In order to provide Georgia customers with liquefied natural gas (LNG)-sourced gas, Southern Natural Gas pipeline has asked FERC for authorization to sell pipeline, proposed compression and associated facilities to Magnolia Enterprise Holdings Inc., a subsidiary of Atlanta-based AGL Resources Inc., for an estimated $20.3 million.

Magnolia Enterprise, in the same filing, requested that it be allowed to lease the facilities back to Southern Natural so that the pipeline can continue to operate and maintain the facilities as part of its interstate gas pipeline system [CP08-5]. The transaction, subject to Federal Energy Regulatory Commission (FERC) approval, is expected to close on Dec. 1, 2009.

Specifically, Southern Natural is seeking to sell:

Magnolia Enterprise also would acquire AGL's Brunswick Pipeline, and then lease it to Southern to be operated with the other facilities as part of Southern's system.

The undivided interest in the facilities to be sold to Magnolia Enterprise would be equal to approximately 82,000 Mcf/d, according to the companies. They noted the facilities would provide Magnolia Enterprise with direct access to approximately 275 miles of interstate pipe facilities and gas supplies at Southern's Elba Island LNG terminal to serve the anticipated growth in gas demand in Georgia.

On Sept. 27, the Georgia Public Service Commission approved AGL's proposal to provide Georgia customers with access to Elba Island LNG supplies via a series of pipes, some owned by Southern Natural (see NGI, Oct. 8). The Atlanta, GA-based utility estimates the sale facilities will eventually provide approximately 3% of its gas supply. AGL developed the plan to diversify its supply sources. Currently, most of the company's capacity comes from the Gulf of Mexico. Developing the new route will cost an estimated $43 million, which AGL will recover through gas capacity charges.

In addition to the proposed facilities' sale, Southern Natural proposes to build a new meter station at or near the interconnection of its Cypress Pipeline with AGL's Brunswick Pipeline in Glynn County to provide measurement for gas volumes delivered to AGL on the eastern portion of AGL's Brunswick Pipeline, which will not be sold to Magnolia Enterprise.

It also seeks to construct a new measurement station on the Southern Brunswick Pipeline in Jones County, GA, at the new MM3 delivery point, which would have a design capacity of 67,140 Mcf/d.

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