Atmos Energy Corp. and Equitrans LP are pinning their hopes on FERC approving their separate proposals in September to build new pipelines to ease the capacity constraint in eastern Kentucky that has led to natural gas production being shut in for much of the year in that region.

Equitrans, a subsidiary of Equitable Resources in Pittsburgh, PA, is seeking to build a 60-mile, 20-inch diameter pipeline that would extend from the existing Kentucky Hydrocarbon plant in Langley in eastern Kentucky to Tennessee Gas Pipeline’s Broad Run Lateral in Carter County. The Big Sandy Pipeline project would provide 130 MDth/d of takeaway capacity for Kentucky producers to transport Appalachian gas to markets in the Mid-Atlantic and Northeast regions.

Dallas, TX-based Atmos Energy proposes to build a pipeline that would originate in Floyd County, KY, and extend north 50 miles to interconnect with the Tennessee system in Carter County as well. The 20-inch diameter system would be capable of initially moving up to 100,000 MMBtu/d of gas, with the ability to expand throughput to 225,000 MMBtu/d. The company plans to add gathering pipeline infrastructure and compression as demand requires. “This will be an ongoing enterprise,” said Mark H. Johnson, senior vice president for nonutility operations at Atmos Energy. The company has requested that its so-called Straight Creek project be declared gathering and exempt from FERC jurisdiction under the Natural Gas Act.

“We are expecting to hear from them [FERC] from mid- to late September. And we expect a positive ruling,” Johnson told NGI. “We have a very large and significant interest in our project” from producers in eastern Kentucky. Assuming it receives FERC approval next month, Atmos Energy expects to begin construction later this year, with operations to begin by the summer of 2007. The Equitrans pipeline project would be targeted for in-service later in the summer of 2007, according to David Spigelmyer, a spokesman for Equitable Resources.

New gas pipelines to serve eastern Kentucky have been long in coming because potential shippers are small producers, who aren’t big enough to carry a project alone, and the terrain in the area is difficult (rocky and mountainous) to lay pipeline, Johnson said. “We’re building a gathering system across the Appalachian Mountains,” noted Brent McDaniel, Atmos Energy’s senior vice president of business development.

The two pipeline projects are “functional opposites,” McDaniel added. The proposed Equitrans line is designed as an interstate pipe that will move processed gas from production areas to the Tennessee system, while the Atmos Energy Straight Creek project will gather unprocessed gas from a wide production area and process it at the terminus of its system before it enters Tennessee, he said.

Both proposed pipelines are direly needed because the gas pipeline that Kentucky producers have traditionally relied on — Columbia Gas Transmission — is fully subscribed due to the coalbed methane production that’s coming from Virginia, said Rick Bender, director of Kentucky’s Division of Oil and Gas Conservation. “That’s the bottleneck,” he told NGI.

NiSource Inc.’s Columbia Gas Transmission in March launched an open season for up to 65,000 Dth/d of newly created firm transportation service on a proposed expansion of its Appalachian pipeline system in West Virginia and Kentucky (see NGI, March 13).

As a result of the full pipeline capacity, gas production in eastern Kentucky has been routinely shut in, except during periods of high demand (winter) when interruptible service is available on Columbia, Equitable Resources’ Spigelmyer said. In addition to gas being shut in, Atmos Energy’s Johnson said a large number of acres remain undeveloped due to constrained pipeline capacity.

Brandon Nuttall, a geologist for the Kentucky Geological Survey, estimated that 25-30% of the state’s natural gas production is shut in due primarily to the lack of space on pipelines. The latest figures show that producers in Kentucky produced 92.8 Bcf of gas in 2005, up significantly from 74.8 Bcf in 1995. Nuttall estimated that 98% of Kentucky’s gas production comes from the eastern half of the state.

The East Kentucky Independent Oil and Gas Association has pegged shut-in gas in Kentucky at approximately 65-70 MMcf/d, Atmos Energy’s McDaniel said. “We expect to be able to alleviate this shut-in situation,” noted Johnson, adding that Atmos Energy’s gathering line would be expandable with additional compression.

Nuttall reported that the recoverable natural gas resources in eastern Kentucky are about 9-23 Tcf. The western half of the state holds approximately 8-10 Tcf, according to Nuttall.

Johnson said that some 1,700 natural gas wells in the eastern part of Kentucky have been shut in for long periods, blocking a “substantial amount of gas” from reaching the consuming public. He believes the economic benefit to Kentucky of Atmos Energy’s proposed gathering system could exceed $150 million a year.

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