Northern Border Partners LP expects to see gathering and processing volumes from the Powder River Basin gain between 15-20% by the end of the year with the timely completion of the Bureau of Land Management’s final environmental impact statement (FEIS), company officials said in an earnings conference call Thursday.

Permitting for Basin wells has been slowed by the lengthy process — three years and $2.5 million for research — of drafting the environmental statement, but the effort should mean that the final stages will be relatively speedy. The FEIS was printed in the Federal Register Jan. 17 (see Daily GPI, Jan. 13), and the 30-day comment period ends Feb. 18.

Pierce Norton, president of the company’s Bear Paw and Crestone subsidiaries, expects “the extra effort should ward off issues that would be coming up in the comment period. I don’t know what kind of protests there will be, but in the context of the national energy picture, it’s not going to take forever” for those to be reviewed. He said the “extreme risk” items such as drainage have been addressed in the FEIS.

Northern Border expects to see an impact in its gathering and processing results from increased activity in the third and fourth quarter, but “I don’t think we’ll see a huge boom,” Norton said. Rather, he expects steady growth in permitting and bringing new development on line from 2004-2006. The company is predicting a 5-10% increase in overall gathering and processing volumes in 2003 and 10% growth in earnings before interest, taxes, depreciation and amortization (EBITDA) and net income from the unit.

“Our interstate pipelines continue their pattern of high utilization and stable cash flows and our gathering and processing segment continues to grow,” said Chairman Bill Cordes. “Looking forward to 2003, we will focus on three major goals: integrating Viking Gas Transmission’s operations into our interstate pipeline group; developing our Powder River Basin businesses to meet customer growth needs resulting from the recently issued environmental impact statements; and negotiating with potential customers for capacity subscriptions on Northern Border Pipeline. Financially for 2003, our current expectations are for earnings per unit in the range of $2.55 to $2.65.”

The company also is looking for improved results due to “higher stable gas prices,” and it will be on the trail of further acquisitions. Northern Border executives noted a good omen was the completion of the Viking acquisition in mid-January “just when the weather turned cold.”

Northern Border Partners reported fourth quarter 2002 net income of $24.0 million or $0.49 per unit compared to $20.3 million or $0.45 per unit in the fourth quarter 2001. Full-year net income for 2002 was $113.7 million ($2.44 per unit) as compared to full year 2001 net income of $87.8 million ($2.12 per unit). EBITDA decreased from $76.1 million in the fourth quarter of 2001 to $71.7 million in the fourth quarter 2002. EBITDA for 2002 increased to $317.2 million from $303.0 million for 2001.

Fourth quarter 2002 earnings reflect a $7 million non-cash charge related to a reserve established by Northern Border Pipeline Co. The reserve was recorded to reflect the potential costs that may arise from its treatment of previously collected quantities of natural gas used in utility operations to cover electric power costs. While the ultimate outcome of this matter cannot be predicted, Northern Border Pipeline has concluded it’s prudent to establish a reserve at this time. Company officials said more information would be available on this in about two weeks.

Delivered volumes in the partnership’s interstate natural gas pipelines segment increased during fourth quarter 2002 to 241.6 Bcf from 231.9 Bcf for the fourth quarter of 2001. Average gathering volumes increased to 1,185 MMcf/d during the fourth quarter 2002 compared to 905 MMcf/d for the fourth quarter 2001. Processing volumes were 123 MMcf/d for the fourth quarter of 2002 compared to 120 MMcf/d for the fourth quarter 2001.

Northern Border Partners owns interests in four interstate natural gas pipeline systems: a 70% general partner interest in Northern Border; Midwestern Gas Transmission Co; Viking; and one-third interest in Guardian Pipeline, LLC. The partnership also has gathering systems and processing plants in the Powder River, Wind River and Williston Basins in the U.S.; owns and operates processing plants and gathering pipelines in Alberta, Canada; and transports coal-water slurry via a pipeline in the southwestern U.S.

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