El Paso Corp.’s Tennessee Gas Pipeline Co. will acquire the majority of Columbia Gulf Transmission’s interest in offshore Louisiana assets that the two companies co-own in the Gulf of Mexico, NiSource Inc. unit Columbia Gulf said. Once consummated the deal would end “all pending litigation between the companies.”

Columbia Gulf agreed to transfer its ownership in the Bluewater Pipeline System, the Bluewater Header, Columbia Deepwater’s Southwest Lateral and the South Pass and South Timbalier offshore pipeline systems. Also included in the deal are Columbia Gulf’s Pecan Island Compressor Station and Extraction Plant, the Vermilion Block 245 offshore compressor station, and the onshore section of pipeline from Pecan Island to the Egan Measuring Station.

Tennessee will assume operation of the assets upon regulatory approval and closing of the transaction.

“These assets were built by Columbia Gulf and Tennessee when both companies performed gas merchant functions prior to the unbundling of the natural gas industry, which occurred in the 1990s,” said NiSource Gas Transmission and Storage President Christopher Helms. “Today, Columbia Gulf is interconnected with numerous and diverse supply sources, including new gas supply from Texas and Louisiana at the expanding Perryville, LA, hub.”

Helms said Tennessee, as the joint venture partner in the offshore facilities, is the logical owner, adding that his company would work with Tennessee and system shippers “to ensure a smooth and seamless transition.

During an earnings briefing with analysts last week, Jim Yardley, chairman of El Paso’s Pipeline Group, said the buyout of Columbia Gulf’s share of the Bluewater system will help Tennessee do a couple of things. For one, it will help the pipeline migrate gas to its 500 line, which is a more fuel-efficient pipeline, Yardley said.”And as LNG comes on and more gas comes in from the deepwater, this will also help us move gas from west to east. This is down the road. We will be competing with others for it, but with this [Bluewater], we’ll be well positioned to get our share.”

Regulatory filings are expected by year-end from both companies, and closing is anticipated in the first half of 2008. An agreement signed last week also specifies settlement of all pending litigation between the companies at the deal’s closing. The companies said they are working on future staffing arrangements for employees who will be affected by the transaction.

In May FERC approved a stipulation and consent agreement requiring Columbia Gulf to pay a $2 million penalty for its repeated refusal to allow Tennessee to construct an interconnection on a line jointly owned and operated by the two pipelines on the Gulf Coast in Louisiana (see NGI, May 28). The interconnection was eventually built and placed into service in October 2006, but not before FERC issued three orders directing Columbia Gulf to permit the tap. The Commission issued its last directive to Columbia Gulf in July 2006, and then referred the case to the Enforcement Office (see NGI, July 31, 2006). In March 2004 Tennessee filed a complaint at the Federal Energy Regulatory Commission accusing Columbia Gulf of engaging in a “pattern of anticompetitive conduct and practices” by denying its request to construct an interconnect from its Muskrat line to the Columbia Gulf-operated side of the Bluewater Pipeline at Egan, LA (see NGI, March 22, 2004).

In March of this year FERC denied a request by Tennessee to acquire capacity entitlements that Dynegy Marketing and Trade holds to a portion of Columbia Gulf’s capacity on the South Pass 77 facilities offshore Louisiana (see NGI, March 5).

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.