Wyoming Interstate Co. Ltd. (WIC) got the green light from FERC Thursday to carry out an expansion of its Medicine Bow lateral that would allow Powder River Basin producers to transport more natural gas to the Cheyenne Hub in Colorado.
The project calls for WIC to add a 24,930 hp gas-driven turbine compressor unit and pipeline facilities at its Douglas compressor station in Wyoming, creating up to 330,000 Dth/d of additional capacity on the lateral. The Federal Energy Regulatory Commission has given the El Paso pipeline subsidiary one year to build the expansion and place it in service.
The Medicine Bow lateral consists of approximately 155 miles of parallel 36-inch and 24-inch diameter pipelines that extend from the Douglas compressor station in Converse County, WY, to a connection with the WIC mainline immediately downstream of WIC’s Cheyenne compressor station at the Cheyenne Hub in Weld County, CO. The lateral enables shippers to move gas from the Powder River Basin to the Cheyenne Hub for delivery to downstream markets.
As a result of two open seasons held this year, Anadarko Energy Services, Williams Power Co. and Yates Petroleum have signed precedent agreements for the expansion capacity. Anadarko signed a 10-year agreement for 100,000 Dth/d of transportation capacity in year one, increasing over the course of the first three years to 200,000 Dth/d and then decreasing to 150,000 Dth/d beginning on Jan. 1, 2011.
Williams also signed a 10-year agreement for 25,000 Dth/d, increasing to 110,000 Dth/d in 2014 and remaining at that level for the life of the agreement. Yates inked a seven-year agreement for 30,000 Dth/d, increasing to 60,000 Dth/d in the third year, and gradually decreasing to 30,000 Dth/d in the last year of its deal.
If the extension rights are exercised by the three shippers at the maximum permitted level, WIC said the combined contractual maximum daily quantity of the shippers would increase to 370,000 Dth/d in 2014. To meet its contractual obligations, WIC said it would use existing capacity from other transportation agreements that are due to expire in 2011.
FERC granted WIC’s request for a predetermination to roll the costs of the project into the incremental rates of its existing customers on the Medicine Bow lateral in its next Section 4 rate case. “We find that WIC can construct and operate the Medicine Bow Expansion Project without subsidies from its existing customers, since revenues will exceed the cost-of-service over the initial 10 years that the project is in service. Thus, we will grant the request for a predetermination supporting rolled-in rate treatment.”
The agency also approved WIC’s request for rolled-in treatment for fuel costs, beginning with the first fuel filing following the in-service date of the proposed expansion.
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