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Fayetteville Shale Laterals Get Environmental Nod

FERC Friday issued a favorable environmental assessment (EA) to Texas Gas Transmission Inc. for its proposed compression expansion of its Fayetteville and Greenville laterals, which are under construction. Texas Gas, a subsidiary of Boardwalk Pipeline Partners LP, sought the expansion last September to accommodate growing production from the prolific Fayetteville Shale basin in North Central Arkansas.

In the EA, staff recommended that the Federal Energy Regulatory Commission (FERC) find that the compression expansion would have "no significant impact" on the environment [CP08-467].

The $162 million project would add two compressor stations on the Fayetteville and Greenville laterals. One compressor station (Bald Knob Compressor Station in White County, AR) would consist of two 13,330 hp turbine compressor units to boost the maximum capacity of the Fayetteville Lateral to 1.3 Bcf/d from the originally planned 853 MMcf/d, according to the EA. The second compressor station (Isola Compressor Station in Humphreys County, MS) would consist of one 13,330 hp turbine compressor unit to increase the maximum capacity of the Greenville Lateral in Mississippi to 1 Bcf/d from the initially planned 751 MMcf/d. It also proposes to modify its existing Greenville Compressor Station in Washington County, MS.

Texas Gas has asked the Commission to issue a certificate order by no later than April 16 so it can begin construction by June 1 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, 2008).

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. 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.

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 Fayetteville 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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