Owners: Abandon gas pipeline use
Published 12:12 am Thursday, April 3, 2014
NATCHEZ — The owners of the area’s only natural gas pipeline have officially filed a request with federal regulators to abandon the use of the pipeline.
American Midstream Partners — owned by the Boston-based hedge fund ArcLight Capital Partners — announced the filing Wednesday. The company’s plans to abandon the pipeline had previously been discussed in an investor’s conference call last month.
According to a news release from the company, the application says the Midla mainline pipeline’s 1920s construction restricts the ability of modern tools to find or predict leaks, and leakage rates are rising. The application likewise claims erosion and land cultivation have brought the ground surface closer to the pipeline, and Mississippi River floods have destroyed six of eight river crossings.
The line serves Clayton, Ferriday, Ridgecest, Vidalia, Natchez and Woodville, among other areas.
The application also says the pipeline’s right-of-way has been encroached on by development, which includes two schools, a prison and a housing community in the planning stages.
American Midstream Executive Chairman, President and Chief Executive Officer Steve Bergstrom said the company is not aware of any imminent danger but cannot be sure the pipeline is safe to operate.
“The fact that the pipeline is still in service five decades beyond its predicted useful life is a testament to Midla’s maintenance program,” Bergstrom said. “Like an old car, however, there is only so much maintenance that can be done before the frame gives way and the car must be replaced. Midla’s mainline has clearly reached that point, and needs to be shut down and a replacement pipeline or alternate form of service installed and commissioned.”
The company said it has looked into alternatives to operating the pipeline as is, including partial reconstruction of the line or trucking compressed natural gas to its existing distribution system connections.
The company estimates those options will cost approximately $1.76 a month more for customer meters on the Atmos Energy system.
But Natchez Mayor Butch Brown and Vidalia Mayor Hyram Copeland said last week the cost adjustments they have been appraised of could be five times as much for customers in the area.
Midla has asked the Federal Energy Regulatory Commission to have a public technical conference before the end of the month so the proposal can be clarified and customers express their objections.
The company asked FERC to make a decision about the abandonment by July 1. U.S. Sen. Mary Landrieu filed an objection to the abandonment proposal with the federal agency, saying the July date was rushed.
“The American Midstream abandonment proposal could result in at least a doubling of an average home owner’s monthly utility bill,” Landrieu wrote in her objection. “This is simply unacceptable and is an outright violation of the public interest standard of the federal Natural Gas Act as administered by FERC.”
The senator likewise objected to a request by the company for a shortened timeframe for objections. The company requested a 10-day period for filing rather than the usual 60-day period.
“Under this approach, any Louisiana communities and other Midla customers that miss the 10-day deadline for intervention will lose their right to rehearing by FERC and judicial review of the abandonment in the U.S. Court of Appeals,” Landrieu wrote. “Put simply, they will lose their opportunity to go to court if they are not satisfied with FERC’s decision. That just is not enough time for the Midla customers to prepare and appears, again, to be an effort by Midla to seek to overwhelm other parties due to the deep pockets Midla’s new hedge fund owner has that allow it to hire a phalanx of lawyers and consultants to dominate the FERC proceeding.”
Copeland said Vidalia would file an objection, as will the Louisiana Gas Authority.
“You are just seeing the beginning of this situation, and there will probably be class-action lawsuits filed,” Copeland said. “I think we are looking at a two- to three-year process — if not longer — before we come to any conclusions.”
Natchez Inc. Executive Director Chandler Russ said the area’s industrial base uses a significant amount of gas, and he does not foresee a scenario in which the Natchez region is without gas.
“This is just a matter of who will deliver it, what it looks like and what it will cost,” Russ said.
“What you have in here is really them trying to force Atmos and some of the other users to help offset the costs of upgrades. There is a significant poker match going on, and obviously they are not liking the field out there right now.”
Woodville Mayor Gary D’Aquilla said he and others have been meeting with Louisiana and Mississippi officials to ensure the Wilkinson County portion of the line is not without service.
U.S. Sens. Thad Cochran and Roger Wicker sent a joint letter objecting to the shutdown proposal before it was filed, as did Landrieu and Sen. David Vitter.
In a response to the Cochran and Wicker letter, FERC chair Cheryl LeFleur said no pipeline can be abandoned if a customer is willing to meet the demands of its transmission tariff.
Copeland said the pipeline issue is a “David and Goliath story.”
“You have a $10 billion hedge fund in Boston that is all of a sudden trying to abandon this line in these communities that have a slate of problems right now, but it is not going to happen,” he said.