FERC has cleared the way for Tennessee Gas Pipeline Co. LLC to sell more than 1,300 miles of pipeline in the Gulf of Mexico (GOM), known as the Supply Area Facilities, to Kinetica Energy Express LLC, allowing the pipeline to exit the offshore business and shift its attention to the onshore shale market.
In its application, which was filed in July 2012, Tennessee said it wanted to move away from its historic role as an aggregator of offshore supplies to focus its efforts on its onshore mainline system. It said the Supply Area Facilities no longer fit into its business strategy as gas production is shifting away from conventional offshore supplies to developing prolific onshore non-conventional natural gas.
“We find that Tennessee has adequately supported its position that shedding its offshore facilities will put it in a better position to respond to changes in the interstate pipeline industry and natural gas supply market and thus address its customers’ evolving needs by focusing more efficiently on operations to access the new and growing onshore shale formations,” said an order issued by the Federal Energy Regulatory Commission Friday.
The Commission “approves Tennessee’s request to abandon the Supply Area Facilities and grants certificate authority for Kinetica Energy to acquire and operate the Supply Area Facilities found to be jurisdictional transmission facilities. This order also approves Tennessee’s settlement agreement,” the order said.
In a November 2011 order, the Commission approved Tennessee’s abandonment by sale to Kinetica Partners, which owns Kinetica Energy, of certain onshore and offshore facilities in the GOM and Louisiana that were found to perform non-jurisdictional gathering, exempt from FERC jurisdiction under the Natural Gas Act. In that same order, it denied the pipeline’s request to abandon those facilities found to perform jurisdictional transmission functions because Kinetica Partners had not filed for a Section 7(a) certificate to acquire and operate the facilities on a jurisdictional basis.
In its latest application, Tennessee seeks authority to abandon approximately 1,325 miles of pipeline consisting of approximately 425 miles of pipelines found to be jurisdictional and 900 miles of additional pipeline facilities, 34,250 hp of compression facilities, 12 offshore platforms and other associated facilities, according to the order [CP12-490].
The Supply Area Facilities that Tennessee is seeking to abandon include:
At the closing of the transaction, Kinetic Partners will assign facilities found to be jurisdictional transmission to its affiliate Kinetica Energy, and facilities deemed to be non-jurisdictional gathering facilities to its affiliate Kinetica Midstream.
Both the sale and abandonment of the Supply Area Facilities were contingent on the approval of Tennessee’s offer of settlement, which provides rate reduction benefits for the pipeline’s shippers.
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