The Federal Energy Regulatory Commission (FERC) has approved El Paso Natural Gas pipeline’s request for a waiver of $6 million in penalties incurred by its shippers during a major chill in the Southwest last February, which forced El Paso to declare an emergency on its system. El Paso told FERC that its shippers had incurred $6.9 million in penalties during the first week of February, but it didn’t believe that all warranted waivers. The pipeline said it would adjust shipper invoices within 45 days of the Commission order. FERC agreed with El Paso’s position that even though penalties were being waived, the shipper would still be an “offending” shipper under the pipeline’s tariff, and thus would not be allowed to share the penalty amounts with El Paso and the “non-offending” shippers (see NGI, Aug. 15).

DCP Midstream is holding a binding open season through Oct. 31 for capacity on its proposed Southern Hills Pipeline. The company expects to close by the end of this year its purchase of Seaway Products Pipeline Co., which would be renamed Southern Hills Pipeline. The pipeline is to be converted from refined products service to an interstate natural gas liquids (NGL) pipeline with extensions into Mont Belvieu, TX, along with various receipt points in the Midcontinent and associated gathering infrastructure. Southern Hills would have a target capacity of close to 150,000 b/d of Y-grade NGLs and be connected to several DCP Midstream processing plants. It is expected to be in service by mid-2013. For information, contact Rick Paul at (713) 735-3739, or rmpaul@dcpmidstream.com.

The Federal Energy Regulatory Commission has approved Distrigas of Massachusetts LLC‘s request to install facilities at its liquefied natural gas (LNG) import terminal to meet tighter natural gas quality and interchangeability specifications of interstate gas pipelines serving the Northeast. Specifically, Distrigas intends to install a heating value and Wobbe Index reduction system at its LNG terminal in Everett, MA, replacing its existing air injection equipment with a liquid nitrogen-based system that would be used to conform LNG received at the terminal to new natural gas quality and interchangeability specifications. The project would consist of two liquid nitrogen storage tanks, each with a nominal capacity of 120,000 gallons; ambient pressure coils; and insulated stainless steel piping and associated facilities.

Enbridge Inc. and Veresen Inc., which each own 50% of Alliance Pipeline LP, have approved Alliance’s plans to build a 77-mile pipeline lateral in the Bakken Shale to connect production from a Hess Corp. gas processing facility in Tioga, ND, to the Alliance mainline near Sherwood, ND. The lateral will be used to transport liquids-rich gas to the Aux Sable Liquid Products processing facilities in Channahon, IL, for conversion to natural gas liquids and delivery to the Chicago market hub. Alliance is holding an open season to identify further shipper demand on the Tioga lateral, which will conclude at 4 p.m. CDT Oct. 27. The pipeline’s design capacity is 120 MMcf/d, which could be expanded, with planned in-service July 2013.

SandRidge Energy Inc. is selling its East Texas natural gas properties in Gregg, Harrison, Rusk and Panola counties to NFR Energy LLC for $231 million. The properties include about 25,000 net acres with average 2011 production of approximately 25 MMcfe/d. Proceeds from the deal, which is expected to close in November, will be used to fund a portion of SandRidge’s oil-focused drilling program, the Oklahoma City, OK-based company said. As a result of the sale, SandRidge expects production to be 23.9 MMBoe in 2011 and 27.7 MMBoe in 2012. SandRidge recently increased its 2011 production guidance to 24.1 MMboe from the previously announced 23.3 MMboe.

Antero Resources has acquired CONSOL Energy‘s 7% overriding royalty interest in 115,647 net acres in the Marcellus Shale in southwestern Pennsylvania and north central West Virginia for $193 million. The deal has an effective date of July 1, 2011. The acquisition increases Antero’s average net revenue interest to 87% in acreage acquired from Dominion Resources three years ago (see NGI, July 7, 2008) and adds 12 MMcf/d in existing Antero-operated wells. The acquisition adds more than 500 Bcfe of net risked resource to Antero’s resource base, including more than 60 Bcfe of proved reserves. CONSOL would retain existing shallow wells and formations and all other leasehold interests on the acreage.

PDC Mountaineer (PDCM), a joint venture of Petroleum Development Corp. and Lime Rock Partners V LP, is paying $152.5 million to National Grid plc for Seneca-Upshur LLC, including the rights to an estimated 90,000 net acres in the Marcellus Shale in north central West Virginia. Closing is scheduled for Monday (Oct. 3), with an effective date of July 1, 2011. The acreage is estimated to contain 1.5 Tcfe of net risked resources from about 435 gross horizontal drilling locations. PDCM plans to begin development next year. Currently the assets produce about 5.4 MMcfe/d; the existing production has estimated net proved developed producing reserves of 30 Bcfe, and the acreage is 100% held by production, PDCM said.

The proposed merger of Southern Missouri Gas Co. — doing business as Southern Missouri Natural Gas (SMNG) — and Missouri Gas Utility (MGU) has been approved by the Missouri Public Service Commission. The merger would not result in any rate changes or a reduced level of service or reliability, the companies said. SMNG serves about 8,000 customers in Greene, Webster, Laclede, Wright, Douglas, Texas, Howell, Stone and Taney counties; MGU serves about 1,500 customers in Harrison, Daviess, Caldwell, Pettis and Benton counties. The post-merger company would operate as Missouri Gas Utility.

Florida has relatively high electric costs because the state’s utilities have a fuel mix more dependent on natural gas than neighboring states, which rely more on coal and nuclear energy, according to a study released by the Florida Public Service Commission (PUC). Natural gas costs about 10 cents/kWh, coal costs about 3 cents/kWh and nuclear power “has minimal fuel costs but requires a large capital investment,” the PUC said. Residential customers in the state pay 10-20% more for electricity than customers in other Southeast states. The study was conducted by the Public Utility Research Center at the University of Florida‘s Warrington College of Business.

Encana Corp. subsidiary Encana Natural Gas Inc. has opened a compressed natural gas (CNG) station in Strathmore, AB, about 25 miles east of Calgary, to fuel the company’s growing fleet of natural gas-power vehicles and eventually, corporate fleets. The Strathmore station, which could eventually be made available to the public, joins other Encana CNG stations already operating in Fort Lupton, CO, Parachute, CO, Red River Parish, LA and Sierra, BC. Encana is converting much of its vehicle fleet to natural gas fuel; currently 128 of its 1,400-vehicle North American fleet runs on natural gas.

While separate regulatory commission and fire department investigations continue, Puget Sound Energy (PSE) has determined as a “working theory” that a wind-toppled tree in a north Seattle residential neighborhood caused a gas leak at a home blocks away that resulted in an explosion Sept. 26. A married couple inside the home were treated for burn-related injuries and the home was leveled, a PSE spokesperson told NGI. PSE leak survey crews have identified at least seven leaks.

Kodiak Oil & Gas Corp. is buying 13,500 net acres in the Bakken Shale play from an undisclosed private oil and gas company for about $235 million in cash. It also agreed to assume the terms of a contract for its sixth drilling rig. Denver-based Kodiak said the acquired acreage is located in Williams County, ND, just north of the company’s Koala Project area. Kodiak said estimated net oil and gas production from the acquired acres was about 3,000 boe/d. The transaction is expected to expand Kodiak’s position in the Williston Basin to about 110,000 net acres. The deal is expected to close in late October, subject to due diligence, closing conditions and adjustments with an effective date of Aug. 1, 2011. The latest transaction is the company’s second expansion into the Bakken this year after it agreed to acquire 25,000 net acres in McKenzie County from a private seller for $85.5 million in May.

Joe Oliver, Canada’s natural resources minister, told the Economic Club of Canada in Ottawa that natural gas would help make the country a “global energy superpower.” emphasizing that the resource can be produced and delivered in a safe and environmentally responsible way. Oliver said Canada is the world’s third-largest producer of natural gas, and more than half of all Canadian homes are heated by natural gas. He added that natural gas utilities in Canada have invested more than C$450 million in conservation and efficiency efforts, strategies that have reduced greenhouse gas emissions by more than 16 million tons. “We recognize that natural gas can and must be a key ingredient in Canada’s energy mix for many years into the future,” Oliver said.

Ashland Inc., a chemical company headquartered in Covington, KY, plans to install two natural gas boilers at its Ashland Hercules Water Technologies (AHWT) paper chemical plant near Franklin, VA. The conversion from electric to natural gas-powered boilers is said to cost about $5.7 million and would include the construction of a three-mile gas pipeline that could eventually be extended to supply the nearby Turner Tract industrial site. The conversion project is expected to be completed in May. Columbia Gas of Virginia would supply the facility with natural gas. Columbia spokesman Bob Innes said construction of a six-inch diameter steel pipeline to AHWT would be finished in one month.

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