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FERC OKs Sale of NGPL Offshore Laterals

FERC OKs Sale of NGPL Offshore Laterals

Natural Gas Pipeline Company of America (NGPL) was given the green light last week by FERC to sell its interests in 181 miles of offshore laterals to Green Canyon Pipe Line Co., and 40 miles of offshore laterals to East Breaks Gathering Co. L.L.C.

The facilities earmarked for Green Canyon include 39 laterals, each five miles or less in length, that are located offshore Louisiana. Some of the laterals have been previously abandoned and retired in place. Most of the facilities interconnect with the High Island Offshore System, U-T Offshore System and the Pelican Interstate Gas System. The purchase price has been pegged at about $1.3 million.

NGPL plans to sell its interests in nine other lateral lines and associated facilities in the Gulf of Mexico to East Breaks. The lateral segments, which also are less than five miles long, currently are or had been interconnected to Stingray Pipeline. NGPL estimated the purchase price for these facilities --- plus an additional five lateral lines that it plans to sell later --- will be about $5.1 million.

With the elimination of the bundled sales service, NGPL said the offshore laterals were no longer a strategic benefit for the pipeline.

The Commission conceded to NGPL's request to declare the abandoned facilities to be exempt gathering upon their acquisition by Green Canyon and East Breaks.

Chevron U.S.A. Inc. objected to the sales of the laterals to both Green Canyon and East Break, saying that they violated a 1988 take-or-pay settlement in which Natural agreed --- after the termination of its gas purchase contracts --- to continue to operate or provide transportation to Chevron through certain facilities.

Chevron asked FERC to impose a default contract requirement on the new owners of the lateral facilities, requiring them to provide service to Chevron at its existing rate and service conditions. But the Commission noted that it had no jurisdiction over exempt gathering facilities to take this action.

Anyway, it pointed out "the purchasers represent that they will continue to provide existing services at current rates and contractual terms of service until Natural's agreements expire." And after Natural's agreements expire, East Breaks has agreed in principle to provide service to Chevron through the so-called Chevron Interconnect at "mutually acceptable rates, terms and conditions of service."

Lastly, the Commission scoffed at Chevron's suggestion that it intervene in the sale. FERC "will not dictate to Natural that it must sell its interest to Chevron, a shipper, or to Stingray, an interconnecting pipeline, or to any other party. The suggestion that the Commission should prevent the designated buyers from acquiring the property would also be inappropriate and would interfere with matters of private negotiation."

Susan Parker

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