Northern Natural Loses Bid to Sell Pipe to Duke Energy

FERC on Friday rejected Northern Natural Gas Co.'s request to sell 419 miles of natural gas pipelines and associated compression facilities in Texas, Kansas and Oklahoma to Duke Energy Field Services LP. FERC took this action after denying Duke Energy's plea for the facilities to be declared nonjurisdictional gathering.

Northern Natural proposed to sell part of its wet gas facilities in its so-called Beaver Wet System, with pipelines ranging in diameter from two to 30 inches, to a yet-to-be-named limited liability company, which would transfer its interest in the facilities to Duke Energy upon the closing of the transaction. Northern Gas would retain all of the dry gas facilities in the Beaver Wet System area that are used to deliver gas to markets on its system, as well as the ownership of wet gas facilities downstream of its Mullinville Compressor Station in Kiowa County, KS.

"We find that the subject facilities, when viewed as a whole, are not nonjurisdictional gathering facilities, but instead are facilities used to provide interstate natural gas transmission services. Thus, we will deny Duke's request for a declaratory order finding that the subject facilities are, or would be, nonjurisdictional gathering facilities," the FERC order said [CP06-39]. And since Northern Natural's application to sell its facilities was based on Duke Energy receiving a declaratory order, "we will also deny that application," it noted.

"The overall configuration of the subject facilities operated by Northern Natural reflects an approximately 113-mile pipeline consisting of 16-inch to 30-inch diameter pipeline paralleled by a 50-mile, 24-inch diameter pipeline moving gas from Dumas [TX] to the Beaver Compressor Station; an 86-mile pipeline with diameters of 10 inches to 24 inches and an eight-inch diameter; 10-mile parallel pipe moving gas to the Beaver Compressor Station [OK]; and an approximately 90-mile, 24-inch and 30-inch diameter pipeline moving gas from the Beaver Compressor Station to the Mullinville Compressor Station," the order said.

"Rather than any of these pipelines constituting the backbone of a gathering system, discrete gathering systems off these lines with their own spine- or web-like configurations feed into Northern Natural's facilities...When all of the physical characteristics of the subject facilities are considered...the Commission must conclude that the primary function of these facilities is transmission."

The proposed transaction came under attack by the Independent Petroleum Association of America and other protestors who claimed that FERC approval of the sale would give Duke Energy monopoly control over gas gathering in the Anadarko Basin area. The protestors, particularly ONEOK Energy companies, further argued that the facilities were not gathering, pointing out that pipelines that ran parallel to the Northern Natural system were considered transmission in nature.

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