Houston-based High Point Gas Transmission LLC (HPGT), a newly formed company focused on the offshore, is seeking FERC approval to purchase 617 miles of pipeline and associated facilities located onshore and offshore Louisiana from Southern Natural Gas Co. LLC.

The facilities that High Point proposes to buy are upstream of Southern’s Toca Compressor Station and are referred to as the South of Toca facilities. Specifically, they are located in Plaquemines and St. Bernard parishes in onshore Louisiana, and in the Mississippi Canyon, West Delta, Main Pass, South Pass, Viosca Knoll and Breton South areas of offshore Louisiana.

The pipelines and other associated facilities deliver natural gas from producers and pipeline interconnects in onshore and offshore Louisiana to the interconnect with Southern’s system at the Toca Compressor Station in St. Bernard Parish. The pipe facilities range in diameter from four inches to 26 inches in water depths of up to 1,000 feet.

The sale represents a restructuring away from declining Gulf of Mexico supplies as major interstate pipelines concentrate on unconventional gas in onshore basins.

High Point asked the Federal Energy Regulatory Commission (FERC) to issue a final order by May 1, 2012. Southern has filed a separate application seeking permission to abandon by sale the South of Toca facilities to HPGT.

“The abandonment of the South of Toca facilities by sale to HPGT reflects the significant and irrevocable changes in historical supply sources and patterns and the constant need for interstate gas pipelines with offshore systems to rationalize their services and costs to correspond with the needs of their current customers in order to continue to compete for new customers,” High Point told the Commission in its application.

“As a result of recent changes in the natural gas industry, including the development of new onshore pipeline infrastructure and nonconventional onshore gas supplies, many interstate pipelines have experienced significant changes in pipeline operations. The significant influx of new gas supplies from the Rocky Mountains and shale plays, such as Marcellus and Eagle Ford, has caused many pipelines to focus on core onshore transmission systems and move away from their traditional role of aggregator of offshore supplies,” it noted.

“Although supplies in the Gulf of Mexico have declined [in the past year or so], HPGT expects this area to continue to contribute to the overall United States natural gas supply portfolio. As producers take steps to drill and develop additional supply sources in the Gulf of Mexico, there will be an important role for entities like HPGT, which are solely focused on offshore pipeline infrastructure.”

High Point noted that the acquisition could benefit Southern customers. “The sale of the South of Toca facilities will reduce the rate base and operating and maintenance expenses on the Southern system and, in turn, may reduce the rates for Southern customers, the majority of which do not utilize the South of Toca facilities,” it said.

According to High Point, customers representing approximately 72% of Southern’s firm transportation reservation revenue on the South of Toca facilities have expressed support for the sale of the facilities, while customers representing about 19% of the revenue said they either supported it or did not oppose the sale.

HPGT is a joint venture that was formed to purchase and operate the South of Toca facilities. It is owned by High Point Energy LLC and ArcLight Capital Partners LLC.

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