National Fuel Gas Supply Corporation (“Supply”) and Empire
Pipeline, Inc. (“Empire”), the companies that comprise the Pipeline
and Storage segment of National Fuel Gas Company (NYSE: NFG)
(“National Fuel”), have reached major milestones on two pipeline
expansion projects that are the first in the industry designed to
receive natural gas produced from the Marcellus Shale and transport
it to key markets of Canada and the Northeast U.S. Supply has
entered into a binding precedent agreement with Statoil Natural Gas
LLC (“Statoil”) for 100 percent of the capacity on Supply’s
“Northern Access” expansion project. Empire also has a binding
precedent agreement in place with anchor shipper East Resources,
Inc. (“East”) for Empire’s “Tioga County Extension” project, and is
concluding negotiations for additional capacity with a second
shipper. The precedent agreements provide for Statoil and East to
sign, after satisfaction of conditions, firm transportation service
agreements under which Supply and Empire will transport natural gas
for Statoil and East.
“The market dynamics generated by the Marcellus Shale
development have created a unique opportunity to move gas away from
the increasingly competitive Appalachian Basin and into the newly
expanding markets of Canada and the Northeast,” said David F.
Smith, Chairman, President and Chief Executive Officer of National
Fuel. “We are excited to provide the pathway to new markets for
Appalachian gas production and we look forward to executing our
plans while continuing to identify new opportunities to alleviate
regional infrastructure constraints. In addition to these projects,
we continue to implement the first phases of other Appalachian
infrastructure projects designed to transport 190,000 dekatherms
per day for a number of Marcellus producers, including Range
Resources Corporation, Seneca Resources Corporation and EOG
Resources, Inc.”
Supply’s Northern Access expansion project is designed to
transport 320,000 dekatherms per day of Marcellus Shale production
utilizing Supply’s existing pipelines to an existing
interconnection between Supply and TransCanada Pipeline (“TCPL”) at
the Niagara River near Lewiston, New York (“Niagara”), for delivery
to the diverse markets accessible on the TCPL system. The required
project facilities include bi-directional metering at Niagara and
at Supply’s interconnects with Tennessee Gas Pipeline (“TGP”) at
East Aurora, New York, along with incremental compression at
Supply’s interconnect with TGP at Ellisburg Station and at East
Aurora. Initial estimates place project costs at approximately $60
million, with an expected in-service date of June 1, 2012. The Open
Season for firm transportation capacity that concluded on February
17, 2010, received requests for transportation of more than 1.6
million dekatherms per day.
The Statoil agreement, which was executed today, includes a
20-year firm transportation commitment for all of the available
320,000 dekatherms per day of natural gas transportation service
from Ellisburg for delivery to Niagara. Statoil is currently a
partner in a joint venture with Chesapeake Energy Corporation for
the development of natural gas from the Marcellus Shale.
Empire’s Tioga County Extension project will stretch
approximately 16 miles south from its existing interconnection with
Millennium Pipeline at Corning, New York, into Tioga County,
Pennsylvania. The project will require the construction of 16 miles
of new 24-inch diameter pipeline. Additionally, Empire will replace
1.3 miles of pipeline near Victor, New York, and construct a new
interconnection with TGP’s Line 200 in Ontario County, New York.
Project costs are estimated to be approximately $45 million and the
facilities are expected to be operational by September 1, 2011. The
Open Season for the project offered pipeline capacity of at least
300,000 dekatherms per day and concluded on November 25, 2009.
Earlier this year, East executed a precedent agreement that
contains a 10-year firm transportation service commitment with
Empire for 200,000 dekatherms per day. East’s contracted capacity
allows for gas produced in both the Marcellus Shale and
Trenton-Black River formations to be delivered to an interconnect
with TCPL at the Canadian border between Grand Island, New York,
and Chippawa, Ontario, Canada. Based on this anchor shipper
support, on January 28, 2010, Empire began the FERC National
Environmental Policy Act pre-filing process. Additionally, Empire
expects to conclude negotiations with another shipper for an
additional 150,000 dekatherms per day.
“These two projects are the most recent examples of our
continued progress in executing on our Appalachian development
strategy across multiple subsidiaries of our Company,” said Smith.
“From Seneca Resources Corporation’s accelerating Marcellus Shale
drilling program, to our ongoing investment in National Fuel Gas
Midstream Corporation’s gathering assets, to market broadening
projects like these from Supply and Empire, our Company is
positioned to be a key player in the increasingly important
Appalachian market.”
National Fuel is an integrated energy company with $4.8 billion
in assets comprised of the following four operating segments:
Exploration and Production, Pipeline and Storage, Utility, and
Energy Marketing. Additional information about National Fuel is
available at http://www.nationalfuelgas.com or through its investor
information service at 1-800-334-2188.
Certain statements contained herein, including those that are
identified by the use of the words “anticipates,” “estimates,”
“expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,”
“believes,” “seeks,” “will,” “may” and similar expressions, are
“forward-looking statements” as defined by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve
risks and uncertainties, which could cause actual results or
outcomes to differ materially from those expressed in the
forward-looking statements. The Company’s expectations, beliefs and
projections contained herein are expressed in good faith and are
believed to have a reasonable basis, but there can be no assurance
that such expectations, beliefs or projections will result or be
achieved or accomplished. In addition to other factors, the
following are important factors that could cause actual results to
differ materially from those discussed in the forward-looking
statements: financial and economic conditions, including the
availability of credit, and their effect on the Company’s ability
to obtain financing on acceptable terms for working capital,
capital expenditures and other investments; occurrences affecting
the Company’s ability to obtain financing under credit lines or
other credit facilities or through the issuance of commercial
paper, other short-term notes or debt or equity securities,
including any downgrades in the Company’s credit ratings and
changes in interest rates and other capital market conditions;
changes in economic conditions, including global, national or
regional recessions, and their effect on the demand for, and
customers’ ability to pay for, the Company’s products and services;
the creditworthiness or performance of the Company’s key suppliers,
customers and counterparties; economic disruptions or uninsured
losses resulting from terrorist activities, acts of war, major
accidents, fires, hurricanes, other severe weather, or other
natural disasters; changes in the availability and/or price of
natural gas, and the effect of such changes on natural gas
production levels; significant differences between projected and
actual natural gas production levels; uncertainty of natural gas
reserve estimates; inability to obtain or retain sufficient
customers or commitments for planned projects; factors affecting
the Company’s ability to complete expansion projects as planned,
including among others geography, weather conditions, shortages or
unavailability of equipment and services required in construction
operations, unanticipated project delays or changes in project
costs or plans, and the need to obtain governmental approvals and
permits and comply with environmental laws and regulations; changes
in laws and regulations to which the Company is subject, including
energy, environmental, tax, safety and employment laws and
regulations; governmental/regulatory actions, initiatives and
proceedings, including those involving expansion projects,
financings, rate cases, affiliate relationships, industry
structure, and environmental/safety requirements; significant
changes in the Company’s relationship with its employees or
contractors and the potential adverse effects if labor disputes,
grievances or shortages were to occur; or the cost and effects of
legal and administrative claims against the Company. The Company
disclaims any obligation to update any forward-looking statements
to reflect events or circumstances after the date hereof.
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