A battle is raging between Atmos Energy and Equitrans, two companies that are seeking to build new natural gas pipelines to ease the transportation constraint in eastern Kentucky that has forced producers to shut in their gas.

Equitrans, the pipeline subsidiary of Equitable Resources in Pittsburgh, contends that the first phase of Dallas-based Atmos Energy’s Straight Creek project, which has been characterized as gathering, would be a “functional replica” of its Big Sandy jurisdictional transmission pipeline project. Both projects would be built in eastern Kentucky. The companies expect FERC to give the go-ahead for their proposed facilities later this month.

Equitrans claims the “Big Sandy project would serve the same market, and would provide the same function as the proposed Straight Creek project,” and that there is no evidence to suggest that the second phase of construction by Straight Creek would ever take place, the Equitable Resources’ pipeline said in a filing at FERC earlier this summer.

It further accused Atmos Energy’s Straight Creek project of “attempting to create, through its phasing proposal, the facade of a web-like gathering facility in order to build its Phase I…pipeline ahead of Equitrans in the competition for that market.” Equitrans asked the Federal Energy Regulatory Commission to not act on Straight Creek’s petition for a gathering declaratory order prior to acting on Equitrans’ certificate application.

In another filing last month, Equitrans urged FERC to subject the Straight Creek project to the same level of regulatory scrutiny as the proposed Big Sandy Pipeline under the Natural Gas Act (NGA), given that Straight Creek initially will transport processed gas from Columbia Gas Transmission, Equitrans’ affiliate Kentucky West Virginia Gas and Chesapeake Energy, rather than unprocessed gas from eastern Kentucky producers.

The Big Sandy project calls for the construction of a 60-mile, 20-inch diameter pipeline that would extend from Equitable’s Kentucky Hydrocarbon plant in Langley, KY, to Tennessee Gas Pipeline’s Broad Run Lateral in Carter County. The project would have 130,000 MMBtu/d of takeaway capacity for Kentucky producers to transport Appalachian gas to markets in the Mid-Atlantic and Northeast.

The Straight Creek project would originate in Floyd County, KY, and extend north 50 miles to interconnect with Tennessee’s system in Carter County as well. The 20-inch diameter system would be capable of moving 100,000 MMBtu/d of gas, and would have the ability to expand throughput to 225,000 MMBtu/d (see Daily GPI, Aug. 25).

Atmos Energy affiliate Straight Creek Gathering LP strongly disputes Equitrans’ allegations. “Equitrans has once again grossly misrepresented and mischaracterized the Straight Creek project,” it told FERC last Friday [CP06-369]. “The Straight Creek system will be a low-pressure system operating at 75 to 350 psi; will gather unprocessed gas; will gather gas from wells, producer-owned gathering lines and third-party gathering lines along its entire length; will have all compression, gas treatment and liquids extraction facilities located at its downstream terminus; will have a web-like configuration consisting of a backbone with feeder laterals extending along its entire length; and will be located upstream of the Straight Creek processing plant,” it said.

In contrast, “Equitrans’ Big Sandy system will be a high-pressure system operating at 1,000 psi, will transport processed gas exclusively, will not gather gas from any wells along its entire length, will have compression at its upstream end, will not have a web-like configuration, and will be located entirely downstream of the Equitable Kentucky Hydrocarbon Processing Plant in Langley,” Straight Creek said.

“Equitrans seeks to mislead the Commission by claiming that, before Phase II of Straight Creek’s construction is completed, the majority of the gas moved on Straight Creek will be processed gas. That claim is outrageous and untrue,” Straight Creek said. The only processed gas that will flow on the Straight Creek system is “certain partially processed gas” from Columbia Gas Transmission, it noted.

Other issues raised by Equitrans’ are “red herrings” as well, Straight Creek said. Equitrans “disingenuously claims” that it does not oppose the Straight Creek project as long as it satisfies the Commission’s regulatory requirements and has obtained the required environmental permits and/or clearances. Under the NGA, gathering lines are exempt from FERC jurisdiction, which means they do not require an agency certificate, it said. Moreover, the primary function test is the method used for determining whether a facility is gathering, and FERC does not employ an environmental analysis as part of this test, the company noted.

In a related development, Kentucky Attorney General Gregory D. Stumbo last week expressed reservations about Equitrans’ Big Sandy Pipeline project, claiming that Equitrans is holding eastern Kentucky producers hostage to its pipeline system. He asked FERC to condition any certificate approving the company’s Big Sandy Pipeline project on Kentucky producers being granted open-access taps to take their gas off an affiliated gathering system for transportation on pipelines other than Equitrans.

While reviewing the proposed Big Sandy project, Stumbo said a red flag rose regarding the relationship between Equitrans and its nonjurisdictional gathering affiliate Kentucky West Virginia Gas. Kentucky West, a former interstate pipeline, is the sole gatherer in many areas of eastern Kentucky.

Stumbo told FERC that he was “concerned specifically” that Equitrans controlled Kentucky West and operated it as a “subservient, nonregulated division” of the pipeline company. “This concern was brought about by the fact that Equitrans, speaking for Kentucky West, had repeatedly denied requests by independent Kentucky natural gas producers for [discharge] taps on the Kentucky West system …[to] take their gas out of Kentucky West’s pipelines prior to that gas entering Equitrans’ proposed Big Sandy Pipeline, or the gas processing and compression facilities which will serve the Big Sandy Pipeline,” he said in a FERC filing [CP06-275].

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