The Federal Energy Regulatory Commission has given Cheyenne Plains Gas Pipeline Co., a subsidiary of El Paso Corp., initial environmental clearance to build a 380-mile line that would deliver Rocky Mountain natural gas supplies to eastern markets.

The project would have “limited adverse environmental impact” if it is constructed with the “appropriate mitigation measures as recommended,” agency staff said in its draft environmental impact statement (DEIS) on the Cheyenne Plains pipeline project, which, in addition to the pipeline facilities, would include several small laterals, 33,373 horsepower of new compression, a gas treatment plant at the Cheyenne Hub and nine new interconnects with existing gas pipeline systems.

In the DEIS, FERC staff reviewed the project that was originally proposed by Cheyenne Plains Gas last May — a 30-inch diameter pipeline that would transport as much as 560 MDth/d from the Cheyenne Hub to connections with Midcontinent pipes in Kansas [CP03-302]. Due to “significant” customer response, however, Cheyenne Plains in September announced it planned to build a 36-inch diameter pipeline, which would increase the design capacity of the line to 730 MDth/d.

The company said it would seek authorization from FERC for the change in capacity, and would place the additional 170 MDth/d in service within a year after the Cheyenne Plains Pipeline initially goes into service.

The project is backed by 560 MDth/d of firm contracts with terms of 10 years or longer from 14 shippers, and has additional 10-year contractual commitments supporting the expansion up to 730 MDth/d, according to Cheyenne Plains Gas. FERC normally issues a preliminary determination (PD) for a project shortly after the DEIS becomes available.

Despite the last-minute change to the FERC application, Cheyenne Plains Gas said it didn’t believe the targeted in-service date for the pipeline project (early 2005) would be pushed back.

The proposed pipe has received widespread support from Wyoming producers, who believe it would provide more outlets for their gas production and would bring the prices they fetch for their gas more in line with Nymex-Henry Hub prices. But the project has been the target of some criticism by Kansas regulators. Although they support FERC certification of the proposed Cheyenne Plains pipeline because it would give Midwest customers access to additional lower-priced gas from the Rocky Mountains, Kansas regulators contend the overall rate of return being sought by the El Paso-affiliated project is much too steep (see NGI, Sept. 8).

Cheyenne Plains has proposed a debt-equity ratio of 60-40%, a 9% cost of debt and a 15% rate of return on equity, which would yield an overall rate of return of 11.4%, according to the Kansas Corporation Commission (KCC). “This proposed overall rate of return is excessive, is not supported by current Commission practices and recent Commission precedents, and…has not been justified by Cheyenne Plains,” the KCC told FERC in September.

If approved by FERC, the Cheyenne Plains pipeline would provide a new direct route to Midcontinent markets for rapidly growing Powder River Basin coalbed methane production, gas supply from the Jonah Field in the Green River Basin and other production from Wyoming. Greensburg, KS, was picked as a destination for the pipe because several pipelines meet there, including ANR Pipeline, Kinder Morgan Interstate Pipeline, Northern Natural Gas, Panhandle Eastern Pipe Line and Williams, which together provide more than 6 Bcf/d of takeaway capacity in the area.

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