Anniversary for Northwest PipelineIn August, Northwest Pipeline celebrated 50 years of continuous service. The pipeline was designed and built by Fish Engineering Corporation and Fish Northwest Constructors, Inc. It delivered the first natural gas to the Pacific Northwest at Baker City, Oregon, on August 24, 1956, under the newly formed operating company, Pacific Northwest Pipeline Corporation. Many of the employees who built the pipeline stayed on with Pacific Northwest in Salt Lake City. Shortly after starting operations, the company experienced financial difficulties and proposed a merger with El Paso Natural Gas. El Paso acquired the pipeline in 1957, but the merger between the two companies created much controversy and became one of the longest antitrust court battles in U.S. history.
During this tumultuous time, William V. Holik took over Pacific Northwest’s operations in Salt Lake City for El Paso. During his tenure, he oversaw one of the largest expansions on the pipeline: the looping of the line and additional facilities that increased capacity by 300 million cubic feet per day. At one point Holik was asked how he remembered his time at Pacific Northwest. He replied that he was most impressed by the people. The construction workers built the company from the ground up and most stayed on to start the operating group for the new company. He sincerely believed there was no reason to worry about the pipeline because Pacific Northwest benefited from the greatest group of people that anyone could find. Finally, the protracted court battle ended on February 7, 1974, when dozens of documents were signed transferring assets to Northwest Pipeline Corporation. Holik discussed his feelings about the divestiture by saying it was like watching your mother-in-law drive your new Cadillac off the cliff—definitely mixed emotions! Following divestiture, John G. McMillian was named president of Northwest Pipeline Corporation. He remained in that position until The Williams Companies purchased the pipeline in the fall of 1983, which began a new period of growth for Northwest. According to the National Weather Service (NWS), June–August was the second warmest summer in the U.S. since record keeping began in 1895. Preliminary data indicates the U.S. was 2.4 degrees higher than the average of 72.1. The record, set during the 1936 Dust Bowl, was 74.7.
Temperatures in the Pacific Northwest during May–July were the hottest on record. Excessive heat during the third week of July prompted the Northwest Power Planning Council to examine whether the region has sufficient generating capacity to meet need during the upcoming winter months. The NWS noted that El Niño conditions have developed in the Pacific Ocean and will likely continue into early 2007. El Niño plays a large role in determining North American temperatures and precipitation patterns. El Niño conditions include warmer and drier than average conditions in the Pacific Northwest. However, while the Oregon Climate Service agrees the Northwest will have a warmer than normal winter, it predicts normal or slightly above normal precipitation. Mild September weather, high storage levels, dampened hurricane activity, El Niño and the prospect of a warmer than normal winter changed the market’s perception of winter price risks. The November through March NYMEX prices dropped nearly $2.00 per dekatherm over the past couple of months but is again trending upward.
Of particular interest for the Pacific Northwest is the consistent price differential between Rockies and Sumas gas (see the graph above). This price difference could signal a winter without sufficient gas supply at Sumas to provide displacement for cheaper domestic gas. At a pre-hearing conference held August 15, 2006, in Washington, D.C., Administrative Law Judge Bruce L. Birchman (ALJ) adopted the procedural schedule proposed by Northwest Pipeline and the intervening parties. The procedural schedule allowed Northwest until September 6 to respond to the first round of FERC Litigation Staff data requests and until October 6 to respond to the first round of requests from interveners. The FERC Litigation Staff is expected to issue its initial position, referred to as “top sheets,” by the end of October. Once the FERC Litigation Staff and the intervening parties formulate their initial positions, Northwest anticipates settlement discussions can begin. Direct and answering testimony from the FERC Litigation Staff and the interveners is due February 20, 2007, and Northwest’s rebuttal testimony is due April 9. In the event a settlement is not reached, a hearing will begin May 23, and an initial decision from Judge Birchman will be issued by October 17. Northwest has had a busy summer performing planned maintenance on our pipeline system, and we’re working hard to finish any remaining projects before snow and freezing temperatures set in. Because of this, many of our project work plans can change quickly. Below are the projects with the greatest potential to impact customer nominations in October:
Volume impacts and schedule dates are stated as accurately as possible but are subject to change based on the variable nature of the factors involved in the projects. Schedule changes are communicated to customers as quickly as possible through the EBB. Northwest performs ongoing maintenance to ensure the continued safe operation of the pipeline in compliance with all applicable regulations. Maintenance – Hydro testing vs. Pigging We strive to complete all required maintenance in a manner that is transparent to customers; however, production capacity has averaged nearly 100 percent out of the Rocky Mountain region, causing difficulties during some necessary maintenance activities. Recent impacts on the south end of our system, where nominations have been particularly strong, have been the result of pigging projects and hydrostatic testing (hydrotest). These projects are important to Northwest’s ability to provide ongoing reliability and integrity along the pipeline. Recently, we’ve been asked about the need for hydrostatic testing. Both hydro testing and pigging are integral components of our integrity management program. Northwest uses the latest pigging technology to inspect the line internally with limited impact to customers. Certain issues, however, such as the re-qualification of the mainline, cannot be resolved through pigging and require other tests, such as hydrostatic testing. DOT regulations require hydrostatic testing for class location upgrades.
An example of this is the recent class location upgrade in the Moab district. New home construction in southwestern Colorado has produced an increased population density near the mainline. Once population density reaches a pre-determined level, the Department of Transportation requires Northwest to perform hydro tests to confirm the integrity of the line. Because this section of the pipeline is un-looped, operational capacity of the Pleasant View compressor station was reduced to zero, causing impacts to customers during the maintenance period and short-term fluctuations in gas market prices. We are committed to minimizing any customer impacts due to maintenance. Please feel free to contact your marketing services representative with any questions regarding upcoming maintenance. 2006 Customer Satisfaction Survey Northwest Pipeline’s 2006 customer satisfaction survey will be conducted in October and November. Energy Insights will contact a broad cross-section of customers to schedule one-on-one phone interviews. Customers will be asked to answer a number of questions regarding importance and performance ratings in four areas: 1) Quality of Service, 2) Quality of Communications, 3) Quality of Operations and 4) Product-Related Services. The customer survey process is an integral part of Northwest’s commitment to providing excellent customer service. In the previous survey, conducted in 2004, Northwest scored 8.5 out of a possible 10. Northwest used these results to guide its plans for process and service improvements. Additionally, we formed action teams to target enhancements in the following areas:
Northwest values the feedback it receives from its customers via the customer survey process, and we appreciate the efforts of customers who take time to participate in the survey. We look forward to receiving your responses. Nisqually Tribe Receives Check Northwest Pipeline made a donation of $550,000 to the Nisqually Indian Tribe to maintain streamside habitats in the Nisqually River watershed. As part of the Capacity Replacement Project in Pierce and Thurston counties in the state of Washington, it was necessary to cross the Nisqually River. Attempts to use the horizontal directional drilling method to tunnel underneath the river were unsuccessful because of the cobble and boulder composition of the soil under the riverbed. As a result, an open cut method was used to cross the river upstream from the town of McKenna. The donation will compensate the tribe for potential losses to aquatic resources. According to Nisqually Tribe Chairwoman Cynthia Lyall, the Tribe has always taken a leadership role in protecting natural resources. The Tribe plans to use the money to set up and manage a fund to acquire wetland and streamside habitat to protect the Nisqually River watershed. “Williams has a long history of environmental stewardship, so we’re pleased to make this contribution,” says Scott Long, project manager for the Capacity Replacement Project. “We work closely with tribes, as well as federal, state and local agencies to ensure minimal impact to the environment.” Northwest Pipeline Receives FERC Approval to Build Parachute Lateral Project in Colorado
On August 16, 2006, Northwest Pipeline was issued a certificate by the Federal Energy Regulatory Commission approving construction and operation of a 30-inch diameter natural gas transmission pipeline in Colorado that will bring additional gas supplies to market from the growing Piceance Basin. The new 37.6-mile pipeline and related facilities, known as the Parachute Lateral Project, will transport up to 450,000 dekatherms of natural gas per day from Williams’ production facilities in Garfield County, Colo., to the Greasewood Hub in Rio Blanco County, Colo., where interconnects can be made to interstate pipelines accessing various markets.
Construction began September 1, and the pipeline is expected to be in service prior to January 1, 2007. The estimated cost of the project is $64 million. In October and November 2005, Northwest conducted an open season to solicit binding contractual commitments for firm transportation service on the proposed Parachute Lateral. In December 2005, Williams Power executed a precedent agreement to acquire secure transportation service on the proposed lateral. This was followed by Northwest’s application for a FERC certificate, which was filed in January 2006. Pacific Connector Gas Pipeline Project The Williams project team has been busy with surveying and other work associated with pre-filing activities for the Pacific Connector Gas Pipeline Project (Pacific Connector). We are very pleased to have obtained survey permission for 90 percent, or 192 miles, of the proposed route and are nearing completion of the required survey work. The proposed Pacific Connector is being jointly developed by subsidiaries of Williams, PG&E Corporation and Fort Chicago Energy Partners LP. The project is a 223-mile natural gas transmission line that would connect the proposed Jordan Cove Liquefied Natural Gas (LNG) terminal in Coos Bay, Oregon, to Northwest’s system near Myrtle Creek, Oregon, and the Pacific Gas and Electric Company and Tuscarora gas transmission systems near Malin, Oregon. The project will provide a number of benefits to Oregon and the West Coast. The partners are pleased to receive local support, including an endorsement from Oregon Governor Ted Kulongoski, who in response to audience questions at a forum on July 31, 2006, stated his support for locating a liquefied natural gas terminal in Oregon, preferably in the Coos Bay area. Pacific Connector and the Jordan Cove LNG Project plan to file certificate applications with the FERC in January, 2007. Pending approval, construction of the terminal and pipeline could begin in 2008 and 2009, respectively. Capacity Replacement Project Construction is approximately 90 percent complete on Northwest’s Capacity Replacement Project (CRP) in the state of Washington. The project is on schedule to be in service by November 2006. The CRP involves abandoning 268 miles of 26-inch pipeline between Sumas and Washougal, and the construction and operation of approximately 80 miles of 36-inch pipeline in four sections along the same pipeline corridor. At the same time, Northwest is upgrading compressor stations in the area to provide an additional 10,760 net horsepower at existing compressor stations and related facilities.
Construction work at the Chehalis, Sumas and Mount Vernon compressor stations is winding down. Work at the Washougal compressor station began in August, while work on the Snohomish compressor station was completed in May. Northwest’s fuel reimbursement factor for transportation services increased from 1.92 percent to 2.01 percent for the period October 1, 2006, through March 31, 2007. The annual charge adjustment surcharge decreased from $0.0018 per dekatherm to $0.0016 per dekatherm for the twelve-month period beginning October 1, 2006. In June, Northwest filed tariff sheets to revise an existing discounted reservation rate option under Rate Schedule TF-1 and to reflect that revision, as well as additional “fill-in-the-blank” discount reservation rate parameters in the Rate Schedule TF-1 Form of Service Agreement. These tariff sheets were accepted by the Commission, effective July 16, 2006, subject to the Commission’s pending review of additional explanatory information filed by Northwest concerning load-factor-based discounts. In August, Northwest filed proposed tariff sheets to establish a right-of-first-refusal exemption for interim contracts covering capacity previously committed under pre-arranged future deals. These tariff sheets were accepted by the Commission on September 9, 2006. A True Outdoorsman – Ray Warner If you like an adrenaline rush, climb in an SUV and go four wheeling with Ray Warner, our celebrity outdoorsman/marketing representative.
During a recent family vacation in southern Utah, Ray took his family four wheeling on the Kane Creek Trail west of Moab, Utah. As often happens during family outings, he took photos of his family and his prized Nissan Xterra SUV.
Ray submitted a photo of his XTerra SUV in the Show Us Your X promotion sponsored by Nissan, and to his delight, his photo was voted “best overall” as one of ten finalists. Ray was awarded a trip to New Zealand, compliments of Nissan Motor Company. Ray is preparing to pack up his gear and his wife and head to New Zealand in October. Perhaps he could check out the natural gas industry for us in the land of the Kiwis. Ray graduated from the University of Utah with a degree in accounting. He also received his MBA. He began working at Northwest Pipeline in November 2000 in the marketing department. Ray currently works on the short-term firm team and assists with system enhancements and upgrades to Passage. Not surprisingly, Ray’s hobbies include four wheeling, hunting, fishing, cycling and snowboarding. If you’re planning a trip to Utah and want to know where to go for the best outdoor recreation destinations, contact Ray. Highlights from Williams’ Northwest Employee Meeting On September 5, employees at Williams Northwest Pipeline were invited to attend a gas pipeline employee meeting, which was broadcast from Houston. Speakers included Phil Wright, president of Williams Gas Pipeline, Nancy Shultz, vice president of technical services, Randy Barnard, vice president of operations, Allison Bridges, vice president of Williams Northwest Pipeline and Frank Ferazzi, vice president of Transco and Gulfstream. Williams Gas Pipeline’s business unit experienced strong second quarter financial results as a result of increased natural gas liquids sales margins and increased natural gas production. Williams’ consolidated segment profit rose 14 percent compared with 2005. We anticipate continued growth in this area of our business due to increased demand for natural gas production and volumes and continued strength in crude oil prices. Our gas production business is drilling more natural gas wells than ever before, and we anticipate we will be successful in developing access to new supply sources, including liquefied natural gas (LNG). We are committed to building and operating safe pipelines, and we continue to focus our efforts on training and retaining qualified third-party contractors and workers. In addition, we are developing and implementing more stringent company requirements to ensure that safety remains our number one priority. We support Phil Wright in his belief that, “a culture of safety and compliance is Northwest’s most critical business necessity.”
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Reminder: Move your clocks back one hour on October 29. Remember the old adage, “Spring forward, Fall back.”