Oneok Inc. closed on the acquisition of a wide range ofMidcontinent gas assets from Kinder Morgan Inc. (KMI) lastWednesday after FERC ruled that the operations included in the salewere exempt from the terms of a recent consent agreement, whichimposed a number of restrictions on KMI companies for affiliateviolations [IN00-1]. This transaction, together with Oneok’spurchase of midstream assets from Dynegy Inc. last month, makes thecompany one of the biggest players in the Midcontinent gas market.

As part of the transaction, Oneok purchased Westar Transmission,Caprock Pipeline and American Gas Storage L.P., as well as all ofKMI’s marketing and trading business (including KN Marketing) andall of its gas gathering and processing facilities in West Texas,Oklahoma and Kansas.

Oneok reported it paid KMI $108 million for the assets, plusadjustments in working capital to cover natural gas and gasliquids’ inventories. It said an additional $6 million will be paidfor KMI’s Buffalo Wallow interstate pipeline facilities upon FERCapproval of the sale. The Buffalo Wallow line stretches fromOklahoma to the Texas Panhandle.

Also as part of the deal, the diversified energy company assumedthe operating lease associated with the Bushton, KS, processingplant. In acquiring KMI’s marketing business, it also became theholder of a significant amount of long-term firm capacity onNatural Gas Pipeline Co. of America (NGPL) and Kinder MorganInterstate Gas Transmission (formerly KN Interstate GasTransmission).

The holder of the capacity will be Oneok Gas Marketing, whosename will soon be changed to Oneok Energy Marketing and Trade.Lamar Miller, Oneok’s vice president of risk control, declined todisclose the specific amounts that Oneok will control on the twoKinder Morgan pipelines. He said that while Oneok has contractedfor capacity on the lines previously, this marks the first time ithas held “long-term positions…..of any consequence.”

About 350 employees, mostly in Kansas and West Texas, will beadded to the Oneok workforce.

The deal covers more than 12,000 miles of pipeline, six gasprocessing plants with 1.26 Bcf/d of capacity and storage capacityof 10.5 Bcf. “We will focus on combining these assets with ourexisting assets and those added with the Dynegy transaction” inMarch, said Oneok President David Kyle. Last month, Oneok acquiredMidcontinent gathering, processing and pipeline facilities fromHouston-based Dynegy for $307.7 million.

Susan Parker

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.