Energy Transfer pipeline fight could hurt Haynesville

  • : Natural gas
  • 23/12/05

Efforts by midstream giant Energy Transfer to block a natural gas pipeline out of the Haynesville shale could threaten the region's production growth, the pipeline company and others argue in court filings, as well as the coming US LNG export boom.

In April a Louisiana district court judge ruled that Energy Transfer was within its rights to block DT Midstream from building a gas line that crossed Energy Transfer's own Tiger pipeline in northern Louisiana. Two other midstream companies with plans for gas lines that cross the east-west oriented Tiger gas line, industry groups and the state attorney general have since weighed in on the side of DT Midstream, warning that the precedent set by the April ruling could effectively block other gas line projects if it is not overturned.

"The public policy implications of this decision will have far-reaching consequences for Louisiana's energy sector and, indeed, perhaps for the nation's energy independence," Louisiana attorney general Jeff Landry said in a court filing.

Energy Transfer declined comment on the case.

The case hinges on the validity and meaning of the phrase "exclusive servitude" used in a contract Energy Transfer signed with the now-defunct timber company, Red River Louisiana, from which it purchased the right to construct and maintain the gas pipeline in 2010. Energy Transfer says that the "exclusive servitude" clause means no other entity can build a new gas line across the path of the Tiger line without its consent. Given the number of pipelines in energy-producing states like Texas, Louisiana and Oklahoma, it is common for pipelines to cross each other.

State district court judge Nicholas Gasperagreed with Energy Transfer's interpretation of "exclusive" and said abiding by the contract would not lead to "any absurd consequences." He granted Energy Transfer a preliminary injunction to stop DT Midstream from tunneling its line under the Tiger pipeline.

State, industry back DT claim

Since then, other parties have weighed in on DT Energy's side. Midstream giant Williams, which plans the $1bn, 1.8 Bcf/d (51mn m³/d) Louisiana Energy Gateway gas gathering line that would cross the Tiger pipeline, filed an amicus brief, as did Momentum, which is planning a $1.6bn, 1.7 Bcf/d New Generation Gas Gathering (NG3) project also likely to cross Tiger.

Energy Transfer is trying to "create and control a bottleneck," which, if successful, "other existing pipeline owners could repeat … throughout Louisiana and across the country, which could stymie any new construction of pipelines," Momentum said in its filing.

If Momentum and its allies are correct, the ruling could hamper the gas production growth needed in the Haynesville in the coming years to keep up with a massive build-out of new LNG export capacity along the US Gulf coast.

The district court signaled it had considered these possibilities, writing that it "does understand the possible effect of this ruling and does not like the potential consequence."

Public policy aside, Landry argued the court improperly "provid[ed] primacy" to an "unenforceable" contract over "existing [state] law," which "contains no provision creating an 'exclusive' servitude in the manner asserted in this case."

Following that logic, the Louisiana Oil and Gas Association (LOGA) argued Energy Transfer's "exclusive" servitude "occupies exclusively the subterranean space it actually occupies," not "the entirety of the land, to the exclusion of others."

Louisiana State University energy law professor Keith Hall predicted a court would consider LOGA's interpretation as "baloney," as it effectively erases the presence of the word "exclusive."

Hall was also skeptical of the parties' claims that the ruling would prevent future gas line crossings, since few pipeline servitude contracts contain the word "exclusive." Even in this case, the ruling would not ultimately block competing lines since companies could obtain the right to do so by eminent domain, just as they would with a holdout landowner, Hall said.

DT Midstream has appealed the district court ruling to the 2nd Circuit Court of Appeals in Shreveport. It is awaiting a date for a hearing before the court.

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