Chesapeake Energy Corp. is stepping up for capacity on Texas Gas Transmission LLC’s Fayetteville Lateral, the first segment of which is expected to come on-line in the third quarter, the pipeline said Monday.

Boardwalk Pipeline Partners LP subsidiary Texas Gas said it has made a 10-year binding transportation agreement with Chesapeake. During the first 12 months following the entire project being placed in service in the first quarter of 2009, Chesapeake’s firm capacity commitment will increase from an initial 75 MMcf/d to 200 MMcf/d. Chesapeake’s committed capacity on the project will decline to 100 MMcf/d in the second year and thereafter. The agreement increases the long-term firm commitments on the Fayetteville Lateral to 1.3 Bcf/d by 2010 from the previously announced 1.2 Bcf/d and will require the construction of additional compression facilities, subject to approval from the Federal Energy Regulatory Commission.

This is the first capacity Chesapeake has taken in the project. A Chesapeake spokesman told NGI that the decline in capacity over the agreement corresponds with other commitments made by Texas Gas and plans that Chesapeake has for future pipeline projects.

Boardwalk said it expects the first 60 miles of the Fayetteville Lateral to be in service during the third quarter of 2008 and the remainder to be in service with an initial capacity of 800 MMcf/d during the first quarter of 2009 and expanded to 1.3 Bcf/d in 2010.

Last month Boardwalk received certificates of public convenience and necessity to construct its Gulf Crossing Pipeline and the Fayetteville and Greenville Laterals (see Daily GPI, May 7). The projects are intended to provide an outlet for production from the Barnett Shale, Caney Woodford Shale and other producing areas in Texas and southeast Oklahoma.

Earlier this year Texas Gas said it would seek FERC approval to increase the planned capacity of the Fayetteville and Greenville laterals to 1.2 Bcf/d from 800 MMcf/d. The company said it had entered into a binding precedent agreement with XTO Energy Inc. to transport 300 MMcf/d on the laterals. The 10-year firm agreement is to begin at 50 MMcf/d when the project is placed into service and increase to 300 MMcf/d by 2012, according to Boardwalk (see Daily GPI, April 4).

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