Blue Sky Gas Storage LLC has received a certificate from FERC to construct and operate a natural gas storage field and associated pipelines in Colorado. The project is intended to serve Rockies gas producers.

The facility, which is to be constructed in the Armstrong Gas Field, a nearly depleted gas reservoir in Logan County, will have a total capacity of nearly 6.5 Bcf (4.4 Bcf of working gas and 2.1 Bcf of cushion gas). Blue Sky said the facility has been designed to accommodate a minimum of two storage cycles per year and will have a maximum injection and withdrawal rate of 100 MMcf/d. The company said it hopes to begin construction during the second quarter with start-up during the first quarter of 2011.

The project was filed with the Federal Energy Regulatory Commission in June and received a favorable environmental assessment from the Commission in October (see NGI, June 15).

Blue Sky, which is a subsidiary of Linear Energy Holdings LLC in Houston, said the purpose of the facility is "to provide gas storage services to interstate shippers of natural gas and to allow them to manage intra-month and intra-week price volatility, provide balancing services and manage seasonal price arbitrage opportunities." The company said it will offer storage services at competitive rates to a variety of customers from the Front Range to the Midwest and will have access to the Cheyenne Hub via firm backhaul capacity on Trailblazer Pipeline.

To connect the project Blue Sky proposes to construct a 5.3-mile, 16-inch diameter pipeline header extending north from the storage facility to interconnections with Rockies Express Pipeline LLC (REX) and Trailblazer Pipeline Co. The company also proposes to construct a 9.8-mile, 16-inch diameter pipeline header extending southwest from the storage facility to an interconnection with Kinder Morgan Interstate Gas Transmission LLC (KMIGT).

"The Blue Sky storage facility would be an important addition to the Central Rockies market and we believe additional storage in the area could help shippers in situations such as the shortage of supply recently announced on KMIGT and the lack of available capacity currently existing on REX," said Paul Jornayvaz, managing partner of Blue Sky.

In its filing with FERC, Blue Sky said that "[w]hile both interconnections would have a bi-directional flow capacity of 100 MMcf [per day], Blue Sky anticipates that it will be able only to receive gas at its interconnect with Rockies Express, given its higher operating pressure."

The company also plans to construct two meter stations, one at the interconnection with Rockies Express and Trailblazer and one at the interconnection with Kinder Morgan. Blue Sky also proposes to construct a 4,740 hp compressor station, consisting of two 2,370 hp reciprocating compressors and dehydration equipment.

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