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TransColorado Expansion Approved

TransColorado Expansion Approved

After several years on hold because of poor Rocky Mountain region market conditions, TransColorado Gas Transmission's Phase II expansion project is proceeding and should be in service in December. FERC approved the 300 MMcf/d expansion earlier this month as did the Bureau of Land Management and the U.S. Forest Service.

The new line would link the existing TransColorado pipeline in the northern San Juan Basin in northwestern New Mexico with the mainline facilities of Questar in the Piceance Basin near the Big Hole area of Rio Blanco County in northwestern Colorado. The line also is expected to be connected to Colorado Interstate Gas on the north end. It is an important addition to regional pipeline infrastructure, providing access to growing reserves and production in the Piceance, Uinta and the Green River basins.

When the Phase I project was approved by FERC in late 1994, TransColorado sponsors felt the market wouldn't support the northward extension. But improved market conditions, including higher gas prices, an increase in drilling activity in the Rocky Mountain region and better access to Midwestern and MidContinent markets, have allowed the Phase II project to go forward.

"If you look just at the 30-day market, you're unconvinced. But if you look at the pattern that's existed over the last couple years and what's behind the pattern that has evolved," you see a solid market need for new capacity in the region, said Julian Huzyk, marketing director for TransColorado. "In calendar year 1996, you had an average differential between northern Rockies and San Juan of 22 cents, and in 1997 you had an average of 33 cents. This year it looks as though it's going to be closer to a 1996 pattern, somewhere in the 20s. But San Juan Basin supplies are still expected to - come 2000 - show a dramatic drop-off in coal-seam [gas] production. And couple that with projections of a number of analysts that California demand is going to increase and Canadian pipeline projects will be taking supplies away from California," and you have a strong case for the TransColorado expansion, said Huzyk.

Huzyk also noted drilling in the region has increased significantly over the last few years in response to stronger prices, new pipelines (such as KN Energy's Pony Express) and the expansions of Wyoming Interstate and Trailblazer. He said recent outlooks show regional production growing 500 MMcf/d this year and 860 MMcf/d by the end in 1999. Huzyk provided basin-specific data projecting 1999 production levels up 43%, or 106 MMcf/d, in the Piceance; 55%, or 159 MMcf/d in the Uinta; 8%, or 147 MMcf/d in the Green River Basin; 60%, or 226 MMcf/d in the Wind River; 1,300% or 230 MMcf/d in the Powder River and flat in the Trust belt.

TransColorado's Phase II expansion is proposed to be about 280 miles of 22- and 24-inch diameter pipe. Two mainline compressor stations will add about 10,000 hp to the system. TransColorado selected winning bidders this week and plans to begin construction of the Phase II project by July 27, with completion by December.

Shippers signed agreements several years ago for 210 MMcf/d of the 300 MMcf/d of expansion capacity. Most of those agreements will be renegotiated, but Huzyk said he expects shippers to sign up for the entire space in the pipe. TransColorado Gas Transmission is jointly owned by Questar Corp. and KN Energy.

Rocco Canonica

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