Out of Gas? Company discusses abandoning pipeline

Published 12:07am Saturday, March 29, 2014

The possible abandonment of the only natural gas pipeline into the area has local officials working to find a solution to a situation that could stop the supply or significantly increase the cost of gas in the area.

Though the official process of abandonment is yet to begin, American Midsteam Partners, owners of the Midla pipeline that runs from Monroe, La., to  Baton Rouge and provides gas service to the Ferriday, Vidalia, Natchez and Woodville areas — among others — stated their intentions to abandon the pipeline in a mid-March conference call with investors.

Built in 1926, the pipeline has outlived its useful life and can be heard leaking just walking by it, AMP’s Chief Financial Officer Dan Campbell said during the call.

Campbell said the pipeline’s costs are roughly equal to its revenues.

“This is not an issue of cost or revenue,” he said. “This is an interest of safety and being able to operate a pipeline safely and prudently.”

The pipeline is reportedly in compliance with federal regulations.

Campbell said the company would begin the “orderly shutdown” of the pipeline April 1.

The company had previously announced an open season looking for commitments from new and existing customers, but none signed on, Campbell said.

The company was in negotiations with Atmos Energy, its largest customer, but those negotiations broke down just before the open season, he said.

Atmos Energy distributes natural gas locally, but does not control the pipeline through which it is delivered to the area. The City of Vidalia is the second largest customer on the line, Vidalia Mayor Hyram Copeland said.

Atmos Energy Spokesman Robert Lesley said while the discussion is ongoing, nothing is going to happen for some time and the issue of the abandonment has to go before the Federal Energy Regulatory Commission in Washington, D.C., before it or any actual shutdown can start.

“That is the only gas pipeline that currently feeds into the City of Natchez, so we have been monitoring this for a while,” he said. “We have been talking with the Midla folks on this for several weeks.”

Copeland said he believes the shutdown discussion will ultimately be a protracted one, first because it still has to clear federal regulatory hurdles and also because of legislation introduced into the Louisiana Senate.

Sen. Robert Adley, R –Benton, has introduced legislation that would consider any pipeline proposed to be abandoned in Louisiana as under the oversight of and requiring the approval of the Louisiana Public Service Commission.

The legislation is written to be retroactive.

“Our congressional and state delegations are going to do everything they can,” Copeland said. “There is no way possible our citizens can pay an exorbitant rate more so than they do now.”

Natchez Mayor Butch Brown said he, Copeland and Natchez Inc. Executive Director Chandler Russ met with the area’s congressional delegations and FERC officials to express their concerns about the pipeline when they were recently in the nation’s capital. Of particular note was the cost adjustments to customers the company said would be necessary to keep the pipeline open, Brown said.

“We are watching this very closely because we know that the whole transition would result in higher costs to the citizens of this area,” he said.

“The number of the cost adjustments that I was given was at the high end something like 600 percent more and the low number was around 50 percent more, so we are talking about a very expensive adjustment if indeed something does happen.”

In Vidalia, the city is a member of the Louisiana Gas Authority and distributes natural gas over a municipal system. Copeland said when AMP was purchased last year by a hedge fund — Arclight Capital Partners — company officials approached the city with proposals that would have had “a profound effect on prices.”

“It would have prices going up 4-5 times higher than residents are paying how,” Copeland said.

“When they came in and said that, I told them if you think you are going to come in here and do that, I think you are going to have second thoughts.

“They have charged us a transmission fee much higher than we have ever (paid), and they have not taken that money and put it back into the pipeline like they should have.”

Adams County Board of Supervisors attorney Scott Slover said the board will file an objection to the abandonment with the federal regulators.

“If we didn’t have natural gas service to this area, we would all be on propane,” Slover said. “If we didn’t have natural gas service, that would also obviously be prohibitive to recruiting any industry that utilizes it.”

The area’s congressional delegation has expressed its opposition to the abandonment. In a news release from Louisiana Sen. David Vitter’s office, Vitter said rural residents deserve affordable energy.

“FERC has plenty of regulations in place to protect ratepayers, and I told them they need to investigate,” he said.

Copeland said Sen. Mary Landrieu, the chair of the U.S. Senate Committee on Energy and Natural Resources, has emphatically told him the abandonment of the pipeline and rate hike won’t happen.