The Wyoming Natural Gas Pipeline Authority is closing in on deals to utilize some of its $1 billion bonding authority for three projects that will either directly or indirectly promote the sale and transportation of more Wyoming natural gas.
According to a source at the Pipeline Authority, there are plans to help El Paso finance the 380-mile Cheyenne Plains pipeline. The Authority also is in talks to provide financial assistance to Lower Valley Energy for a proposed gas pipeline to serve Jackson, WY, and is looking at plans to help a developer build a business complex in Rock Springs that will be leased by oilfield services giant Halliburton.
The Pipeline Authority is still in the negotiating stage on the $425 million Cheyenne Plains project. El Paso has been in financial distress for some time and Wyoming wants to make sure the much needed export pipeline is put into servive. Although the company already has obtained construction financing, final contract signatures are being held up by delayed quarterly financial statements. While that may be only a short-term concern, the real issue involves a permanent financing package, the source noted.
“The Cheyenne Plains pipe is literally laying on the ground right now,” the source said. “The contracts are completed and about to be signed. They have their construction financing in order. Everything is a go on that project, but they have not addressed their permanent financing and that’s where we may come in with some sort of assistance.”
The Pipeline Authority sees Cheyenne Plains as an essential addition to the Rocky Mountain gas grid. “It is the one project we feel Wyoming cannot do without,” the source said.
The project, which will extend from the Cheyenne Hub in northeastern Colorado to Greensburg, KS, will be a significant new addition to the entire region, but particularly for Wyoming. It will provide a new direct route to Midcontinent and Midwest gas markets for rapidly growing Powder River Basin coalbed methane production, as well as for gas supply from the Jonah Field in the Green River Basin in western Wyoming and other production from the Piceance Basin in western Colorado.
The 36-inch diameter pipeline will include several laterals, 23,063 horsepower of new compression, a gas treatment plant at the Cheyenne Hub in Weld County, CO, and nine new pipeline interconnects. The project has been targeted for service in January 2005 with an expansion the following year. Initial deliveries will total 560 MMcf/d with another 170 MMcf/d in phase II and the possibility of an additional 1 Bcf/d expansion.
The second project the Authority is examining is Lower Valley Energy’s 52 mile, eight-inch diameter pipeline from Williams’ Merna gas production field to Jackson, WY. It would be a $12-15 million pipeline.
Gas conversions and customer demand growth in Jackson have made it extremely impractical and inefficient for Lower Valley to expand its LNG transportation program beyond the current 500 trucks per year.
“If you saw the roads, these little skinny mountain roads, and considered all the snow slides, you would understand that it has come to a point where the logistics are too difficult and just don’t make sense anymore,” the source said.
“They are still in the process of doing their environmental impact statement and so until that is done, they can’t really commit to saying this is how they want to do the financing. They have their NEPA work done but are still working on other environmental work so when that is done I think we can sit down and do some negotiating. It’s probably going to happen in the next 60 to 90 days. They have some existing debt that we may be able to roll into this new project and do some financing.”
The third project being discussed is already being built in the southwestern part of Wyoming under previously obtained construction financing but the builder has requested additional financing assistance from the Pipeline Authority because the project, a $25 million business complex, will be leased to Halliburton, one of the world’s largest gas and oil field services companies. It’s a 40 acre facility with 120,000 square feet of office and shop space and railroad spurs.
“We have a draft opinion from our bond counsel saying that this fits under our legislation — we can help with financing this because all of these services are needed to have gas production.”
The Rock Springs project is likely to go through Pipeline Authority financing first and may happen by the end of the year, the source said. Lower Valley’s project may not happen by the end of the year because it is still going the environmental work. And El Paso’s permanent Cheyenne Plains financing most likely will not be completed until next year, the source said.
The Wyoming Natural Gas Pipeline Authority was reconstituted in 2003 after the state’s natural gas industry suffered from a year of depressed gas pricing due to poor pricing differentials and tight export pipeline capacity. Pipeline Authority staff spent the last year gathering information on gas transportation problems in the state and region and identifying several means of addressing those problems. By the end of this year staff hopes to have begun taking action on solutions. The Authority currently has funding for two years.
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