Duke Energy Field Services has agreed to purchase percentageinterests in several non-regulated natural gas gathering systemsand processing plants from subsidiaries of ONEOK Inc., and hascommitted to build a natural gas processing plant with ONEOK insouthern Oklahoma.

Duke has purchased half of ONEOK’s interest in a partnershipthat owns and operates the Sycamore Gas Gathering system in CarterCounty, plus it has bought ONEOK’s Aledo gas treating plant andgathering system in Dewey County; the Minneola gas gathering systemand related facilities in Ford, Meade and Clark counties in Kansas;and about a 16% interest in the oil and gas reserves, gatheringsystem and processing plant in the Black Lake Unit located inNachitoches Parish, LA. The effective date for the transaction isSept. 1. No financial details were disclosed.

Duke Energy and ONEOK Gas Processing also have formed apartnership to build a new natural gas processing plant andgathering system in Carter County to process approximately 25MMcf/d of natural gas in an area that includes the Sycamore Field.

ONEOK spokesman Weldon Watson noted the “opportunities involvedin having someone of Duke’s size focusing on this area.”Questioned, he said that despite Duke’s announced sale of PanhandleEastern and Trunkline, he had seen no indication Duke is gettingout of the midstream business. He cited the deal with ONEOK andDuke’s Field Services announcement Wednesday of the purchase of agas processing plant in Texas.

“The purchase of these facilities and the construction of theprocessing plant will further our ability to meet our customers’needs by increasing capacity in strategic areas and enhancingoperating efficiencies through consolidation,” said Jim Mogg,president of Duke Energy Field Services.

“The Aledo plant, the Minneola plant, were plants that werepicked up in other acquisitions,” said ONEOK’s Watson said. “TheBlack Lake reserves we purchased back in the early ’90s. We’ve gotmore of an exploitation focus for reserves and owning reserveswhere we own other operations where we’re very active, and that wasnot the case with the Black Lake area in Louisiana.”

Collaborative Process Under Review

Attorneys and executives that have used the collaborativeprocess to reach agreement on thorny issues prior to filinghydropower relicensing applications touted the benefits of theprocedures for the natural gas pipeline industry, but they stressedthat the time involved and even the costs in some cases can beoverwhelming.

This was a key message at yesterday’s FERC staff workshop on anotice of proposed rulemaking (NOPR) that seeks to extend the useof the collaborative process, which is being practiced in thehydropower industry now on a limited basis, to other regulatedenergy projects, including interstate gas pipelines. TheCommission’s proposal would provide a vehicle for pipelines andother stakeholders, such as disgruntled landowners and stateagencies, to sit down and decide sticky environmental issues andpossibly other matters prior to the filing of project applications.

The biggest plusses of a collaborative process are that it wouldeliminate the “surprises” that normally crop up in subsequentNational Environmental Policy Act (NEPA) reviews of energy projectssince the issues would be debated up-front, would give applicantsmore control over the NEPA review process (they would be actualparticipants rather than onlookers), and would provide the meansfor stakeholders to agree early on how to study the key issues,workshop participants said.

The Commission staff believes the pipeline industry especiallyis ripe for the collaborative process because of mounting landownerdissatisfaction with new projects and the rising number of gaspipeline projects. It estimated that applications for about 6 Bcf/dof pipeline capacity currently are pending at FERC and that projectapplications for 7.5 Bcf/d more are on the horizon. It believes theuse of collaboratives could speed up the processing of theseapplications, resulting in prompter decisions.

But the collaborative does exact a toll. For “folks that arecontemplating this, I think it’s tremendously important to reallyopen your eyes to what the process means,” said Timothy Lukas, apartner with the Hanover, ME, firm of Lukas & Ayer, whichspecializes in hydro project licensing. The amount of work involved”can’t be overestimated.”

In his role in a Washington Water hydro case over the past twoyears, he noted he has been directly involved in more than 60formal consultation meetings. “That’s a tremendous workload for theapplicants,” as well as for other stakeholders. “I don’t knowanyone that hasn’t gone into it and ended up a year or two latersaying ‘this was 20 times more work than I thought it would be,'”Lukas said.

And although it may be worth it in the end, the collaborativeprocess could be expensive, he and others noted. This is becauseapplicants would be required to pay for the expenses to bringstakeholders to the negotiating table. This could include payingfor environmental consultants, transportation costs, room andboard, meeting rooms, administrative staff personnel and otheritems. This is a “hotly debated issue within the hydropowerindustry, and I would assume it would be the same in the gasindustry,” Lukas said. “At first blush…you don’t want to fund thepeople that sit across the table from you. On the other hand, it’simportant to have them sitting across the table.”. In the end, hebelieves many “will tell you that they got more than their money’sworth out of it.” Others pointed out that participants have tobear many of those same costs if projects are involved in formalhearings.

Although not the norm in the pipeline industry, one workshopattendee pointed out that the Portland Natural Gas Transmissionproject, which has faced “significant local opposition” in Maine,has used a variation of the collaborative process to smooth overlocal concerns. It did a “pretty good job” by holding publicoutreach meetings and by upgrading pipeline standards beyond whatwas required. “Actually [it] did many of the same steps you do in acollaborative when issues and local concerns were raised.”

Most agreed that the collaborative process shouldn’t be mademandatory for pipelines or any other energy projects. “If folksthat aren’t interested in collaboratives…are forced into acollaborative when it’s not the best role, I think it’s going toresult in more delay and more complicated processes because you’retrying to fit a round peg into a square hole,” said MargaretBowman, chairman of the Hydro Reform Coalition.

The question of whether collaboratives ought to be mandatory”needs to be answered ‘no’ because I think applicants…and otherparties need to believe that there’s another option out there andit’s [the] traditional process,” agreed John Mohm, a WashingtonD.C. attorney who has experience in both hydro cases and railwayconstruction.

Mohm also believes that the pre-filing collaborative processshould be confined to dealing with environmental issues andoperations that may have an impact on the environment. In its NOPR,the Commission has sought industry comment on whether bothenvironmental and non-environmental issues should be open to reviewprior to a company filing a project application. He thinks,however, that financial information about a company-applicantshould be outside the scope of negotiations between stakeholders.

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