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MarkWest, ArcLight Form Arkoma Connector Venture

MarkWest Energy Partners and ArcLight Capital Partners have formed a joint venture for the construction and operation of the Arkoma Connector, a 50-mile interstate gas pipeline that would allow producers in the Woodford Shale area of Oklahoma to interconnect with the Midcontinent Express and Gulf Crossing pipeline systems for delivery of their gas to eastern markets.

Under terms of the joint venture, ArcLight will acquire a 50% equity interest in the pipeline for $62.5 million. MarkWest will operate the pipeline and ArcLight will pay a fee to MarkWest to manage the joint venture. Following operational commencement of the pipeline, the two partners will invest equally in ongoing costs associated with operating or expanding the pipeline.

Standard & Poor's Ratings Services (S&P) said creation of the venture will not immediately affect MarkWest's ratings or outlook.

"We view the transaction as supportive of credit because of its potential to reduce debt and improve liquidity, while at the same time providing MarkWest the opportunity to complete one of its strategic growth projects," S&P said.

Denver-based MarkWest said it expects the 24-inch diameter Arkoma Connector Pipeline to be completed this month. The pipeline will extend from the outlet of an affiliate's existing treating plant in northeast Oklahoma 50 miles in a southeasterly direction to near Bennington, OK, where it will interconnect with the Midcontinent Express and Gulf Crossing systems. The project also calls for the construction of approximately 19,500 hp of compression at two compressor stations and associated facilities in Coal, Atoka and Bryan counties in Oklahoma.

The Arkoma Connector is expected to have the capability to deliver 625,000 Dth/d out of the Woodford Shale area to the Bennington area. Upon completion MarkWest said it will have total takeaway capacity in southeast Oklahoma of approximately 1.3 Bcf/d. MarkWest Pioneer, a subsidiary of MarkWest Energy Partners LP, has inked precedent agreements with two anchor shippers -- Newfield Exploration Mid-Continent Inc. for 500,000 Dth/d of firm transportation for a term of nine years, and with Chesapeake Energy Marketing Inc. for 76,000 Dth/d of firm transportation for a term of 10 years.

FERC approved MarkWest's Arkoma Connector plans last November (see Daily GPI, Nov. 14, 2008).

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