In a busy regular meeting Wednesday, FERC awarded certificates to two Rocky Mountain gas pipeline projects and a pipeline to a proposed LNG terminal in the Bahamas. The Commission also asserted “exclusive jurisdiction” over the “siting, construction and operation” of an LNG project that Sound Energy Solutions (SES), a U.S. subsidiary of Japan’s Mitsubishi Corp., is planning to build in the Port of Long Beach, CA (see related story).

FERC granted certificates to Colorado Interstate Gas Co.’s 380-mile, 560,000 Dth/d Cheyenne Plains pipeline and to a 125,000 Dth/d expansion of TransColorado Gas Transmission. Both projects would provide much needed regional export capacity for the Rocky Mountains where abundant gas reserves are waiting to be developed and shipped to market once the pipelines are built. However, the Commission said still more capacity is needed.

In a special report on the Rocky Mountain region Wednesday, FERC said even with these two new projects there still will be insufficient capacity to meet the potential 8 Bcf/d of Rocky Mountain production in 2005.

According to the report, Wyoming had the largest increase in proved reserves, by state or federal region, from 2001 to 2002 at 2.1 Tcf (total U.S. reserves increased by 3.5 Tcf over that period). The region holds 26% of total U.S. gas reserves and has about 209 Tcf of total gas resources (proved, probable and possible reserves).

The 11 pipelines in the region currently have a capacity to export 5,239 MMcf/d. But EIA estimated that the Rockies could have produced 6 Bcf/d in 2003. And consultants at Pace Global Energy Services estimate that the region’s production could grow to 8 Bcf/d by 2005 and 11 Bcf/d by 2010 given adequate pipeline capacity.

Since mid-1999 FERC has approved 19 projects in the Rockies with about 4.5 Bcf/d of additional pipeline capacity. In total, 2,168 miles of new pipeline and almost 500,000 horsepower of additional compression have been added. Cheyenne Plains and TransColorado will add another 0.7 Bcf/d of capacity initially. Cheyenne Plains also has filed to expand its system to 730,000 Dth/d and theoretically could grow to 1.7 Bcf/d with added compression.

The $425 million Cheyenne Plains pipeline will be a significant new addition to the region, providing 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 in western Wyoming and other production from the Piceance Basin in western Colorado.

The 36-inch diameter pipeline project will include several laterals, approximately 23,063 horsepower of new compression, a gas treatment plant at the Cheyenne Hub in Weld County, CO, and nine new pipeline interconnects. It will connect with Colorado Interstate Gas and Wyoming Interstate Co. at the Cheyenne Hub, and with Kinder Morgan Interstate Gas Transmission, Natural Gas Pipeline Company of America, Southern Star Central Gas Pipeline, ANR Pipeline, Northern Natural Gas, Panhandle Eastern Pipe Line and Kansas Gas Service Co. at various locations along the pipeline route to Kansas.

Greensburg, KS, was picked as a destination for the pipe because multiple pipelines meet there, providing more than 6 Bcf/d of takeaway capacity in the area. The project has been targeted for in-service in August 2005.

The TransColorado project will provide a southwestern market outlet for burgeoning Piceance Basin supply. The Kinder Morgan subsidiary signed a 10-year firm gas transportation contract with a major producer for the project, but also may plan a much larger 600,000 Dth/d expansion to accommodate additional production from the Piceance, Paradox, Uinta and other basins in Colorado, Utah and Wyoming (see Daily GPI, March 17).

The current TransColorado expansion project would provide additional firm capacity from northwestern Colorado to the Blanco Hub in New Mexico. It is expected to cost $50 million. To accommodate the additional volumes, the company will construct three new compressor stations and modify equipment at two existing locations, which will increase compression by more than 20,000 horsepower.

FERC staff told the Commission Wednesday that it is aware of 11 other regional pipeline projects in various planning stages with a total of 4.8 Bcf/d of proposed capacity to move Rockies gas. EnCana’s proposed 1.3 Bcf/d Entrega pipeline, which would bring Piceance Basin supply to the Cheyenne Hub, is the largest planned project currently.

“With the inclusion of all the pre-filing (0.1 Bcf/d) and on the horizon (4.8 Bcf/d) projects, the pipeline capacity (10.8 Bcf/d) is close to meeting the potential 11 Bcf/d production rate in 2010,” FERC staff said in its report.

FERC Approves Second Bahamas Pipeline

In other action Wednesday, FERC granted a certificate and presidential permit to Tractebel’s $132 million Calypso Pipeline, the U.S. portion of an international pipeline project that would deliver gas to the Florida peninsula from a proposed LNG terminal in the Bahamas. The terminal is expected to be approved this summer.

The U.S. portion of the project would include 36 miles of 24-inch diameter offshore pipeline facilities and 5.8 miles of 24-inch onshore pipeline. It would transport up to 832,000 MMBtu/d of gas to a connection with Florida Gas Transmission (FGT) in central Broward County from a connection with a non-jurisdictional line at the EEZ boundary. The U.S. segment of the pipeline would make landfall at Port Everglades, Florida, then travel onshore to a proposed interconnection with FGT adjacent to Florida Power & Light’s (FPL) Lauderdale power plant.

The Commission has given Tractebel Calypso up to three years from the date of the certificate — rather than the typical two years — to complete the 41.9-mile pipeline. Tractebel sought the additional time to accommodate the Bahamian portion of the project, which includes an affiliate’s new LNG terminal in Freeport, Grand Bahama and the connecting Bahamian pipeline. It said while it expected to complete construction of the U.S. portion of the pipeline in 15 months, construction of the Freeport LNG terminal and the Bahamian leg of the line would take up to 32 months. The company further said that construction of the Bahamian facilities would most likely not begin until FERC awards a final certificate.

“I think this is a fascinating project,” said Commissioner Nora Brownell. She hopes that project sponsors and FERC can work closely with the state of Florida to satisfy any environmental concerns so the project can move forward.

“The FERC’s green light underscores Tractebel’s commitment to complete this project in a sound and environmentally prudent manner,” said William P. Utt, CEO of Tractebel North America, Inc. “We’re one step closer to bringing clean-burning natural gas to Florida to help meet its increased fuel needs by 2007.”

Pre-construction activities are under way for the pipeline project, with construction expected to begin this summer. Tractebel anticipates initial gas deliveries to begin in 2007.

The state governor and cabinet still have to approve an easement for submerged lands for the project. They are expected to make their ruling on April 13. The state also still has to issue its environmental resource permit.

Calypso Project Director Jim Ebeling said the state has been “firm and diligent,” but has “worked to reach a solution… I haven’t seen anything that would appear to give the project a problem.” Even among local groups at the pipeline landfall location, Ebeling said there “hasn’t been an overwhelming swell of opposition.”

Regarding a market for the capacity and gas supply, however, the outlook is pretty cloudy at this point. Calypso is the second Bahamas pipeline project approved this year by FERC. In January, the Commission granted AES Ocean Express LLC a certificate and presidential permit to build the 54-mile U.S. leg of a $440 million pipeline that would transport 842 MMcf/d of gas to southern Florida from a proposed LNG import terminal in the Bahamas. AES is dredging sand and soil to create its own 90-acre industrial island, called Ocean Cay, for its LNG plant.

But El Paso also is still moving forward with its Seafarer pipeline, a 750 MMcf/d project that would deliver gas from a Bahamas LNG terminal to southern Florida (see Daily GPI, Jan. 26). Although El Paso’s project is behind in the regulatory process, it recently gained a key market ally in FPL Group, parent company of Florida’s largest electric utility, FPL, which could give it an edge over the other projects. FPL holds an option to take a large stake in El Paso’s project.

FPL is expected to issue a request for proposals for gas sales within the next month, the results of which could determine which projects move forward first. “We are in discussions with other utilities and industrial gas users,” said Ebeling, adding that he could not disclose if Calypso had any signed precedent agreements yet with customers. “We are in negotiations with a number of entities and they are covered by confidentiality agreements which prevent us from talking about them. My lawyers would break my fingers if I said much more.”

Tractebel, a subsidiary of the French water and energy company Suez, also owns the Cabot LNG import terminal in Everett, MA.

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