Western Producers Press FERC for Construction Start on Pipe to Connect Rockies, Midwest

Wyoming and Montana natural gas producers and other western business interests are urging FERC to issue "as soon as possible" a certificate to Williston Basin Interstate Pipeline Co. to build its proposed 245-mile Grasslands Pipeline to carry gas from the Powder River Basin to a connection with Northern Border Pipeline and Midwest markets. They insist the project is critical to expand their access to markets and to bring the prices for their gas up to par with those of other producers across the nation.

In calling for the Commission's urgent attention, the producers pointed out that the window of opportunity to construct a pipeline in the West is an abbreviated one. "The construction season in Montana is weather-constrained; therefore granting of the certificate needs to be accomplished quickly to allow the construction season to be utilized," wrote the Montana Petroleum Association (MPA), which represents producers, pipelines, refiners and associated service companies in the state, in a letter to FERC Monday [CP02-37].

The "construction of this project should take place while the weather is warm. A springtime start will allow for more time to perform reclamation work in ideal weather conditions," agreed the Petroleum Association of Wyoming (PAW), whose members account for more than 90% of the gas and over 80% of the crude oil produced in the state, in a separate letter.

"If pipeline construction is not completed by November [2003], it's quite possible it may not be completed until the following spring. That kind of delay is costly," said Renee C. Taylor, environmental coordinator for Belle Fourche Pipeline Co. and other affiliates of True Oil in Wyoming.

The comments were in response to FERC's draft environmental impact statement (DEIS) for the Grasslands project, which was issued in January. The proposed pipeline is awaiting final environmental clearance and a certificate.

The Grasslands project "is extremely important to the state of Wyoming and its producers. The disparity between natural gas prices received by Wyoming producers and prices paid for gas produced elsewhere in the country is having a devastating effect on not only those who rely on this resources to make their living, but also on the state treasury," said PAW. Taylor estimated that Wyoming producers currently fetch $2/Mcf less for their gas than other producers nationwide.

"By some estimates, [this] is costing Wyoming up to $1 million per day in lost royalties and severance tax revenue. The reason for this inequality is primarily Wyoming's lack of pipeline capacity to move natural gas to the market," noted the Wyoming producer group, adding that it believed the Grasslands project would "help alleviate the price disparity."

Wyoming has a "decided shortage of natural gas transmission," and Williston Basin is proposing a "partial solution" with its Grasslands project, said True Oil's Taylor. In addition, "this pipeline will provide access to a vast natural gas storage field in southeastern Montana, allowing producers the option of storing their gas until [market] conditions improve."

The MPA spelled out a similar situation in Montana. "Pipeline constraints impact prices received for Montana natural gas. Montana producers have often endured transportation penalties on prices received" as a result of the tight capacity situation, the group said. "This impacts not only revenues to producers, it affects royalties paid to the federal government and taxes and royalties paid to the state of Montana."

The Western Business Roundtable, which represents a cross-section of business interests in western states, also urged FERC to act expeditiously on the Grasslands project. "We strongly believe that an important linchpin of the West's long-term economic viability is responsible development of the region's substantial energy resources...The Grasslands Pipeline would contribute to that objective by allowing resources from the natural gas-rich Rocky Mountain region to be exported to the energy-hungry Mid-continent markets (including the Chicago area)."

Not of all the comments were favorable, however. The Commission's DEIS on the proposed Grasslands Pipeline was "too narrow in scope to provide an adequate assessment of the consequences of the project," said the Dakota Resource Council in Dickinson, ND.

"Pipeline construction is not taking place in a vacuum. Public statements by the developers have made it clear that the pipeline's purpose is to serve intensive new gas development in the region, particularly from coalbed methane (CBM) wells. CBM production entails massive impacts on aquifers throughout the region...The EIS contains no analysis of these impacts," the council said.

The Northern Plains Resource Council and the Western Organization of Resource Councils believe the environmental effects of the Grasslands project and expanded CBM development in the Wyoming and Montana portions of Powder River Basin should have been evaluated in one EIS. The Bureau of Land Management (BLM) offices in Wyoming and Montana already have conducted separate environmental reviews of methane development in the basin.

The two councils urged FERC and the BLM to "take a step back and complete a single EIS" on pipeline construction and CBM exploration and development in the region.

Williston Basin has said its proposed 16-inch diameter pipeline will be a "single-purpose pipeline," transporting CBM gas from the Powder River Basin in Montana and Wyoming to the Northern Border Pipeline system, which in turn would deliver the gas to Midwest markets. The line is expected to have an initial capacity of up to 180 MMcf/d, with the capability to expand to approximately 200 MMcf/d.

The proposed pipeline would start 15 miles north of Gillette, WY, and would terminate just south of Killdeer, ND, where it would interconnect with the Northern Border system. Williston Basin has indicated that construction on the line could be completed by as early as late 2003, assuming the company receives all of the necessary approvals from FERC quickly.

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