A threatened shut-in of 250 MMcf/d or more of raw gas productionconnected to Southern Natural Gas Co.’s system has been averted —at least temporarily — as the owners of key processing facilitiesin Louisiana yesterday re-started some of their operations to bringproduction up to the pipeline’s specifications for delivery.

The problem on Southern is one that has been plaguing a numberof pipelines recently since producers, seeking to collect the highgas prices, have been leaving heavier liquids in the gas stream toincrease the heat content and value of the gas.

The owners of the processing facilities — a few of which arethe producers whose gas would have been shut in — agreed to aneleventh-hour “economic arrangement” that called for one of twofacilities in Toca, LA, which are operated by Enterprise ProductsOperating L.P., to become “fully operational” yesterday, Southerntold FERC this week. A third processing plant in Toca operated byWestern Gas Resources also agreed to re-start operations yesterday.

By late Thursday, Southern Natural reported that theWestern-operated plant in Toca had received sufficient volumes torecommence its 150 MMcf/d facility. However, a mechanical problemarose when the Enterprise Toca II facility was being tested forstart-up. Thus, the 250 MMcf/d plant is not in operation at thistime, but repairs are expected to be finished by Saturday. The 750MMcf/d Toca I facility has been running all along.

A knowledgeable source stressed the agreement with the plantowners was only temporary, providing for the Toca facilities to beopen on a “day-to-day basis.” There is “no commitment [by theparties] even through the end of the month.”

Consequently, “if the owners decide to shut it [the facilities]down again, we still are threatened with shut in” of gas productionby Southern Natural, the source noted. While there is “someoverlap” between producers and plant owners, ” the producersbehind-the-plant cannot control the decisions fo the plant owners,and thus shouldn’t be penalized for them, she said. Some of theplant owners are Amoco Production, Conoco, Duke Energy, DynegyMidstream, Lousiana Land & Exploration and Exxon .

Southern Natural threatened to shut in the producers’unprocessed gas because it allegedly exceeds its tariff’slimitation for the amount of hydrocarbons permitted in the gasstream, which is set at 0.3 gallons per Mcf (GPM). The pipeline,however, has vowed to postpone its shut-in plans, provided all thegas upstream of the Toca facilities is being processed startingSunday.

This greater-than-normal amount of hydrocarbons in the gas isposing operational concerns for its system, Southern Naturalcontends. The hydrocarbons turn into liquids that fall out insidethe pipeline or inside end-use plants or at LDC regulator stations.If the regulators at LDC delivery points freeze due to the presenceof hydrates in the liquids, distributors often are prevented fromdelivering gas to their downstream markets, it noted.

The owners of the Toca facilities, as well as other processingplant owners around the nation, are choosing to suspend theirprocessing operations because they can nab higher prices forheavier, hydrocarbon-laden gas in the current seller’s market forthe commodity.

Four producers and a marketer — Amoco Production Co., BPExploration & Oil Inc., Chevron U.S.A. Inc., ExxonMobil GasMarketing Co., and Shell Offshore Inc. — responded to thepipeline’s warnings by filing an emergency petition at FERC for atemporary restraining order (TRO) to prevent Southern Natural fromshutting in their gas. They urged the Commission to act by Jan. 9,the date that Southern Natural said it would begin refusing toaccept unprocessed gas from producers [RP01-208].

In a Jan. 8 motion seeking dismissal of the producers’ petition,Southern Natural said the request for a TRO is “hopefully soon tobecome moot” as a result of the agreement by owners to re-opentheir processing facilities. But the petition hadn’t been withdrawnby the producers or acted on by FERC as of yesterday.

In fact, the producers filed an answer at the CommissionThursday opposing Southern Natural’s motion to dismiss. “This isnot a moot issue,” said a source close to the case. “It’s not asimple case of them enforcing their tariff [on specs] and usdigging in our heels.”

The producers contend that Southern Natural is holding them to a”higher standard” than other supplies entering its system at otherlocations, which they claim have a “higher liquefiable content”than their unprocessed gas. The most recent gas analysis indicatesthat — even after taking into account the producers’ unprocessedgas — the quality of the upstream gas stream on Southern Naturalis 0.161 GPM, which is “well within” the 0.3 GPM spec, they said.

“It is apparent that the [processing] plant is not, at least inour view, the real cause of the problem here because our[producers’] blended gas stream is well below spec,” said thesource familiar with the case.

“The real problem on their [Southern Natural’s] system is theirliquids quality spec is too high at all the other pipelineinterconnects. Gas is coming in at 0.3 spec, which their systemcan’t take. So they’re coming to us (our spec is 0.16 now), andthey’re trying to get us to strip out more to make it even lower.We need a technical conference to address this issue.”

Atlanta Gas Light (AGL), the largest capacity-holder on SouthernNatural, called on the Commission to reject the producers’ petitionfor emergency relief, saying it “raises very serious operationalreliability and safety issues for the markets and customersdownstream of the Toca gas-processing facilities.

Any order by FERC that would enjoin Southern Natural fromenforcing its gas quality specs “exposes Southern’s downstreamcustomers to serious operational risks, including facility damageor failure during this peak winter season, which, in turn, couldhave serious adverse economic consequences for retail marketers inGeorgia and the natural gas customers that they serve,” the LDCsaid.

The producers are seeking the TRO for “purely economic reasons,”AGL charges. “It would be unjust and unreasonable for theCommission to elevate the economic interest of certain producersover the safety and welfare of natural gas consumers.”

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