Pipeline companies vying to take Wyoming gas to markets

Wednesday, April 23, 2008

By Henry Sweets

Jackson Hole, Wyo.-After losing hundreds of millions of dollars in tax revenue last year due to limited gas pipeline capacity, Wyoming is eying new line proposals officials hope will relieve a supply bottleneck.

The state lost an estimated $470 million in tax and royalty revenue in 2007, when gas prices plummeted and existing pipelines were not sufficient enough to transport all of Wyoming’s abundant gas supply, according to state officials. The Rockies Express pipeline, which went on line this year and pumps more than 1 billion cubic feet of natural gas per day to Missouri, solved that problem, but many see that as a temporary fix.

Officials said Wyoming needs at least one additional pipeline to bring more gas to market and more money into state coffers.
Several pipeline proposals are currently on the table.

Brian Jeffries, the spokesman for the Wyoming Pipeline Authority, said Wyoming gas production will continue to increase, and more pipeline capacity will be needed for Wyoming to avoid another price crunch in three or four years. A pipeline will ensure that Wyoming natural gas fetches the best possible price.

But getting new pipeline is challenging, Jeffries said.
Some companies want to route pipelines directly from Wyoming to existing routes from Canada to California or Chicago, while other plans suggest pioneering new routes.
Before any line can be built, pipeline companies must secure financial commitments from gas suppliers and buyers, which guarantee payment for pipeline space whether they actually use all of it or not. Often these contracts bind companies for 10 years or more.

Pipeline companies solicit these commitments during a process known as an open season. The companies must have these commitments to provide for the bulk of financing for the construction of multi-billion dollar pipelines.

So far, the Houston-based El Paso Corp.’s Ruby Pipeline proposal has secured commitments from Pacific Gas and Electric on the market end.

Don Likwartz, the supervisor of the Wyoming Oil and Gas Conservation Commission, said permits are taking longer to get this year, and habitat restrictions keep some pumps dormant for months out of the year. These concerns can reduce gas suppliers’ willingness to commit to long-term transport contracts.

In addition to getting commitments from producers and buyers, the pipeline companies also must get extensive approvals from state agencies, and, ultimately the Federal Energy Regulatory Commission.

The Ruby Pipeline has come across an unexpected hurdle this month when its proposed route angered some Utah residents. The Cache County Executive, Lynn Lemon, said landowners were opposed to the 42-inch pipeline that might get buried in their yard, citing environmental and land value concerns.

Lemon said El Paso has since agreed to work with county officials. But if individual landowners still oppose the pipeline after El Paso tries to compensate them for potential land devaluations, the company can use condemnation rights to build the pipeline anyway.

Richard Wheatley, the spokesman for El Paso, said the company is working on the conflict and is moving forward with the project.
“The beauty of this project is that it offers a lot of potential for moving gas to a variety of markets,” Wheatley said.
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Pipeline companies vying to take Wyoming gas to markets | Planet JH News Article: General Environment

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