Market Hub Partners LP (MHP) subsidiary NE Hub Partners LP hasreached an agreement with CNG Transmission and North Penn Gas onthe development of NE Hub’s 5-6 Bcf Tioga Gas Storage Project innorth central Pennsylvania

In April the Federal Energy Regulatory Commission (FERC)approved construction and operation of the Tioga facility, which NEHub filed for in 1995. Since then, NE Hub and the twointervenors-North Penn Gas, a wholly owned subsidiary of Penn Fuel,and CNG-have battled over the amount of insurance required beforeNE Hub could begin construction and drilling. In October FERCordered the parties negotiate the issues in mediation. Details ofthe agreement were not made available.

North Penn and CNG oppose the project because it would belocated directly below their existing storage field. The companiesfor years have argued NE Hub’s plan to drill ten 28-inch diameterwells through their storage field could result in the loss of 10%(2.7 Bcf) of the working gas in the existing field and doirreparable damage.

The settlement agreement represents the last significantregulatory hurdle before the project can be constructed, NE Hubsaid. That’s not exactly right, said Henry Brown, chief counsel forCNG Transmission. CNG is awaiting a FERC order on its request forrehearing of the project, which may or may not come. And yet to beapproved by the FERC is NE Hub’s implementation plan forFERC-specified safeguards for project construction, Brown said.While the insurance issue between NE Hub and CNG-Penn Fuel has beensettled, Brown said customers of the intervening companies stilllack assurance of supply should something go wrong duringconstruction of Tioga. A NE Hub spokesman could not be reached forcomment by press time

The Tioga project is the first independent high-deliverabilitysalt cavern storage facility in the Northeast. MHP said it hopesthe FERC will grant NE Hub authorization to begin the Tioga Projectimmediately, noting the project has received all major federal andstate approvals necessary to begin construction and operation. NEHub has entered into long-term firm agreements with SouthernConnecticut Gas, Aquila Energy Marketing and Tejas Power for 1.87Bcf/d of the 5-6 Bcf/d of total working gas capacity of the twostorage caverns. This would put the amount of working gas capacityunder contract between 31.2% (based on 6 Bcf/d) and 37.4% (based on5 Bcf/d).

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