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FERC Approves Market-based Rates for Unocal Keystone Expansion

FERC Approves Market-based Rates for Unocal Keystone Expansion

The Federal Energy Regulatory Commission Thursday voted to approve market-based rates for storage and hub services for an expanded Unocal Keystone Gas Storage LLC, facility in the Permian Basin in Winkler County, TX, near the Waha Hub.

Unocal Keystone currently operates storage in two salt caverns with total working gas capacity of 2 Bcf, injection capability of 100 MMcf/d and deliverability of 200 MMcf/d. It expects to add two more caverns this year and a third by 2006, at which time it will have a total of 5 Bcf capacity with 167 MMcf/d of injection capability and 400 MMcf/d of deliverability. Eventually the goal is to develop as much as 15 Bcf of capacity at the site.

The company operates 3.8 miles of pipeline connecting the storage field to El Paso Natural Gas, Northern Natural Gas and Transwestern pipelines. The two caverns have been in service since September 2002, operating under market-based rates. Thursday's FERC action extends that authority to the new caverns. Unocal Keystone operates as a Hinshaw service under Texas Railroad Commission jurisdiction.

The existing storage is fully subscribed . An open season held late last year looking for a minimum of 2 Bcf for the new caverns, brought in bids for over 3.5 Bcf, according to Unocal's Chris Hoekenga. The company currently is negotiating the bids into firm agreements. One of the new caverns will be opening in April and the second in October, which is about the time work will start on the third cavern. Developing the salt caverns takes about 18 months to two years, Hoekenga said.

Unocal has two storage facilities operating in Alberta and is looking at three or more other potential storage projects, in Colorado, Arizona and Texas. "Two have a really good chance of turning out," Hoekenga said.

FERC issued a press release about Unocal Keystone, saying, "The action underscores the Commission's desire to encourage construction of new natural gas storage facilities and allow applicants to obtain market-based rates where appropriate." FERC said there were at least five storage projects with applications on file from the Waha production area, indicating a competitive market.

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