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 (FERC) [CP12-490].
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. 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.
The Supply Area Facilities that Tennessee is seeking to abandon include the Kinder System, located onshore extending southward from Tennessee’s Compressor Station 823 connecting to the Cameron System, and consisting of approximately 130 miles of six-inch to 20-inch diameter pipe; and Blue Water, which begins at an interconnection on its western end with Tennessee’s mainline and connects with the South Marsh Island System, from which it extends offshore in Vermilion Block 245, then extends easterly to Ship Shoal Block 198, then northerly to a connection with the Cocodrie System, and consisting of about 528 miles of four-inch to 36-inch diameter pipeline, five platforms and 12,000 hp of compression,
Also to be abandoned is the Cocodrie System in onshore Louisiana and in state waters offshore, extending from a connection with the Blue Water System to a connection with the West Delta 68 System, and consisting of 63 miles of six-inch to 24-inch diameter pipeline and 12,050 hp of compression; the West Delta 68 System onshore in Lafourche and Plaquemines Parishes, LA, with extensions running offshore into the Main Pass Area and into the West Delta and Grand Isle Areas, including 179 miles of eight-inch to 30-inch diameter pipeline.
In addition, the Off System Main Pass Laterals would be abandoned. They consist of two small, off-system pipelines in Main Pass Block 311, consisting of 2.7 miles of four-inch and six-inch diameter pipeline facilities, jointly owned by Tennessee and High Point Gas Transmission LLC.
At the closing of the transaction, Kinetic Partners would 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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