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Wyoming wants to move its gas State authority could help finance pipelines to boost value of natural gas Larry Persily Petroleum News Juneau Correspondent
Like Alaska, Wyoming also has a state-funded authority to help get its natural gas to market. But unlike the Alaska Natural Gas Development Authority, which is working on building its own project, the Wyoming board is looking toward assisting private developers with financing.
The Wyoming Natural Gas Pipeline Authority has been around since 1973, when the Legislature created the entity to help ensure that soda ash mines had enough affordable gas for drying the trona ore and running the mines. It turned out the mines did fine without the authority�s help.
�The pipeline authority has been dormant for long periods of time,� said Mark Doelger, a geologist in Casper, Wyo., and chairman of the authority�s five-member board of directors.
The authority has never financed a project in its 30-year history, but recent events have brought it back to life. �Just because we haven�t done it doesn�t mean we won�t,� Doelger said.
No competition with Alaska It�s not a matter of competition between the Wyoming and Alaska natural gas authorities, he said. �We can get a project built in four years. We�re the immediate part of the solution. You guys (Alaska) are the long-term solution. We need it all.�
The Wyoming Legislature this year voted to expand the authority�s bonding limit from $250 million to $1 billion, and appropriated $279,000 for expenses for the fiscal year ending June 30, 2004.
Wyoming�s problem is not a lack of gas � the state produces about 4.2 billion cubic feet per day, or about 7 percent of the nation�s consumption. The problem for Wyoming producers is that limited pipeline capacity to get their gas to market forces down the price for the gas.
�We have such a volume of natural gas supply here that is severely underpiped,� Doelger said. Wyoming gas sold at between $1.50 and $2 per thousand cubic feet below the Henry Hub price for much of 2002, he said. Even with additional pipeline capacity this summer, the price remains about 50 cents below Henry Hub.
And even at 25 cents an mcf, the lost revenue on 4.2 bcf per day would exceed $1 million a day, much of which would have gone to the state in taxes and royalties. Wyoming wants more pipeline capacity The Wyoming authority would like to see more pipeline capacity built.
State statute gives the authority the option of building and operating its own pipeline, but �that would be a last resort,� said Doelger.
Board members are looking at a couple of things the authority might be able to do to help the situation, Doelger said. Options include using the authority�s bonding power to help finance a pipeline and/or working to ensure that a private developer is assured of enough gas to fill a line.
A pipeline developer would need to have gas supply contracts before moving ahead with construction, and the authority could bring together small producers to help encourage private development and/or pledge state royalty gas to help fill the line, Doelger said. The authority would not buy and resell the gas, he explained, and would limit its work to �facilitating� or aggregating the production of smaller companies to pool their supply, he said.
The best of all choices, he said, would be if industry responds to the problem and builds new pipeline capacity on its own. �Everybody would be happy with that outcome, too.�
Some help on the way Kern River Gas Transmission Co. in May finished its $1.2 billion pipeline expansion to move Wyoming gas to California, doubling the pipe�s flow to 1.7 bcf per day. The expansion project was backed by long-term contracts for more than 99 percent of the line�s capacity.
The company already is planning another expansion, with a scheduled completion date in late 2005 or early 2006 to carry an additional 500 million cubic feet per day to Southern California.
And Cheyenne Plains Gas Pipeline Co., part of the El Paso Corp. pipeline group, filed an application with the Federal Energy Regulatory Commission in May for approval to construct a new line to carry 560 million cubic feet per day from the Rockies to Midcontinent markets, with an in-service date by mid-2005.
�It seems as though the industry is getting up a head of steam to build several projects from Wyoming,� Doelger.
The gas authority came close to taking a role in a pipeline project in the late 1980s and early 1990s when it discussed financing the first Kern River line to California, Doelger said. The state had agreed to provide a 4 percent loan for construction of the line, but developers turned instead to private financing. Authority asks for funding Just in case the authority is needed for the latest round of projects, it is asking for $1.6 million from the Wyoming Legislature to cover Fiscal Years 2005 and 2006 expenses. The money would go toward financial advisers for a possible bond issue, economic reviews and drilling analysis � �so that we know the kind of volume that can be expected� � Doelger said. Work also would include �selling the merits of Wyoming gas to the end users.�
Doelger has spent almost 30 years as a geologist in Wyoming, looking for gas prospects and hoping for success. He said he remembers working for Gulf Oil in the early 1970s, looking at gas prospects and telling management to �just hang in there,� that gas would reach 60 cents an mcf. It was 20 cents at the time.
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