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The Fastest Pipeline in the West; Pipes, Producers Combine to Send Gas East, NGI Reports.

DULLES, Va. -- An interesting mix of large natural gas producers and pipelines, with endorsements from the state of Wyoming and the U.S. Interior Department, is combining in a 1,323-mile, $4 billion pipeline project, the Rockies Express, to carry natural gas across the nation, from the Rocky Mountain basins in the West to the energy-starved East.

There has never been an energy project put together so quickly with the cooperation of so many (and a boost from Mother Nature), according to a report in Natural Gas Intelligence (NGI).

"Rarely has a single pipeline had the potential to have such a transforming effect on the North American natural gas industry," said Kinder Morgan Energy Partners (KMP) CEO Richard Kinder, predicting that gas consumers across the country would see lower gas prices once the pipeline is built.

It would provide eastern markets greater access to 200 Tcf of potentially recoverable Rocky Mountain gas resources, positioning the Rockies to become "the most significant natural gas play in the United States," he said. It also will allow Rockies producers to compete for the dominant northeastern market.

It was less than a year ago -- before the hurricanes -- that Kinder Morgan Energy Partners started to sound out support for a west to east long line. Sempra Energy quickly stepped in as a one-third owner. Then the hurricanes hit, crippling production in the Gulf of Mexico, sending natural gas prices soaring and blowing out the basis differential between western supplies and eastern markets served by the Gulf.

What had been potentially a good idea became a very obvious necessity. When KMP and Sempra announced eight months later on Feb. 28 that the 1.8 Bcf/d fully subscribed project was going forward they credited support from Rockies giants EnCana, Questar, ConocoPhillips, and BP, along with Ultra Petroleum, EOG, Williams, and other producers. A very large market signal had driven a very large and very speedy response.

EnCana sold its large diameter, 330-mile Rockies connecting pipeline Entrega, then under construction, to the project developers. Questar Energy agreed to a long-term lease for expansion capacity on its Overthrust Pipeline, another connecting link.

Then the producers jumped on board with EnCana leading the pack with a pledge to take 500 MMcf/d of firm capacity on the long line to Ohio. ConocoPhillips is taking 400 MMcf/d of capacity, BP, 300 MMcf/d, Sempra, 200, Ultra Petroleum, 200, EOG, 50, and others with smaller amounts.

The Interior Department's Minerals Management Service (MMS) also provided support for the project through its decision to subscribe for 50 MMcf/d of long-haul capacity on a long-term basis to service its royalty in kind gas program in Wyoming.

The project sponsors also said they owe a "debt of gratitude" to the Wyoming Natural Gas Pipeline Authority (WPA), which has been an advocate of Rockies Express since the project's inception, from an initial firm capacity commitment through attendance at shipper meetings to support the project.

The Rockies-to-Ohio pipeline will go forward in segments, with the first part from the Cheyenne Hub in Colorado to a Midcontinent connection in Missouri expected to go into service in January 2008. By the time the line is completed to Ohio, expected by June 2009, sponsors believe that an extension to the major eastern hub at Leidy, PA will be in the works.

"We are just starting to talk to our shippers about where we go from here," Scott Parker, president of Kinder Morgan's natural gas pipelines group, told NGI. "There's a lot of interest in (the Leidy Hub in Pennsylvania) and there is a lot of interest even further East in penetrating the market further and those are some of the things we are just going to have to work through over the next few weeks and then come out and look at an open season."

He also said that Kinder Morgan probably will add storage capacity to the system through the addition of new and existing storage fields. "We are one of the biggest storage operators in the country today and in the Midwest we have a huge storage asset base," he noted. "We would expect to look at some new storage in the West. In the Midwest, we would look at some of our existing fields and our ability to expand them. In the East, we will definitely look at new storage development."

Parker and executives of other companies involved in at the Rockies project will be among those speaking at the 20th annual GasMart conference and trade show in Denver May 3-5, hosted by Intelligence Press. FERC Chairman Joseph Kelliher will be keynoting the wide-ranging conference, "U.S. Natural Gas in a Global Market."

Questar Chairman Keith Rattie, and veteran Houston analyst John Olson will be among those making presentations (see http://gasmart.com/). Sponsors include the New York Mercantile Exchange, the InterContinentalExchange and the Natural Gas Exchange.

About Intelligence Press Inc.

Intelligence Press Inc. is an independent publishing company and has been serving the energy industry since 1981 with leading news and price survey reports for the natural gas market in its publications: Natural Gas Intelligence, Daily Gas Price Index, Weekly Gas Price Index and Power Market Today.

The publisher runs real-time news on natural gas and power market developments at http://intelligencepress.com. Additionally, Intelligence Press, commonly identified by its flagship weekly newsletter, Natural Gas Intelligence or NGI, provides historical price data and publishes natural gas infrastructure and storage maps. NGI also hosts GasMart, www.gasmart.com, now in its 20th year -- for the natural gas industry.

About GasMart

GasMart is the premiere trade show and conference and a major networking event for natural gas producers, pipeliners, end users, utilities and marketers. More than 25,000 have attended GasMart events since 1987.

Check www.gasmart.com for 2006 program updates or to register. A few sponsorships opportunities are still available. Call 800-427-5747 or email gasmart@gasmart.com.
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