NGI The Weekly Gas Market Report / NGI All News Access

Industry Briefs

Rockies Express Pipeline (REX) said last Thursday that weather has yet again delayed service to REX-East interim delivery points, this time until the first half of June. Previously the pipeline said service would be delayed until late May (see NGI, May 11). On Thursday REX affirmed its previously projected in-service dates for Lebanon, OH, of June 15 and Clarington, OH, of Nov. 1. The Illinois River horizontal directional drill has caused repeated delays of REX-East work (see NGI, April 27). For more information visit, "Rockies Express -- East," "REX-East -- Informational Posting."

With its strategy more trained on oil than natural gas, Denbury Resources Inc. has agreed to sell 60% of its Barnett Shale natural gas assets to privately held Talon Oil & Gas LLC for $270 million. Denbury said assets being sold contributed 16% of its total output and 18% of its total proved reserves at the end of 2008. Production attributable to the interest in the properties being sold last year averaged 45.7 MMcfe/d, weighted 77% to natural gas. Besides its Barnett Shale holdings, the Dallas-based explorer is the largest gas and oil operator in Mississippi, and it owns the largest reserves of carbon dioxide used for tertiary oil recovery east of the Mississippi River. The sale is expected to close in late June. After the transaction is completed, Talon will operate the properties after a transition period. Proceeds from the sale initially will be used to repay Denbury's outstanding bank debt. As part of the transaction, Talon is acquiring some of Denbury's natural gas swaps for 2010 that total 16 MMcf/d at an average price of $5.65/MMBtu, and natural gas swaps for 2011 totaling 13 MMcf/d at an average price of $6.16. At closing Talon agreed to pay the market value of the derivative contracts, or if the amount is negative, Talon would be reimbursed, Denbury said.

Lexington, KY-based NGAS Resources Inc. has agreed to sell a 50% interest in most of its Appalachian gas gathering facilities to its gas processing partner, Seminole Gas Co., for $28 million. NGAS said proceeds will used to be reduce debt and strengthen its balance sheet. NGAS said the portion of the company's gas gathering and midstream facilities covered by the purchase agreement spans 485 miles through parts of southeastern Kentucky, eastern Tennessee and western Virginia. The companies expect the sale to close by the middle of June. Upon closing, NGAS will enter into various gas marketing and sales arrangements with Seminole Energy Services, the parent of Seminole Gas. Under the arrangements, NGAS will remain operator of the facilities and will have firm capacity rights for daily delivery of 30 MMcf of controlled gas through the system. Seminole Energy will have a six-month option to purchase NGAS' remaining 50% interest for $22 million. Under certain conditions, NGAS will have the right to require Seminole Energy to exercise its purchase option.

The New York State Public Service Commission (PSC) has established near- and long-term targets for natural gas efficiency that would decrease the amount of gas used by home and business owners by nearly 15% over the next 10 years. The new targets are expected to result in an average annual reduction in gas use of 3.8 Bcf/d by 2020. Combined with reductions anticipated from other sources, estimated gas use by 2020 could decline by 14.7%, independent of any fluctuations in use caused by fuel-switching or other economic factors, said the PSC. The program portfolio assumptions underlying PSC targets through 2011 would use a mixture of 75% residential programs, of which 20% would be allocated to low-income customers. A quarter of the programs would be designed for commercial/industrial users, with half of the programs allocated to small commercial/industrial customers and half for large commercial/industrial customers. The decision is available at under the "Commission Documents" section, Case No. 07-M-0548. Commission orders also are available from PSC's Files Office, 14th Floor, Three Empire State Plaza, Albany, NY 12223; (518) 474-2500.

FERC has approved a certificate for Williams' Transcontinental Gas Pipe Line's (Transco) Mobile Bay South project. New service from the project would be available in the second quarter of 2010. The project is designed to create 253,500 Dth of southbound, year-round firm capacity on the Mobile Bay Lateral from Transco's mainline at Station 85 near Butler, AL, to its interconnect with Gulfstream Natural Gas System in Coden, AL. "The Mobile Bay South project will enable us to provide firm southbound transportation service for growing domestic supplies from new pipeline interconnects at Station 85 to markets in Southwest Alabama and Florida, as well as third-party storage facilities, while maintaining the full capability of the lateral to supply our traditional customers through northbound service to Station 85," said Phil Wright, president of Williams' natural gas pipeline business. The project will require construction of a 9,470 hp compressor facility at Station 85 in Choctaw County, AL. Williams estimates that the project facilities will cost $37 million. The project received its environmental approval from the Federal Energy Regulatory Commission in March (see NGI, March 23).

With natural gas futures prices "considerably less than the average price for the last three winter heating seasons," the Maryland Public Service Commission (PSC) initiated a proceeding to review the hedging plans of the state's gas and electric utilities. The PSC ordered the state's utilities to file hedging plans by Tuesday (May 19) and scheduled a hearing at PSC headquarters in Baltimore on May 27. The PSC has taken a decidedly hands-on approach to Maryland utilities' gas purchases in recent months. In March the PSC ordered each of the utilities to purchase 40% of its summer gas injection needs immediately for delivery through October (see NGI, March 23). In a series of orders the PSC directed Baltimore Gas & Electric Co., Washington Gas Light Co., Columbia Gas of Maryland, Chesapeake Utilities Corp. and Easton Utilities Commission to take actions -- other than options -- to assure that 40% of their summer natural gas injection volumes for delivery between April and October "will reflect pricing that reflects a Henry Hub price of $4.32 or less per MMBtu plus basis cost."

ExxonMobil Corp. has begun drilling at the Point Thomson oil and gas field on the North Slope in Alaska, the company said. Last month ExxonMobil said it had mobilized an upgraded drilling rig that can be used in the deep reservoirs using extended-reach drilling technology (see NGI, April 27). It also said first production from the play is on track to begin by year-end 2014. The rig, owned by Nabors Alaska, was moved from Deadhorse on the North Slope to the drilling site in modules, some weighing more than one million pounds. Because there are no permanent roads to Point Thomson, Fairweather E&P Services Inc. and Nanuq/AFC constructed more than 30 miles of ice road. Most of the ice road follows the shoreline along the Beaufort Sea.

Clean Energy Fuels Corp., a Seal Beach, CA-based natural gas for transportation provider, said it has agreed to acquire the natural gas fueling station business of Exterran Holdings Inc. for an aggregate price of $5.9 million. The acquisition agreement includes station operation and maintenance contracts with four transit operators and eight fueling facilities dispensing 25 million gasoline gallon equivalents annually. The transit agencies involved are the Los Angeles County Metropolitan Transportation Authority, which operates the nation's largest clean air bus fleet; Montgomery County Transit in Maryland; Washington Metropolitan Area Transit Authority in Washington, DC; and the Massachusetts Bay Transportation Authority in Boston. Along with the volume and revenue additions, Clean Energy strategically "expands its participation in the transit industry nationwide" through the acquisition, according to CEO Andrew Littlefair. He said more than 20% of the nation's transit buses now run on natural gas.

The Bureau of Land Management (BLM) is taking comments about Noble Energy's plans to drill natural gas wells from five well pads south of Rulison, CO, in western Garfield County. The U.S. Department of Energy has dropped its opposition to gas drilling within a half-mile of the Project Rulison nuclear blast site, but Garfield County commissioners have asked DOE to drill some test wells before any new energy development is allowed closer to the site. Noble's Cache Creek Master Development Plan, on file at BLM's Glenwood Springs, CO, office, outlines plans to drill 79 wells in the next two to three years. Included in the proposal are plans to build a road and pipeline on U.S. Forest Service (USFS) lands. The BLM and the USFS will prepare environmental impact statements of the plans, and the public will be allowed to submit comments until June 8. Written comments should be directed to BLM's Glenwood Springs Energy Office, 2425 S. Grand Ave., Ste. 101, Glenwood Springs, CO 81601; electronic comments may be submitted to Copies of the plan and the project map are available at Select "Oil and Gas," "Master Plans of Development" and "Cache Creek Proposed Plan."

Bellevue, WA-based Puget Sound Energy (PSE) has asked Washington state regulators to cut its retail natural gas utility rates 12.5% overall and 16.4% for residential customers, effective June 1. Separately, the Puget Energy combination utility also asked the Washington Utilities and Transportation Commission (WUTC) to begin an 11-month review of what PSE called moderate general rate hikes collectively totaling $175.2 million for its gas and electric utility customers. The utility said it is taking advantage of the current low wholesale natural gas prices by securing supplies for the rest of 2009 and storing increased supplies for next winter in what it said "captures benefits" for its retail customers. In a May 8 filing, PSE requested an overall $27.2 million, or 2.2%, increase in gas rates and a $148 million, or 7.4%, overall increase for electric utility charges. The utility is asking for the general rate increases to be effective April 1 next year. The utility added the caveat that none of the proposed increase is related to the $7.4 billion merger that closed last February, taking Puget Energy private with an investment consortium headed by a North American unit of the Australian firm, Macquarie. PSE said that if projected wholesale natural gas prices stay low, it hopes to file another purchased gas adjustment request this summer to extend the cost reduction in October to cover next winter's heating season rates.

The Los Angeles Harbor Commission approved spending $44.3 million for natural gas-powered trucks in the port, which combined with that of neighboring Long Beach makes up the nation's busiest harbor. In its 2009 Clean Truck Incentive Program, Seal Beach, CA-based Clean Energy expects to provide the majority of the 1,000 alternative-fueled trucks by the end of this year. Clean Energy provides the infrastructure and fuel as either compressed natural gas or liquefied natural gas to power trucks -- replacing the ones that run on diesel fuel. In addition, the port is investing in lithium battery electric-powered vehicles, too. Clean Energy said the port last year put more than 2,200 trucks in service that meet or exceed the 2007 U.S. Environmental Protection Agency emission standards. Since last October the ports of Long Beach and Los Angeles combined have reduced air pollution by more than 23%, the LA port said.

Credit rating outlooks for several pre-paid long-term natural gas purchases by public-sector utilities and the billions of dollars of bonds supporting them turned more positive as Standard & Poor's Ratings Services translated an uptick in the outlook for a Merrill Lynch & Co. unit as cause to remove negative outlooks on the muni deals. Earlier in May S&P was giving all of the same deals a "negative" outlook. Impacted so far are Roseville Natural Gas Financing Authority, Long Beach Bond Financing Authority, Public Authority for Colorado Energy (PACE), and Main Street Natural Gas Inc. In each case, Merrill Lynch Commodities Inc. (MLCI) is providing the pre-paid gas supplies and Merrill Lynch serves as the guarantor.

Southern Union Co. weathered the storm of lower realized commodity prices from the company's gathering and processing segment to post 1Q2009 adjusted net earnings that beat analyst's estimates. Adjusted net earnings for the quarter were $73.1 million, or 59 cents per share, which beat analyst predictions that ranged from 50 to 55 cents/share. Net earnings including special items were $44.1 million, or 36 cents per share, compared with $78.6 million, or 64 cents per share, in the prior year. The Houston-based transporter, storer, gatherer, processor and distributor of natural gas said its earnings are still being impacted by Hurricane Ike's visit last September. Southern Union said Ike negatively impacted the quarter by an additional $2.1 million, or 2 cents per share, as a result of a $3.4 million reduction in transportation revenue compared to the prior year due to reduced volumes flowing after the hurricane. In addition to creating lower volumes, Ike's rampage left a lasting impact on Southern Union's pipeline infrastructure. The company recorded a $16.1 million charge during the quarter to increase the provision for repair and abandonment costs as a result of damage to the company's Sea Robin Pipeline caused by the hurricane. The company expects 2009 net earnings of $1.45-1.60 per share and adjusted net earnings of $1.75-1.90 per share.

Maryland Attorney General Douglas F. Gansler has filed a lawsuit in federal district court challenging the Department of Commerce's decision overriding the state's efforts to block AES Sparrows Point LLC's proposed 1.5 Bcf/d liquefied natural gas (LNG) import terminal and pipeline east of the Port of Baltimore. Maryland has asked the U.S. District Court of Maryland in Baltimore to reverse the decision issued by former Commerce Secretary Carlos Gutierrez and to send the issue back to Obama Commerce Secretary Gary Locke with instructions to abide by the Coastal Zone Management Act. In its June 2008 decision, Commerce determined that the national interest served by the Baltimore facility would outweigh its limited adverse coastal effects. The proposed project would help meet regional energy demand by providing enough natural gas to heat approximately 3.5 million homes per day or to generate electricity for 7.5 million homes per day, and the impact of dredging to fish and aquatic vegetation would not be significant, the agency said (see NGI, June 30, 2008).

©Copyright 2009 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

Copyright ©2018 Natural Gas Intelligence - All Rights Reserved.
ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus