Gas Utility & Midstream - Operations and Strategy
| Declining production in south Texas pushes Tennessee Gas to abandon 34 laterals |  |
November 04, 2009 5:09 PM ET
By Robert Walton
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Citing declining production in south Texas, Tennessee Gas Pipeline Co. is proposing to sell 34 small gas supply laterals attached to its mainline that it says have been either underused or out of service for years. "Over the years, production has fallen from these South Texas production fields," the company told FERC in an Oct. 23 application. "In fact, about one third of these laterals are not being utilized at all." The El Paso Corp. subsidiary said that on April 9 it executed a sale agreement with Tauber Pipeline, a wholly owned subsidiary of Tauber Oil Co. The laterals range from 2- to 12-inch lines and were constructed between 1947 and 1981 to connect the Tennessee system to more than 30 production fields. The abandonment does not include any compression. The facilities have a book value of $3.35 million, Tennessee said, though Tauber Pipeline will pay $1.6 million. Abandoning the facilities, Tennessee said, will facilitate economic and operational efficiency of the company's mainline transmission system by eliminating an estimated $1 million of annual operation and maintenance expenses and the estimated $4.2 million cost to make some supply laterals piggable, while maintaining access to existing supply sources. As the gas industry changed and Tennessee shifted its role from gas merchant to transporter, the company said it completed a review of the supply laterals in question and "determined that the facilities are not needed to provide current or future transportation service on Tennessee's system and represent unnecessary ongoing operation and maintenance expenditures." "The proposed abandonment and sale of the facilities will not have an adverse impact on Tennessee's current shippers," the company assured FERC. "In particular, because there are no firm primary points on the facilities, primary firm shippers will not be adversely affected by the proposed sale. With respect to interruptible and secondary firm services, all shippers that have nominated on a meter affected by this proposal since January 1, 2008 have been notified of the proposed sale, and almost seventy percent have provided their consent." The company told FERC that for the year ended Sept. 30, the capacity used ranged from zero percent to 5% for the majority of the laterals, and from 10% to 32% for eight of them. Tauber, in consideration for the transfer of the laterals, agreed to assume future operation and maintenance, repair and abandonment costs for the facilities, "thus reducing costs that would otherwise ultimately be paid by Tennessee's shippers." "None of the remaining shippers have expressed opposition to the proposal," Tennessee said. The company also noted that no shipper would need to amend its transportation contract and said the shippers could continue using them in a seamless manner for transportation service on Tennessee's system. (CP10-9) | 
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