Houston-based Falcon Gas Storage Co. last week was awarded a lease by the state of Alabama for three depleted gas reservoirs, allowing it to move forward with its MoBay Storage Hub project.

Falcon was the only bidder seeking to lease the reservoirs in Alabama waters north of Dauphin Island. Bids were opened Dec. 19, about two years after Falcon first started talking to the state about leasing the reservoirs for its project.

Edmund Knolle, Falcon COO, told NGI the company should have the lease wrapped up by the end of the month and will release more project details then. The company is working on project financing and has procured some of the long lead-time items necessary for construction. The storage project is now projected to be in service by fall 2009.

Falcon's bid was $3 million/year for the 50-year lease of the reservoirs, which includes a 2.5 cent/Mcf injection charge. Falcon will pay the state $15 million up front for the first five years of the lease.

MoBay received its certificate under Section 7 of the Natural Gas Act from the FERC in January 2007 (see NGI, Jan. 8, 2007). Air, water and U.S. Army Corps of Engineers permits all have been granted, Knolle said.

The project is slated to provide 50 Bcf of working gas capacity and 1 Bcf/d of injection and withdrawal capacity. MoBay will offer firm and interruptible storage, balancing, wheeling, parking and loaning services at market-based rates. Future receipt points may include the four gas processing plants at Coden (1.3 Bcf/d) and the proposed 1.14 Bcf/d Southeast Supply Header (SESH) project planned to connect with the Gulfstream, FGT, Gulf South, Southern Natural Gas, Columbia Gulf Transmission, CenterPoint Energy Gas Transmission, Texas Eastern Transmission and Tennessee Gas pipelines.

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