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Topsy-Turvy Week in FL Ends with Gulfstream Sale

Topsy-Turvy Week in FL Ends with Gulfstream Sale

While the political battleground in Florida grew bloodier with each passing day last week, natural gas pipelines eager to serve the growing market reached a truce agreement of sorts that calls for Duke Energy and Williams to purchase the proposed Gulfstream Natural Gas System from The Coastal Corp. and ditch their competing Buccaneer Pipeline project for the state.

Duke Energy and Williams refused to discuss the specifics of the deal, except to say that they were purchasing 100% of Coastal's interest in the Gulfstream project, and that the transaction was subject to federal regulatory approvals and the Coastal/El Paso Energy merger being finalized. They expect the merger to be final before the end of the year. The cost of building the Gulfstream project has been estimated at $1.6 billion.

Coastal approached both Duke and Williams with the Gulfstream offer after the Federal Trade Commission (FTC) conditioned its approval of the pending merger on Coastal divesting its assets in Florida, said Robert B. Evans, president of Duke Energy Gas Transmission. The agency ordered the asset divestiture because El Paso already owns 50% of Florida Gas Transmission, the sole gas pipeline currently serving the Sunshine State.

"Until the merger is complete, Coastal will continue to develop and market Gulfstream, will ensure that the project moves forward as scheduled and will remain fully committed to its many stakeholders in Florida," said Coastal Chairman and CEO David A. Arledge. At the same time, Duke and Williams said they will maintain their Buccaneer application on file at FERC until the transaction closes.

While Williams and Duke obviously were "very happy" about their plans to acquire Gulfstream, Evans expressed remorse about Coastal being forced to exit the Florida gas market. "They would have been a good partner if we could have eventually become partners with them," he noted.

"We're going to step into Gulfstream's shoes at FERC," said Evans, explaining that Duke and Williams won't be required to file a new application at the Commission. Nor, he added, do the companies plan any immediate changes for the pipeline project that would serve Central Florida.

"We have no planned changes at this time. They [the Gulfstream sponsors] have got a good route laid out, and have moved along very well on contracting for construction of the pipe, in getting things done right away and, of course, [in negotiating] contracts with the customers," he told NGI.

Gulfstream has precedent agreements with 10 large Florida utilities and power-generation facilities for the majority of the 1.1 Bcf/d capacity of the proposed pipeline.

Evans acknowledged that Duke and Williams will have a better chance in the Florida market with Gulfstream than Buccaneer. "At this point in time, the market appears to be ready for this pipeline. And Gulfstream has done a good job of positioning themselves to make that happen...It gives us entrance into the market quicker than we would have had if we'd have stayed with our Buccaneer project."

The opposition of Florida landowners to the Buccaneer project did not factor into the companies' decision to go with Gulfstream over Buccaneer, Evans said.

Evans said he expects FERC to certify the Gulfstream project by early next year, and it will be in service by June 2002. The 744-mile pipeline wound run under the Gulf of Mexico and come ashore at Tampa, providing 1.1 Bcf/d of new gas supplies to the middle region of Florida.

The state forecasts that about 10,000 MWs of new gas-fired generation capacity will be built in Florida between now and 2010, which would boost gas demand by 1.6 Bcf/d, according to Evans.

Susan Parker

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