Natural Gas Pipeline Company of America (NGPL) was given thegreen light last week by FERC to sell its interests in 181 miles ofoffshore laterals to Green Canyon Pipe Line Co., and 40 miles ofoffshore 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 offshoreLouisiana. Some of the laterals have been previously abandoned andretired in place. Most of the facilities interconnect with the HighIsland Offshore System, U-T Offshore System and the PelicanInterstate Gas System. The purchase price has been pegged at about$1.3 million.

NGPL plans to sell its interests in nine other lateral lines andassociated facilities in the Gulf of Mexico to East Breaks. Thelateral segments, which also are less than five miles long,currently are or had been interconnected to Stingray Pipeline. NGPLestimated the purchase price for these facilities — plus anadditional five lateral lines that it plans to sell later — willbe about $5.1 million.

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

The Commission conceded to NGPL’s request to declare theabandoned facilities to be exempt gathering upon their acquisitionby Green Canyon and East Breaks.

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

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

Anyway, it pointed out “the purchasers represent that they willcontinue to provide existing services at current rates andcontractual terms of service until Natural’s agreements expire.”And after Natural’s agreements expire, East Breaks has agreed inprinciple to provide service to Chevron through the so-calledChevron Interconnect at “mutually acceptable rates, terms andconditions of service.”

Lastly, the Commission scoffed at Chevron’s suggestion that itintervene in the sale. FERC “will not dictate to Natural that itmust sell its interest to Chevron, a shipper, or to Stingray, aninterconnecting pipeline, or to any other party. The suggestionthat the Commission should prevent the designated buyers fromacquiring the property would also be inappropriate and wouldinterfere with matters of private negotiation.”

Susan Parker

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