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Williston Basin Banking on Canadian Supply Shortfall

Williston Basin Banking on Canadian Supply Shortfall

Williston Basin Interstate Pipeline Co. is in the midst of upgrading firm transportation capacity on its system in anticipation of supplying cheaper Powder River Basin gas to shippers on Northern Border Pipeline, who it believes will be deprived of economical Canadian gas supplies when Alliance Pipeline goes into service in October.

"We feel that with the Alliance Pipeline coming on-line that there's going to be an opportunity for shippers [Powder River producers] to make use of a pretty good market on Northern Border" at Glen Ullin in North Dakota, where Williston Basin interconnects with Northern Border, to fill an expected shortfall in Canadian gas, said Bill Kickert, WillistonBasin's transportation services manager.

"I think they're going to be supply short in Canada at least for a short period of time, if not for a longer period," with producers unable to supply both Alliance and Northern Border, he noted. Signs of a supply shortage have already been seen on the TransCanada Pipeline system, and "I think Northern Border is going to see some of the same," Kickert said.

"There's only a finite amount of gas in Canada, and I don't think there's enough to feed all the pipelines. I think Alliance will be fully subscribed...But some of the Northern Border shippers are going to be looking for gas." Williston Basin plans to be there to fill that void.

The window of opportunity to market Powder River Basin gas, which primarily is coal-bed methane (CBM), at the Glen Ullin interconnection will begin when Alliance "rolls in" and will last until 2003 or possibly beyond, Kickert noted. In 2003, he said a "pretty huge" number of contracts on Northern Border and Foothills Pipeline will be up for renewal, at which time shippers "would have the opportunity to change their receipt points" for gas. "That's kind of what I'm hoping [for] is that if gas is available off of our system, some of those Northern Border shippers may...decide to move their primary receipt points downstream."

Kickert believes lower prices will make Powder River gas even more attractive than Canadian supply. "...[I]f there is a tight supply in Canada, the Canadian prices for gas are going to go up. Northern Border shippers don't necessarily have to take gas from Canada, even if it is available. They could take the cheaper gas off of our system."

Williston Basin is "just pulling the final strings together" on its first system expansion out of the Powder River Basin, which would add 40 MMcf/d of transportation capacity by Dec. 1, according to Kickert. It would loop about 45 miles of the pipeline's existing system from a point called Recluse in Line Section 14 in northeast Wyoming to its Belle Creek point in Montana. The open season for the capacity closed in late June.

The pipeline, whose system is mostly located in North Dakota and Montana, is planning a second project to add another 50-60 MMcf/d to its existing system capacity of about 450-475 MMcf/d (peak-day winter). "We plan to do some looping, but the majority of it will be 80 miles of new pipe" extending from Williston Basin's Little Beaver compressor plant in Montana to its Dickinson compressor station in Line Section 1 in North Dakota. Kickert said the pipe plans to file an application at FERC by the end of the year, seeking project implementation by Nov. 1, 2001.

The "ultimate goal" of both projects "is to increase our capacity for folks [Powder River producers] to transport gas to.....Glen Ullin," he noted. "Our whole marketing strategy is to grow our pipeline in step with the development of the Powder River. We're not trying to build a huge pipeline. But yet at the same time we want to make sure we're ready when the gas is ready."

More Powder River gas will become available, he said, as producers move into the western part of the basin. "There's quite a bit of production that's starting to ramp up there. It's really fairly new yet. There are a lot of wells being drilled. [But] the gas has really no way to get out." Williston Basin's sister company, Bitter Creek Pipelines, is building a 16-inch pipeline to gather gas produced in the western part of Powder River and transport it to the eastern section of the basin, which has access to interstate pipelines, Kickert said. Likewise, Big Horn Gas Gathering (a joint venture between CMS, Enron and Northern Border Partners) is planning to extend its line into Sheridan, WY, thereby connecting both the eastern and western portions of the basin.

Susan Parker

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