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Texas Gas Seeks Expansion of Fayetteville Shale Laterals

September 15, 2008
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Texas Gas Transmission Inc. has filed an application seeking FERC authorization for a compression expansion of its Fayetteville and Greenville laterals, which currently are under construction. The expansion is needed because production from the prolific-Fayetteville Shale basin in North Central Arkansas "is exceeding anticipated production schedules," the pipeline said.

The $162 million project calls for the construction of a new compressor station (Bald Knob Compressor Station), which will consist of two 13,330-horsepower (hp) turbine compressor units, to increase the maximum capacity of the Fayetteville Lateral to 1.3 Bcf/d from the originally planned 841 MMcf/d. Texas Gas, a subsidiary of Boardwalk Pipeline Partners LP, also proposes to build a new compressor station (Isola Compressor Station), which will consist of one 13,330-hp turbine compressor unit, to boost the maximum capacity of the Greenville Lateral in Mississippi to 1 Bcf/d from the initially planned 768 MMcf/d. It plans to modify its existing Greenville Compressor Station in Washington County, MS, as well.

Texas Gas has called on the Federal Energy Regulatory Commission (FERC) to issue a certificate order by no later than April 16, 2009 so that it can begin construction by June 1 of next year and place the proposed compression facilities in service for the 2009-2010 winter heating season. FERC certificated the two laterals in May (see NGI, May 12).

The Fayetteville and Greenville laterals, which combined consist of about 262.6 miles of pipeline, are scheduled to be in service in the first quarter of 2009. The Fayetteville Lateral would transport gas from the Fayetteville Shale play in Arkansas to the Texas Gas mainline near Lula, MS, while the Greenville Lateral would deliver gas from the Texas Gas mainline to various pipeline interconnects in Mississippi. The two laterals will give Fayetteville Shale producers access to Midwest, Northeast and Southeast markets by way of several interstate gas pipelines.

"Fayetteville Shale is even more prolific than initially anticipated. The Fayetteville area currently lacks sufficient pipeline infrastructure and capability to transport this new and increasing natural gas production to markets. The proposed project will meet the transportation and economic needs of these producers by creating additional interstate transportation capacity from north central Arkansas to markets on Texas Gas and other interstate pipelines," Texas Gas told the Commission.

The Fayetteville Shale play could hold as much as 20 Tcf of shale gas, according to experts.

Chesapeake Energy Corp. and XTO Energy Inc., major Fayettevile Shale producers, are the primary shippers supporting the project. Chesapeake has executed a transportation agreement for 100,000 MMBtu/d for a primary term beginning April 1, 2010 and continuing through Dec. 31, 2018. XTO has executed two transportation agreements, one with an initial maximum quantity of 50,000 MMBtu/d that ramps up to 300,000 MMBtu/d beginning on Jan. 1, 2009 (or on the first day of the month following in-service of the laterals), and another for 25,000 MMBtu/d for a term that begins on Jan. 1, 2009 and continues through Dec. 31, 2011.

Southwestern Energy Co., the first producer to tap the Fayetteville Shale in 2004, and Petrohawk Energy Corp. also have exercised options in their existing agreements to use a portion of the additional firm transportation capacity that will be created by the compression expansion, according to Texas Gas.

Texas Gas has asked FERC to issue a predetermination allowing it to roll the costs of the compression expansion into its agency-approved incremental rates for service on the laterals in its next Section 4 rate case.

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