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Industry Briefs

The Federal Energy Regulatory Commission issued a certificate to a Kentucky-based storage developer to construct and operate a 13 Bcf underground natural gas storage facility in Hopkins County, KY. Orbit Gas Storage Inc. of Henderson, KY, proposes to convert the depleted White Plains Gas Field to gas storage and build an approximately 22-mile pipeline header, compressor station and associated facilities (see NGI, June 9, 2008). The Kentucky Energy Hub Project would have an estimated 5 Bcf of working capacity and 8 Bcf of cushion gas, the company said. It further noted that the project would have the capability to deliver and inject gas at a rate of approximately 100 MMcf/d and would interconnect with ANR Pipeline near Rabbit Ridge, KY [CP08-409]. The Commission approved Orbit's request to charge market-based rates for firm and interruptible storage services in interstate commerce.

IntercontinentalExchange (ICE) has begun offering clearing services for physical natural gas products at three additional points -- Columbia Gulf Onshore, Columbia Gulf Mainline and Tennessee 500 Leg -- through its exclusive alliance with Natural Gas Exchange (NGX). ICE already has 10 clearable locations at the Henry Hub, Malin, PGE Citygate, Demarc, NGPL-TEXOK, NGPL-Midcont, Panhandle, TCO, Dominion-South. and Transco Stn 65. The clearing services offered by NGX are an extension of ICE's standard bilateral trading capabilities, which will remain unchanged. Similar to the cleared financial markets functionality, both cleared and bilateral orders will be displayed in the same price stream. There will be a fundamental change to the hours of operation for these new clearable markets. Trading hours will be 7:30 a.m. EST to noon EST for all Next Day and Balance of Month products. To use the physical clearing, traders will first need to establish an account with NGX. ICE first introduced cleared financial gas products (Henry Hub Swap) to the industry in 2002 and paper basis a short time later. ICE said the success of using a central counterparty to clear and settle transactions led to the strategic alliance between ICE and NGX. Traders are advised to contact ICEHELPDESK at (770) 738-2101 with technical issues.

El Paso Corp. has sold $500 million of seven-year senior notes, a move designed to enhance the company's ability to handle $1 billion of debt maturities that expire in May. Moody's Investor Services rated the offering "Ba3" and said the outlook for El Paso and all four of its majority-owned pipeline subsidiaries -- El Paso Natural Gas Co., Southern Natural Gas, Tennessee Gas Pipeline Co. and Colorado Interstate Gas Co. -- remains "stable." Standard & Poor's Ratings Services (S&P) affirmed a "BB" credit rating on El Paso, and said the outlook is "negative." El Paso also reported that its proved natural gas and oil reserves at the end of 2008 totaled 2.5 Tcfe, including 222 Bcfe related to its 48.8% interest in Four Star Oil & Gas Co. The E&P unit of the company spent $1.7 billion in 2008. Extensions and discoveries were up 69% over 2007 results. Because it was required to value its E&P reserves for 2008 based on closing commodity prices for Dec. 31, 2008, , El Paso said that for 4Q2008 it will take a noncash charge of $1.9 billion on its oil and natural gas reserves, and it will take a $100 million charge for an impairment to the reserves of Four Star. El Paso is scheduled to release its 4Q2008 earnings on Feb. 26.

Energy Transfer Partners (ETP) has finished its 56-mile Katy expansion pipeline project, which increases the capacity of the partnership's existing ETC Katy natural gas pipeline in southeast Texas by more than 400 MMcf/d. Announced in October 2007 (see NGI, Oct. 15, 2007), the 36-inch Katy expansion provides approximately 20,000 hp of compression to the 30-inch diameter section of the ETC Katy pipeline, which extends from the partnership's Grimes County, TX, compressor station to the Katy natural gas trading hub. The project increases the capacity of the pipeline from 700 MMcf/d to more than 1.1 Bcf/d, enhancing transportation service out of the Barnett Shale and Bossier Sands natural gas plays in Texas. ETP said it now has nearly 13,000 miles of natural gas gathering and transportation pipelines in Texas and claims to operate the largest intrastate pipeline system in the United States. In September the company completed two natural gas projects, adding 875 MMcf/d of capacity to its existing transmission systems -- the 42-inch diameter Carthage Loop pipeline in Texas and the 36-inch diameter San Juan Loop pipeline in New Mexico (see NGI, Sept. 15, 2008).

Sempra Energy unit Sempra Pipelines & Storage is offering up to 2.5 Bcf of firm gas storage service from a pipeline and storage expansion that would enable firm receipts and deliveries on the Gulfstream Natural Gas system at Coden, AL. Additional receipt and delivery points will be considered, including those owned and operated by Florida Gas Transmission, Transcontinental Gas Pipe Line, Southeast Supply Header, Gulf South and Southern Natural Gas, Sempra said. The storage services would be supported by Bay Gas Storage, a salt dome facility 40 miles north of Mobile, AL, and/or Sempra's Mississippi Hub Storage project in Simpson County, MS. These services also would be supported by pipeline facilities and the assets and capabilities of Sempra Pipelines & Storage's new office in Houston. Sempra Pipelines & Storage, through its subsidiary Sempra Midstream Inc., is seeking nonbinding bid proposals for terms of three years and longer with service beginning in August 2010. Bids will be accepted until the close of business on Feb. 25. For more information, contact Russell Murrell at (281) 423-2789 or

Corning Natural Gas Corp. (CNG) recently completed a pipeline to Pennsylvania that taps Marcellus Shale production for delivery to CNG customers in New York state. CNG President Mike German said the project was the largest single expansion built by the company in a quarter century. The pipeline interconnects with a producer's gathering line in Jackson Township PA. In approving the 75-foot, 10-inch diameter line, which crosses the New York-Pennsylvania state line, the Federal Energy Regulatory Commission in November noted that "Corning neither owns nor operates an interstate natural gas transmission system, nor does it have an extensive transmission system. Corning has no pipeline in the requested service area, and only a total of 385 miles of distribution mains. The 75-foot interconnection with Fortuna [Energy] in Pennsylvania will only allow Corning to obtain additional natural gas supplies to serve customers in an area of New York that currently has no other source of natural gas."

The pipeline industry worldwide is set to ramp up substantial capacity additions between now and 2013, with natural gas pipelines responsible for 63% of total capital expenditures (capex) over the period, according to a report by UK-based Douglas-Westwood Ltd. Douglas-Westwood reported the findings in its World Onshore Pipelines Market Report 2009-2013. The consultant is forecasting that almost 139,000 kilometers (86,370 miles) of hydrocarbons trunk pipelines will be constructed over the next five years at a total capital cost of more than $144 billion. At that rate, pipeline spending would be 5% higher than in the previous five-year period of 2004-2008. Globally, more than $91.4 billion is expected to be required to install over 80,000 kilometers (49,709 miles) of gas pipelines -- accounting for 63% of total global capex and 58% of overall installation length. The most significant growth in length installed and associated capex is seen for pipelines 54 inches in diameter or more. North America, Asia, Eastern Europe and the former Soviet Union will account for 74% of pipeline capex to 2012, the consultant said.

TransCanada Corp. reported net income for fourth quarter 2008 of C$277 million, 47 cents/share, compared to C$377 million, 70 cents/share, for fourth quarter 2007. The results reflect tax benefits and land sale proceeds in the 2007 period. Earnings for 2008 were C$1.3 billion, C$2.25/share, an increase of about 8% compared to 2007. The company increased its quarterly dividend 6% to 38 cents/share. "TransCanada's financial performance in 2008 demonstrates our ability to generate significant earnings and cash flow even in these uncertain economic times," said CEO Hal Kvisle. Net income in fourth quarter 2007 included C$56 million of favorable income tax adjustments and a C$14 million gain on the sale of land. Fourth quarter 2008 and 2007 included C$6 million and C$10 million, respectively, of fair value gains in the company's gas storage business. Earnings were C$271 million, 46 cents/share, for fourth quarter 2008 compared to C$297 million, 55 cents/share, in fourth quarter 2007.

The Idaho Public Utilities Commission (PUC) said it supports the need for new state legislation allowing the state's private-sector utilities to propose additional programs, policies and rates to help assist low-income energy utility customers. The PUC cited its staff report, "Energy Affordability Final Report," issued following a series of workshops held during the last half of 2008. State regulators do not want the utilities "compelled" to offer more low-income programs, but provide them more flexibility of offering more financial assistance without violating current parts of the state statutes. What the PUC is recommending is a change in a current statute (Idaho Code 61-315) that prevents the investor-owned utilities from granting "any preference or advantage" to persons or corporations when it establishes rates. Participants in the workshops included the PUC staff, the major investor-owned utilities (Idaho Power Co., Avista Utilities, Rocky Mountain Power, Intermountain Gas), the Northwest Industrial Gas Users, Community Action Partnership Association of Idaho, American Association of Retired People (AARP), Idaho Community Action Network and the Snake River Alliance.

National Fuel Corp. reported a loss for the quarter of $42.7 million, or minus 53 cents/share, due to a previously announced $108.2 million (after tax), noncash impairment charge to write down the book value of its oil and gas producing properties due to lower year-end commodity prices. In the year-ago period the company earned $70.6 million, or 82 cents/share. Excluding the impact of the ceiling test charge, results in the exploration and production segment (represented by National Fuel's Seneca Resources Corp.) were $24.7 million, or 31 cents/share, compared to $34 million, or 39 cents/share, in the first quarter of the prior year. The decrease was primarily due to lower oil prices realized after hedging and lower natural gas production. For the quarter, the weighted average oil price received by Seneca after hedging was $64.34/bbl, a decrease of $8.25/bbl, from the prior year's first quarter. The weighted average gas price after hedging was $8.90/Mcf, an increase of $1.00/Mcf compared to the prior year's first quarter. Seneca is active in California, Appalachia and in the Gulf of Mexico. Pipeline and storage operations in western New York and western Pennsylvania are carried out by National Fuel Gas Supply Corp. and Empire Pipeline Inc. The segment's earnings of $17.2 million, or 21 cents/share, for the quarter increased $4.4 million, or 6 cents/share, when compared with the year-ago period, mainly due to higher transportation and storage revenues and higher efficiency gas revenues. Utility operations are carried out by National Fuel Gas Distribution Corp. in western New York and northwestern Pennsylvania. Earnings of $22.1 million, or 28 cents/ share, for the quarter increased $1.9 million, or 4 cents/share compared with the year-ago period.

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