Houston-based Falcon Gas Storage Co. is the only bidder seeking to lease three depleted gas reservoirs in Alabama waters north of Dauphin Island. Bids were opened Dec. 19, about two years after Falcon first started talking to the state about leasing the reservoirs for its MoBay Storage Hub project.

It remains to be seen whether the state will accept Falcon’s bid and allow the project to move forward. Falcon COO Edmund Knolle told NGI the company’s bid meets the state’s minimum requirement and exceeds the market value of the reservoirs. The state has 25 days from Dec. 19 to make its decision on the $3 million/year bid for the 50-year lease of the reservoirs, which includes a 2.5 cent/Mcf injection charge. If the bid is accepted, the state has up to 30 days to finish the deal.

Barnett Lawley, Alabama commissioner of conservation and natural resources, told NGI previously that the state was hoping for more than one bid to help set the value of the asset (see NGI, Oct. 8).

Last Friday Will Brantley, Alabama lands manager, said the state’s lawyers were reviewing some conditions Falcon placed on its bid. He said a decision on the bid could come as early as this week.

Falcon had hoped to begin construction on the project last month, but those plans were held up by the state. If Falcon’s bid is accepted and a lease executed, Falcon will pay the state $15 million up front for the first five years of the lease. If all that takes place by mid-January, construction could begin by late March or early in the second quarter, Knolle said. The project could be in service in late summer or early fall of 2009. Knolle said further delay of even a month could “make a big difference” in the project schedule.

MoBay received its certificate under Section 7 of the Natural Gas Act from the FERC in January (see NGI, Jan. 8). Air, water and U.S. Army Corps of Engineers permits all have been granted, Knolle said. The lease is the only thing standing in the way of onshore construction. Knolle said clearance for the offshore portion of the project is expected from the Federal Energy Regulatory Commission in the next 30 days or so.

Knolle noted that Falcon is the only entity to hold a FERC certificate or any permits related to the project. “In the unlikely event that, for whatever reason, another party was awarded the storage rights, we would absolutely exercise our right of eminent domain,” Knolle told NGI previously.

MoBay is slated to provide 50 Bcf of working gas capacity and 1 Bcf/d of injection and withdrawal capacity at Coden, AL. The MoBay header system will provide direct, bi-directional receipt and delivery points with Florida Gas Transmission (FGT) in Zone 3, Gulfstream, Gulf South in Zone 4 and Transco in Zone 4A. Via backhaul or displacement, MoBay shippers will be able to access the expanded Destin system.

MoBay will offer firm and interruptible storage, balancing, wheeling, parking and loaning services at market-based rates. Future receipt points may include the four gas processing plants at Coden (1.3 Bcf/d) and the proposed 1.14 Bcf/d Southeast Supply Header (SESH) project planned to connect with the Gulfstream, FGT, Gulf South, Southern Natural Gas, Columbia Gulf Transmission, CenterPoint Energy Gas Transmission, Texas Eastern Transmission and Tennessee Gas pipelines (see NGI, June 26, 2006).

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