U.S. GAS PIPELINES CUTTING DEALS, EXPANDING

Intrastate U.S. gas pipelines continue to capture new markets and offer more transportation alternatives for North American gas producers.

In the latest action, two systems have signed long term contracts with public utilities and a third has outlined plans to add capacity and delivery points:

Valero Natural Gas Partners LP, San Antonio, agreed under a 10 year contract beginning July 1, 1992, to supply all gas requirements of City Public Service (CPS), San Antonio's gas and electrical power utility. The contract replaces an agreement under which Valero supplies 80% of CPS gas needs, expected during 1992 to total about 50 bcf.
Sponsors of the proposed Empire State Pipeline signed a 15 year agreement to transport 20 MMcfd of gas for New York State Electric & Gas Corp. (NYSEG), Binghamton, N.Y. Empire is to transport a 50-50 mix of U.S. and Canadian gas to customers in the western and central New York communities of Auburn, Geneva, and Lockport.
Overland Trail Transmission Co., operated by a subsidiary of Union Pacific Fuel, Inc. (UPFI), Fort Worth, will expand system capacity by about 40 MMcfd. Overland also plans to install a connection with recently activated Kern River Pipeline (OGJ, Mar. 16, p. 28) and increase receipt and delivery capability with Colorado Interstate Gas Co. (CIG).

VALERO GAS SALE

Valero won the contract with CPS in an open bidding process that began last fall.

Terms of the contract allow CPS and Valero to renegotiate fees in 5 years. CPS can accept bids from other gas suppliers if Valero's fees are not satisfactory. But Bill Greehey, chairman and chief operating officer of Valero Energy Corp., said there is little chance of Valero's fee structure being unsatisfactory.

"Valero has supplied or transported a major portion of CPS gas requirements since our company began independent operations in San Antonio in 1980," Greehey said. "We are confident Valero will continue to be a competitive, low cost gas supplier."

Valero Energy, with a 49% interest, is Valero LP's general partner.

Greehey said through its 7,200 mile system of intrastate gas transmission and gathering pipeline Valero provides CPS with access to most major gas supply areas in Texas and out of state.

Valero Energy is negotiating to buy gas processing plants and associated pipelines in South Texas from subsidiaries of Oryx Energy Co. (OGJ, Mar. 23, p. 36).

EMPIRE LINE

NYSEG is the fifth company seeking to transport Canadian gas to U.S. customers on the proposed Empire Pipeline.

Pending approval of gas export volumes by Canada's National Energy Board, construction of the intrastate line is expected to begin this year. Empire has received approvals of the Federal Energy Regulatory Commission and New York State Public Service Commission.

Empire's receipts of Canadian gas also requires NEB approval of TransCanada PipeLine Ltd.'s application to lay a 12.8 mile lateral from Blackhorse meter station on TransCanada's Kirkwall line in Ontario to a connection with Empire at the U.S.-Canadian border.

NEB last summer denied TransCanada a permit to lay the Blackhorse extension (OGJ, July 22, 1991, p. 25) but later agreed to reconsider its decision. The next round of Blackhorse hearings is to begin May 5.

Empire would provide New York customers with access to gas storage in Michigan and Ontario and to gas supplies from essentially every basin in the U.S. and Canada.

Empire sponsors are subsidiaries of Coastal Corp., Houston, Union Energy Inc., Toronto, and Rochester (N.Y.) Gas & Electric Corp.

Through its as transportation, distribution, and storage facilities, NYSEG serves about 220,000 customers in New York. The company also has about 777,000 electrical power customers.

OVERLAND EXPANSION

UPFI expects to finish its pipeline expansion project in the latter part of 1992. Cost of the project is estimated at $9 million.

The company plans to lay 29 miles of pipeline:

17 miles of 12 in. line to connect with Kern River at Opal, Wyo., and install a compressor station at Muddy Creek field.
7 miles of 10 in. to Union Pacific Resources Co.'s (UPRC) Patrick Draw processing plant about 36 miles east of Rock Springs, Wyo.
5 miles of 8 in. to connect with CIG's Desert Springs field compressor station and build a compressor station at Desert Springs.

All together, system compression will increase by 2,000 hp.

Overland Trail is one of Wyoming's newest intrastate pipeline companies. UPFI parent UPRC announced its formation Jan. 6.

In its present configuration, Overland Trail gathers and transports about 60 MMcfd of gas through 215 miles of pipeline in Sweetwater and Lincoln counties in Southwest Wyoming. About 20 MMcfd is dedicated to the Rhone-Poulenc soda ash plant at Green River, Wyo., in which UPRC is a partner with 49% interest.