Sabine Pipe Line Co. has gotten the go-ahead from FERC torestructure its business as a limited liability company to takeadvantage of certain state and franchise tax benefits and gaingreater flexibility to raise capital.

Sabine will abandon all of its jurisdictional pipelinefacilities to Sabine LLC, which will own and operate them in thefuture. It has about 188 miles of pipelines and laterals, rangingfrom 22 to 14 inches in diameter, in Louisiana, Texas and in theGulf of Mexico. The main part of its system extends from the HenryHub at Erath, LA, to Port Arthur, TX.

Sabine LLC is a limited liability company wholly owned by TexacoExploration and Production Inc. One of the reasons stated fortransferring the pipeline assets to Sabine LLC was to create a”more efficient business structure” for the operation of thefacilities, the order said [CP00-24, CP00-25].

As part of the transfer, the Commission also approved the saleto Texaco Petrochemical Pipeline LLC of 43 miles of the 16-inchmainline pipeline that runs from a point west of the Neches Riverin Jefferson County, TX, to a point east of the Calcasieu River inCalcasieu Parish, LA. Texaco plans to convert the line to a liquidsservice. The sale price will be at a depreciated net book value ofabout $1 million.

The sale would reduce the firm capacity of Sabine’s system by65,000 Dth/d, but only one firm customer would be directly affected— Texaco Natural Gas Inc. — and it has not protested theabandonment of the facilities.

Sabine told FERC that the annual usage of the pipelinefacilities to be abandoned has declined over the last couple ofyears. It has dropped from an average of 80,260 Dth/d in 1995 to20,950 Dth/d last year. Sabine said the decline would have beeneven more pronounced had it not been for substantial discounting.

Shippers historically have used this segment of Sabine’s systemto take advantage of the pricing differentials between Texas andLouisiana. But “since such differentials have been flat for sometime, and are expected to continue to be flat for the foreseeablefuture, shippers no longer have this incentive. Instead, it is moreefficient to move gas directly to the consuming markets,” the FERCorder said in approving the sale of part of Sabine’s system.

“The proposed abandonment will permit Sabine LLC to concentrateits efforts on those assets that are of greatest value to itscustomers and avoid the costly maintenance expenses and reduceoperational costs on an underutilized section of the pipeline.”

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.