Inergy subsidiary Inergy Midstream LLC has agreed to buy 100% of the membership interest in US Salt LLC, a mining and salt production company in Schuyler County, NY, between Inergy’s Stagecoach and Steuben County natural gas storage facilities.

US Salt produces food-grade salt products and bulk salt for chemical feedstock. The deal will bring Inergy usable salt cavern capacity for gas storage. After receiving necessary regulatory approvals, Inergy expects to immediately begin developing approximately 5 Bcf of available salt cavern capacity and have that capacity operational in fall 2010.

The transaction provides Inergy with “a long-term pipeline of high-return storage development projects in the heart of the Northeast natural gas distribution infrastructure,” said Inergy CEO John Sherman. “In addition, this transaction is yet another example of the successful execution on our plan to build an integrated natural gas storage and transportation hub in the Northeast.”

The solution mining process used by US Salt creates salt caverns that can be developed into gas storage capacity, and US Salt operations are near Empire Connector Pipeline, New York State Electric and Gas’ intrastate pipeline network, Millennium Pipeline, Teppco’s liquefied petroleum gas pipeline and storage system and Inergy’s own Thomas Corners project, the company said. Inergy expects to immediately market the facilities in an open season.

Inergy said it will spend about $191 million to acquire US Salt and develop the initial 5 Bcf of storage. The acquisition will be funded with a combination of borrowings from Inergy’s revolving credit facility and Inergy LP common units issued directly to US Salt. Inergy expects to generate earnings before interest, taxes, depreciation and amortization from the combined salt production and gas storage operations of approximately $28.5 million on a run rate basis by the end of fiscal 2010.

The acquisition is expected to close by the end of August, Inergy said.

Kansas City, MO-based Inergy Midstream owns and operates Central New York Oil And Gas Co.’s 26.4 Bcf Stagecoach gas storage facility and Arlington Storage Co. (ASC), which includes Thomas Corners, a planned 7 Bcf storage facility being developed in Steuben County, NY. ASC sold out the 5.6 Bcf in available capacity at the Thomas Corners facility earlier this year (see Daily GPI, May 8).

With the acquisition of ASC last year (see Daily GPI, Sept. 6, 2007), Inergy also took over as the majority owner and operator of Steuben Gas Storage Co., which owns a facility in Steuben County. The Steuben facility has approximately 6.2 Bcf of working capacity, maximum withdrawal capability of 60 MMcf/d and maximum injection capability of 30 MMcf/d. The capacity is fully contracted under long-term agreements with investment-grade counterparties. The Steuben facility is connected to Dominion Transmission’s Woodhull Line (see Daily GPI, Dec. 20, 2006) and serves the Northeast gas market.

In March Inergy said it also planned to expand another salt cavern near Bath, NY, for high-deliverability service. Inergy intends to develop additional caverns with approximately 4 Bcf of working capacity, maximum withdrawal capability of 150 MMcf/d and maximum injection capability of 75 MMcf/d.

Once everything is completed, Inergy will have added approximately 15.6 Bcf of working capacity within approximately 60 miles of its existing Stagecoach facility (see Daily GPI, Oct. 27, 2005; July 12, 2005). Inclusive of the Stagecoach operation, Inergy will control more than 40 Bcf of working capacity, making it one of the largest independent storage operators in the northeastern United States.

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