, and enhance gas supplies available to customers on other connected pipelines," the FERC order said [CP07-32, CP07-105, CP07-110].
FERC did not rule on whether Gulf South could roll the costs of the expansion into its next Section 4 rate case. "When Gulf South files a future Section 4 proceeding to recover the costs associated with the expansion project, it will [at that time] have to demonstrate that its proposed rate treatment will not result in the subsidization of this expansion by existing shippers," the order said.
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