Chuck
December 16th, 2005, 03:57 PM
FRANKFORT -- Firm contracts with producers who supply most of the natural gas to Eastern Kentucky's pipeline system has kept other producers out of the market, gas company officials said today.
Glen Kettering, pipelines president for Columbia Gas Transmission Company, told the Special Subcommittee on Energy that over the past four years every cubic foot of the company's 500K mcf (million cubic feet) capacity system in Eastern Kentucky has been purchased by regional producers. Since those with "firm contracts" usually operate at capacity, Kettering said, there is little opportunity for those without these contracts to sell their gas.
That limitation hurts the producers and Columbia Gas Transmission, he explained.
"Our pipelines, to be very blunt about it, are financially incented to maximize the natural gas transmission and storage services that we provide," Kettering said. He added that Columbia Gas Transmission attempted this year to expand capacity by 60K mcf/day in the region but there was not enough interest in the project.
"We are still trying to crack the economic code and find other ways to get gas to market and expand access to production that is trapped in this area," he said.
Independent producers told the subcommittee last month that pipeline transmission companies were shutting them out of the pipelines for much of the year although demand for gas is high. Kettering said the lack of capacity is what is preventing these producers without firm contracts from selling their gas, which totals about 60K mcfs a day.
Producers without firm contracts must sell on an "interrupted basis," he said, which unfortunately includes most of the year except winter months when those with firm contracts cannot keep up with demand. When winter ends, the producers who do not own capacity in the system will likely be shut out of the system again.
"We would expect to one degree or another those same circumstances to continue next summer and fall," Kettering said.
Rep. Rocky Adkins, D-Sandy Hook, said independent producers without firm contracts are hurting financially.
"You try to move that gas because you want a return on that investment," he said. "If you have 1,700 wells shut in for six months, there are not many companies that can withstand that."
Kettering and Dave Spigelmyer with Equitable Resources, Inc., Eastern Kentucky's other natural gas pipeline company, both told the subcommittee that the region's pipeline system needs to be expanded so more gas can be pushed through.
Spigelmyer said Equitable's board approved funding last week for a Big Sandy pipeline that would move 70K mcf/day to market. The 60-mile project has yet to be approved by federal regulators, but Equitable is hoping to have the project complete by 2007.
The $80 million line would connect into the Tennessee Gas pipeline, he said.
"By opening this line, many with trapped gas would be moving it to market," said Spigelmyer.
Subcommittee co-chair Rep. Tanya Pullin, D-South Shore, whose House Bill 225 passed last session created the Kentucky Gas Pipeline Authority to fund pipeline construction in the state, praised Equitable for its commitment.
"It's great," Pullin said. "We say 'We need pipelines' and you say 'OK.'"
Glen Kettering, pipelines president for Columbia Gas Transmission Company, told the Special Subcommittee on Energy that over the past four years every cubic foot of the company's 500K mcf (million cubic feet) capacity system in Eastern Kentucky has been purchased by regional producers. Since those with "firm contracts" usually operate at capacity, Kettering said, there is little opportunity for those without these contracts to sell their gas.
That limitation hurts the producers and Columbia Gas Transmission, he explained.
"Our pipelines, to be very blunt about it, are financially incented to maximize the natural gas transmission and storage services that we provide," Kettering said. He added that Columbia Gas Transmission attempted this year to expand capacity by 60K mcf/day in the region but there was not enough interest in the project.
"We are still trying to crack the economic code and find other ways to get gas to market and expand access to production that is trapped in this area," he said.
Independent producers told the subcommittee last month that pipeline transmission companies were shutting them out of the pipelines for much of the year although demand for gas is high. Kettering said the lack of capacity is what is preventing these producers without firm contracts from selling their gas, which totals about 60K mcfs a day.
Producers without firm contracts must sell on an "interrupted basis," he said, which unfortunately includes most of the year except winter months when those with firm contracts cannot keep up with demand. When winter ends, the producers who do not own capacity in the system will likely be shut out of the system again.
"We would expect to one degree or another those same circumstances to continue next summer and fall," Kettering said.
Rep. Rocky Adkins, D-Sandy Hook, said independent producers without firm contracts are hurting financially.
"You try to move that gas because you want a return on that investment," he said. "If you have 1,700 wells shut in for six months, there are not many companies that can withstand that."
Kettering and Dave Spigelmyer with Equitable Resources, Inc., Eastern Kentucky's other natural gas pipeline company, both told the subcommittee that the region's pipeline system needs to be expanded so more gas can be pushed through.
Spigelmyer said Equitable's board approved funding last week for a Big Sandy pipeline that would move 70K mcf/day to market. The 60-mile project has yet to be approved by federal regulators, but Equitable is hoping to have the project complete by 2007.
The $80 million line would connect into the Tennessee Gas pipeline, he said.
"By opening this line, many with trapped gas would be moving it to market," said Spigelmyer.
Subcommittee co-chair Rep. Tanya Pullin, D-South Shore, whose House Bill 225 passed last session created the Kentucky Gas Pipeline Authority to fund pipeline construction in the state, praised Equitable for its commitment.
"It's great," Pullin said. "We say 'We need pipelines' and you say 'OK.'"