Market Hub Partners LP (MHP) subsidiary NE Hub Partners LP has reached an agreement with CNG Transmission and North Penn Gas on the development of NE Hub’s 5-6 Bcf Tioga Gas Storage Project in north central Pennsylvania.

In April, FERC approved construction and operation of the Tioga facility, which NE Hub filed for in 1995 (see NGI April 20, 1998). Since then, NE Hub and the two intervenors-North Penn Gas, a wholly owned subsidiary of Penn Fuel, and CNG-have battled over the amount of insurance required before NE Hub could begin construction and drilling. In October FERC ordered the parties negotiate the issues in mediation. Details of the agreement were not made available.

North Penn and CNG oppose the project because it would be located directly below their existing storage field. The companies for years have argued NE Hub’s plan to drill ten 28-inch diameter wells through their storage field could result in the loss of 10% (2.7 Bcf) of the working gas in the existing field and do irreparable damage.

The settlement agreement represents the last significant regulatory hurdle before the project can be constructed, NE Hub said. That’s not exactly right, said Henry Brown, chief counsel for CNG Transmission. CNG is awaiting a FERC order on its request for rehearing of the project, which may or may not come. And yet to be approved by the FERC is NE Hub’s implementation plan for FERC-specified safeguards for project construction, Brown said. While the insurance issue between NE Hub and CNG-Penn Fuel has been settled, Brown said customers of the intervening companies still lack assurance of supply should something go wrong during construction of Tioga. A NE Hub spokesman could not be reached for comment by press time.

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

Joe Fisher, Houston

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