Duke Energy and Williams Gas Pipeline announced last Thursday that they closed the deal to buy the Gulfstream Natural Gas System project, a 743-mile natural gas pipeline planned for Florida, from The Coastal Corp. Terms of the transaction were not disclosed.

The companies anticipate the Federal Energy Regulatory Commission will certify the $1.6 billion project within the next month, enabling them to begin construction by June of this year. Gulfstream received the final environmental go-ahead for the proposed line last week. The targeted in-service date for the project, which would introduce pipeline-on-pipeline competition into the Florida market for the first time, is June 2002.

Duke Energy and Williams stepped up their efforts to complete the deal after the Federal Trade Commission (FTC) last Monday authorized the mega-merger of El Paso Energy and Coastal (See Related Story). As a condition to the merger, the agency ordered Coastal to divest itself of the Gulfstream project so as to eliminate any potential competitive concerns in the Florida gas pipeline market. It took this action because El Paso already jointly owns Florida Gas Transmission, the sole gas pipeline currently serving the Sunshine State.

As part of a consent decree, the FTC directed El Paso and Coastal to provide consulting services to Duke Energy and Williams at a “reasonable rate” until June 2002 to ensure that the project meets its targeted in-service date.

Duke Energy and Williams announced last November that they had reached an agreement to purchase 100% of Coastal’s interest in the Gulfstream project and ditch their competing Buccaneer Pipeline project for Florida (See NGI, Nov. 20, 2001). A Duke Energy official at the time indicated Gulfstream would provide the partners with a “quicker” entry into the Florida market than Buccanner.

When Gulfstream was under Coastal’s ownership, it received a preliminary determination and a final environmental impact statement (FEIS) from FERC. Since both findings attach to the project rather than to the sponsor, the new Gulfstream owners will not be required to go back to the Commission.

In the FEIS released last week, the Commission found that the Gulfstream project would result in “limited adverse environmental impacts,” provided that mitigation measures are employed. FERC said it issued a favorable FEIS because nearly 76% of the onshore segment of the pipeline would be located adjacent to existing rights-of-way; Gulfstream sponsors would implement construction and restoration procedures; an environmental inspection and mitgation-monitoring program would ensure compliance with all mitigation measures; specialized offshore construction procedures would substantially reduce impacts on live bottom areas; and the project sponsors assured FERC they would comply with several federal laws before starting construction on any part of the proposed pipeline.

Gulfstream is “approaching being fully subscribed,” said Guy Buckley, senior vice president of the project for Duke Energy. He estimated that more than 24 customers, mostly utilities and power generators, have entered into agreements for capacity on the proposed pipeline.

The proposed Gulfstream project would run from supply areas in Alabama and Mississippi across the Gulf of Mexico and would come ashore on the west coast of Florida near Tampa. It’s estimated that more than half of the line – 400 miles – will be in federal offshore waters. It will deliver up to 1.13 Bcf/d of gas to new gas-fired generation facilities in central and eastern Florida.

The state has forecasted that about 10,000 MWs of new generation capacity will be built in Florida between now and 2010, which would boost gas demand by approximately 1.6 Bcf/d.

Susan Parker

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