FERC on Thursday reaffirmed on remand an order approving a lease agreement between Midcontinent Express Pipeline LLC, an interstate system, and Enogex LLC, an intrastate pipeline, to transport natural gas produced in Oklahoma.

In late December the U.S. Court of Appeals for the District of Columbia Circuit remanded a May 2009 Federal Energy Regulatory Commission (FERC) order that authorized Enogex's lease of up to 272,000 Dth/d of capacity on its system to Midcontinent. Apache Corp., an Oklahoma producer and shipper on Enogex, challenged the order at FERC and eventually petitioned the court, arguing that the lease of capacity to Midcontinent -- along with Enogex's lease of capacity to Gulf Crossing Pipeline Co. LLC -- would reduce the amount of capacity that would be available to Apache for its existing Natural Gas Policy Act (NGPA) Section 311 interruptible service on Enogex (see Daily GPI, Jan. 3).

On judicial review, the court held that FERC had failed to justify one aspect of its decision -- that the lease agreement would not adversely affect the service of existing customers on Enogex.

In response to the court's remand and "after having examined the potential adverse effects of the lease on existing service, we have determined that the lease will not likely lead to adverse effects, that if it does so it would only affect interruptible Section 311service, the diminution of which we, as a general matter, do not consider a disqualifying adverse effect, and that, in any event, the many significant benefits of the lease outweigh the potential adverse effects that Apache has posited. We therefore affirm our approval of the lease," the FERC order said.

The Commission claimed that as an NGPA Section 311 interruptible customer, "Apache has no claim on Enogex's capacity. If, in fact, there is a reduction in the availability of interruptible Section 311 services in the future as a result of the Enogex-Midcontinent lease, that is a consequence inherent to the nature of interruptible service," it said.

"The Commission has found...that it is relatively unlikely that Apache's production will be shut in, or, if that occurs, that the lease will be the cause. We find a party's assertion of adverse effects unconvincing," the order said.

The lease agreement allows Midcontinent to transport gas from various points in Oklahoma to Bennington, OK, and from there into Midcontinent's interstate system.

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