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Ruby Pipeline Clears Hurdle for Wyoming-to-Oregon System

FERC Friday issued a preliminary determination on non-environmental issues for the Ruby Pipeline project, a 675-mile, 42-inch diameter pipeline that would move 1.5 Bcf/d of Rockies natural gas from the Opal Hub in Wyoming to Malin, OR. A final certificate, which is the next step, will be awarded to Ruby if it receives a favorable environmental review from the agency.

The Federal Energy Regulatory Commission dismissed as "premature and speculative" the concerns of Gas Transmission Northwest Corp. (GTN) and Texas Gas Transmission that El Paso Corp.'s Ruby Pipeline project would lead to unsubscribed capacity on their systems. Pacific Gas and Electric (PG&E), which has signed up for capacity on the Ruby line, has decided to turn back 250 MMcf/d of its existing firm capacity on GTN.

"The potential loss of transportation services by GTN [is] attributable, in part, to the decline in gas supplies from production areas in western Canada. We also note that Ruby and GTN are holding discussions on transportation options using GTN facilities from Ruby's proposed interconnection with GTN at Malin. This interconnection will offer GTN's captive customers the opportunity to access competitively priced domestic gas from Rocky Mountain production areas and will offer GTN an opportunity to increase its system's utilization," the FERC order said [CP09-54].

"While Ruby's proposed project will provide a competitive alternative to existing pipelines, none of these parties has demonstrated real economic harm, especially since Ruby's footprint will overlap with only a portion of existing pipelines' service areas," FERC said in response to the concerns of Texas Gas.

"We [also] reject Texas Gas's request, based on its concern as a holder of capacity on El Paso's system, that we somehow condition our approval of Ruby's proposed pipeline to ensure that El Paso's shippers do not incur increased costs as a result of El Paso having more unsubscribed capacity once its affiliate Ruby constructs its competing pipeline," the order said.

"We find that Ruby's proposal is consistent with Commission policy, as any adverse impacts of the proposal on competing pipelines and their existing customers will be the result of fair competition. Further, since the Ruby pipeline will bring domestic gas supplies to markets that now depend on declining imports of Canadian gas supplies, any adverse impacts of the Ruby pipeline on existing pipelines currently transporting those supplies and their shippers may be mitigated by the new opportunities that the Ruby pipeline will create for the existing pipelines to transport gas from additional sources for their shippers," FERC said.

Ruby Pipeline so far has signed precedent agreements for nearly 1.01 Bcf/d of firm capacity for terms ranging from five to 15 years. PG&E executed a precedent agreement for 375,000 Dth/d from receipt points near the Opal Hub to near the Malin Hub in Oregon. "Ruby has precedent agreements for long-term service utilizing a large percentage of the capacity of the proposed pipeline. In addition, the Ruby project will provide direct access for producers in the Rockies to the California, Nevada and Pacific Northwest markets," the order noted.

The project, which has an estimated cost of $3 billion, would extend westward from the Opal Hub through Wyoming, Utah, Nevada and terminate at the Malin Hub in Klamath County, OR. It plans to interconnect with the facilities of PG&E, GTN and Tuscarora Gas Transmission in the vicinity of Malin. The project also calls for the installation of four compressor stations along the Ruby mainline, four receipt meter stations; and four bidirectional delivery points. Ruby anticipates placing the pipeline in service by March 2011, according to the order (see NGI, June 22).

In July El Paso took on private equity fund Global Infrastructure Partners (GIP) as a joint venture (JV) partner for its Ruby Pipeline project, adding more assurance that the Wyoming-to-Oregon pipeline will be completed (see NGI, Aug. 3).

Under terms of the JV, GIP would invest up to $700 million to acquire a half stake in Ruby. Initially GIP would invest $405 million through a 7% secured note, which would reimburse El Paso for half of its costs to date and fund half of its future costs to develop the project. When construction financing is completed, the note would be exchanged for a convertible preferred equity interest in Ruby.

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