REVISED OPEN SEASON NOTICE (PREVIOUS NOTICE 16834) Arizona Gas Storage Project

Transcription

1 REVISED OPEN SEASON NOTICE (PREVIOUS NOTICE 16834) Arizona Gas Storage Project On Tuesday, January 31, 2017, El Paso Natural Gas Company, L.L.C., posted an open season (Notice ID: 16834) which contained the incorrect phone number for Mr. Gregory W. Ruben. The phone number has been corrected below. This revised open season contains no revisions other than the correction of Mr. Ruben s phone number. The original open season (with the corrected phone number) is set forth below. In response to expressions of interest, this Binding Open Season ( Open Season ) is being conducted for natural gas storage-related services associated with a proposed bedded salt cavern natural gas storage facility in Pinal County, Arizona. The proposed storage project is hereinafter referred to as the Arizona Gas Storage Project. The Arizona Gas Storage Project will be developed, owned, and operated by a yet-to-be-formed project entity ( Storage Company ). The new Storage Company will be owned, in part, by an affiliate of El Paso Natural Gas Company, L.L.C. ( EPNG ) as well as third-party investors. As such, EPNG is conducting this Open Season for the initial capacity on behalf of the Storage Company. LENGTH OF OPEN SEASON This Open Season will commence at 6:00 p.m., Mountain Time, on January 31, 2017, and will close at 4:00 p.m., Mountain Time, on March 27, Offer Sheets must be received by EPNG prior to the close of the Open Season. EPNG reserves the right to extend or modify this Open Season by posting a notice on its Electronic Bulletin Board. Successful bidder(s) will be notified by 4:00 p.m., Mountain Time, on March 30, Awards of capacity pursuant to this Open Season are expressly subject to (i) compliance by the bidder with the terms of this Open Season, and (ii) the receipt by Storage Company, on or before May 31, 2017, of all approvals from the appropriate management, management committee, and/or board of directors of Storage Company and/or its member companies, required for Storage Company to exercise its rights and perform its obligations under any Firm Transportation Service Agreement ( FTSA ) executed pursuant to this Open Season. Each successful bidder shall enter into a FTSA reflecting the terms of its bid as awarded in this Open Season. Questions concerning this Open Season or requests to obtain Storage Precedent Agreements should be directed to: Gregory W. Ruben Anthony Sanabria Kinder Morgan, Inc. Kinder Morgan, Inc. VP Business Development AD Business Development (719) (719) Gregory_Ruben@kindermorgan.com Anthony_Sanabria@kindermorgan.com DESCRIPTION OF THE ARIZONA GAS STORAGE PROJECT The proposed Arizona Gas Storage Project, as currently designed, will consist of not less than four (4), nor more than eight (8), natural gas salt storage caverns to be located in Pinal County Arizona, near Eloy having an initial design working inventory of one (1) billion cubic feet ( Bcf ) per cavern for a total capacity of at least four (4) Bcf and having a projected minimum aggregate injection capacity of 168, ,000 thousand cubic feet ( Mcf ) per day and a projected minimum aggregate withdrawal capacity of 400,000 1

2 Mcf per day. Surface facilities will include compression facilities to allow injections into the storage caverns and interconnection facilities with EPNG s mainlines in Pinal County, Arizona. EPNG, on behalf of Storage Company, is seeking binding offers for natural gas storage-related services to support the development of the Arizona Gas Storage Project. EPNG, on behalf of Storage Company, will accept negotiated rate offers as part of this Open Season. Subject to Storage Company s receipt of sufficient shipper commitments and timely receipt by Storage Company of all necessary regulatory approvals, permits, and other authorizations required for the design, development, procurement, construction, installation and operation of the Arizona Gas Storage Project in the manner described herein, in a form and substance satisfactory to Storage Company in its sole discretion, Storage Company anticipates the ability to achieve an in-service date for the first cavern as early as the fourth quarter of 2020, and the final cavern as early as the fourth quarter of The project will include a lease of capacity from EPNG which will be used to provide firm no-notice transportation ( NNT ) services to existing delivery locations on EPNG s system. Interested bidders should contact Gregory Ruben or Anthony Sanabria to determine if their locations are eligible for NNT service from the Arizona Gas Storage Project. RATE SCHEDULE NNT: The proposed firm NNT service would be provided on a firm basis up to a shipper s (1) Maximum Daily Injection Quantity ( MDIQ ), (2) Maximum Daily Withdrawal Quantity ( MDWQ ) and (3) Maximum Storage Volume ( MSV ). The MDIQ will be a function of the MDWQ using the following formula: MDIQ= MDWQ / The MSV will be a function of MDWQ using the following formula: MSV = MDWQ * 10. For illustrative purposes, if a shipper subscribes for a MDWQ of 100,000 Mcf/day, it will be allocated an MSV of 100,000 Mcf * 10 = 1,000,000 Mcf and an MDIQ of 100,000 / = 45,746 Mcf/day. The service would provide shippers with additional firm transportation capacity from the Arizona Gas Storage Project to shipper s delivery points on EPNG s system as defined in the applicable FTSA and would provide shippers with firm receipt to delivery point service with either greater flexibility in adjusting same day nominations or without the shipper having to nominate for such deliveries and receipts. The service would also provide shippers with capacity flexibility in the event that actual requirements vary from nominated and scheduled volumes. PROPOSED RESERVATION RATES The anticipated rates for NNT transportation service on the Arizona Gas Storage Project are reflected below. Maximum Recourse Reservation Rate; or Negotiated Reservation Rate of $ per dekatherm ( Dth ) per month for each Dth of MDWQ (which, for illustrative purposes, is equivalent to $0.70 per Dth on a daily basis); or Negotiated Reservation Rate with adjustment (as detailed below): Shipper shall pay Storage Company a negotiated monthly reservation rate of $ per dekatherm ( Dth ) for each Dth of MDWQ (which, for illustrative purposes, is equivalent to $0.65 per Dth on a daily basis); provided, however, that if the actual cost of constructing the Project is determined to be greater than or less than the $372,833,538 anticipated cost of construction, the negotiated reservation rate for service will be increased or decreased, as applicable, per the following table: 2

3 Cost of Construction Negotiated Monthly Reservation Rate (per Dth of MDWQ) Equivalent Daily Rate (per Dth of MDWQ) For Illustrative Purposes Only Greater than $417,573,565 $ $ $417,573,565 to $406,388,560 $ $ $406,388,559 to $395,203,553 $ $ $395,203,552 to $384,018,547 $ $ $384,018,546 to $372,833,541 $ $ $372,833,540 to $361,648,535 $ $ $361,648,534 to $350,463,529 $19,2213 $ $350,463,528 to $339,278,522 $18,7495 $ $339,278,521 to $328,093,516 $18,3173 $ $328,093,515 to $316,908,510 $ $ Less than $316,908,510 $ $ Variances in the negotiated reservation rate shall be subject to a minimum rate of $ per Dth (which, for illustrative purposes, is equivalent to $ per Dth on a daily basis) and a maximum rate of $ per Dth (which, for illustrative purposes, is equivalent to $ per Dth on a daily basis). The actual cost of constructing the Project will be estimated at the time the Project is placed into service, and the negotiated rate resulting from that estimate shall be used until such time as Storage Company files the statement of cost of construction required by 18 C.F.R (c)(3), at which time the negotiated rate shall be redetermined and that redetermined negotiated rate will apply prospectively only. In order to facilitate the NNT service contemplated herein, EPNG has agreed to lease to Storage Company, and Storage Company has agreed to lease from EPNG, four hundred thousand (400,000) Mcf per day of pipeline capacity on EPNG s system between the aforementioned Primary Receipt Points and Primary Delivery Points at a monthly lease rate of $ per Dth (which, for illustrative purposes, is equivalent to $ per Dth on a daily basis) ( Leased Capacity Rate ). The Leased Capacity Rate is currently included in the Monthly Reservation Rate set forth above. If the Leased Capacity Rate increases at any time during the term of Shipper s agreement for NNT Service as the result of EPNG being allocated costs in any FERC rate proceeding that are not recovered by the Leased Capacity Rate, then such increase will be incorporated into Shipper s Monthly Reservation Rate. For illustrative purposes and avoidance of doubt, a two-cent ($0.02) increase in the Leased Capacity Rate will result in a two-cent ($0.02) increase in Shipper s Monthly Reservation Rate. OTHER RATES & CHARGES: Shipper s bid includes the applicable maximum usage rates and maximum usage surcharges, all other maximum rates, charges and surcharges, including ACA, fuel, lost and unaccounted-for gas ( L&U ), retainage and any other authorized surcharges assessed under the applicable Rate Schedule of the FERC Gas Tariff for the Arizona Gas Storage Project, as those amounts may be amended or superseded from time-to-time. This includes incremental lateral charges and any third party charges resulting from the use of capacity that Storage Company may hold on other pipelines (other than the capacity leased by Storage Company from EPNG to effectuate firm NNT service). SUBMISSION OF BIDS Parties interested in bidding in this Open Season should submit a completed Offer Sheet (which may be accessed using the link provided below) to EPNG before the close of the Open Season via at the following address: KMWestBids@KinderMorgan.com. By submitting an Offer Sheet to EPNG, the bidding party certifies that (a) all information contained in the request is complete and accurate, and (b) the 3

4 person submitting the bid has full authority to bind the bidding party. The bid rate must be presented as the Monthly Reservation MDWQ Charge per Mcf/month or stated as the maximum tariff rate. Storage Company reserves the right to reject negotiated rate bids, bids that have rates less than the applicable maximum recourse rate, bids stated as the dollar equivalent of the proposed maximum recourse rate, bids that are incomplete, and bids that contain additional or modified terms. Storage Company also reserves the right to reject bids for quantities that are not for the same quantity for each month of the bid term. Bids not showing a flat rate for the bid term will not be considered. Development of the Arizona Gas Storage Project is expressly subject to (1) final approval by the appropriate management committee, board of directors, or officer(s) of Storage Company or its members, and (2) negotiation of acceptable FTSAs. In addition to the bid rate, each bidding party shall be subject to the applicable maximum usage rates and maximum usage surcharges, all other maximum rates, charges and surcharges, including annual charges unit charge ( ACA ), fuel, lost and unaccounted-for gas ( L&U ), retainage and any other authorized surcharges assessed under the applicable Rate Schedule of the FERC Gas Tariff for the Arizona Gas Storage Project, as those amounts may be amended or superseded from time-to-time. This includes incremental lateral charges and any third party charges resulting from the use of capacity that Storage Company may hold on other pipelines (other than the capacity leased by Storage Company from EPNG to effectuate the firm NNT service described above). Although this is a binding open season, Storage Company reserves the right, in its sole discretion, to consider requests for capacity received after the close of the Open Season period, including requests to modify a participant s validly submitted bid, but shall be under no obligation to do so. Storage Company anticipates that it will require bids for terms of twenty (20) years from the full in-service date of the Arizona Gas Storage Project in order to economically justify its capital investment in the project (although Storage Company reserves the right to reject any bids inconsistent with the terms and conditions of this Open Season regardless of term). BID CONDITIONS EPNG will accept bids conditioned upon: 1. Receipt of the approval of bidder s management, management committee, and/or board of directors or other appropriate management structure by May 15, Receipt of all necessary approvals from bidder s state regulatory commission, or a waiver of the condition, by May 15, EPNG does not anticipate accepting any other conditions for bids submitted during this Open Season. EVALUATION CRITERIA AND AWARDING OF CAPACITY If EPNG receives acceptable bids for capacity in excess of the amount of capacity being offered, then the capacity will be awarded to the bidder having the highest Present Value (PV) bid, calculated as follows: PV will be the sum of the present values for all of the months from the initial in-service date of the Arizona Gas Storage Project through the end date of the bidding party s bid term. The present value for each month will be calculated as follows: PV = [(R X Q)/((1+i) to the power of n)] Where: R = the monthly reservation bid rate 4

5 Q = the monthly bid quantity i = the monthly discount rate (the annual discount rate divided by 12). The annual discount rate to be used is 3.50%. n = the number of months from the initial in-service date of the Arizona Gas Storage Project to the month the revenue will be received (the first month capacity is available n = 1, the second month n = 2, and so on) If there is not sufficient capacity available to meet all acceptable bids, Storage Company will award first to the bidder having the highest acceptable PV, followed by the bidder having the second highest acceptable PV, etc., etc., until such time as the capacity is completely awarded (recognizing that bidders with lower PVs may have their bids prorated unless they have expressly elected otherwise in the Open Season Offer Sheet). If two or more acceptable bids are of equivalent PV, then the capacity will be allocated pro rata among those bidders, unless the affected bidders have elected not to have their bids prorated (as indicated on their Open Season Offer Sheet(s)). Storage Company will have the right to aggregate bids that generate the highest net present value to Storage Company. EPNG specifically reserves the right to reject bids that are not at maximum recourse rates as well as bids which are for a term of less than twenty (20) years. Any bid received for a term of greater than twenty (20) years will be treated as a 20-year bid for capacity allocation purposes. If there are insufficient maximum recourse or negotiated rate bids for quantities and terms sufficient to economically justify Storage Company s capital investment in the project, then Storage Company reserves the right not to move forward with the Arizona Gas Storage Project or to negotiate with bidders to propose a more appropriately sized project at a corresponding rate. CREDITWORTHINESS REQUIREMENTS The successful bidder(s) shall demonstrate, and maintain throughout the term of any FTSA executed in connection with this Open Season, satisfaction of creditworthiness in the manner set forth below: (i) If bidder is rated by S&P Global Ratings ("S&P") and/or Moody's Investor Service ("Moody's") (hereinafter referred to as a Rated Bidder ), then the Rated Bidder shall satisfy its creditworthiness obligations by making a demonstration to Storage Company that: (a) Rated Bidder s senior unsecured debt securities are rated at least BBB- by S&P or Baa3 by Moody's or Rated Bidder s long-term issuer rating is at least A- by S&P or A3 by Moody s (in the event Rated Bidder is rated differently by multiple agencies, the lowest rating shall be used in making such determination); and (b) Rated Bidder is not under review for possible downgrade by S&P and/or Moody s to a level below that set forth in subpart (a) of this section (i). If at any time during the term of any FTSA executed in connection with this Open Season, a Rated Bidder s S&P or Moody s rating falls below the levels described above, or a Rated Bidder becomes unrated or otherwise fails to satisfy the requirements of this section (i), then for the time period that the Rated Bidder s ratings are below that level or a Rated Bidder is unrated or is otherwise unable to satisfy the requirements of this section (i), Rated Bidder shall satisfy its creditworthiness obligation by providing one of the forms of credit support described in section (ii) below. If a Rated Bidder subsequently becomes able to satisfy the S&P or Moody s rating levels described above, the Rated Bidder may immediately satisfy its creditworthiness obligations in the manner provided in this section (i). (ii) If at the time of the execution of any FTSA in connection with this Open Season, or at any time thereafter, bidder is unable to satisfy its creditworthiness obligations in the manner set forth in section (i) above, then bidder shall satisfy its creditworthiness obligations by providing and maintaining, at its option: (a) an irrevocable, unconditional guarantee of its obligations 5

6 under any FTSA executed in connection with this Open Season, acceptable to Storage Company and issued by another person or entity which satisfies the creditworthiness standards set forth in section (i); or (b) an irrevocable letter of credit acceptable to Storage Company and from a bank acceptable to Storage Company in an amount equal to three (3) years of anticipated charges under any FTSA executed in connection with this Open Season; or (c) such other credit arrangements which are mutually agreed to by Storage Company and bidder, and which are accepted by Storage Company on a nondiscriminatory basis. (iii) Upon request by Storage Company, bidder shall promptly provide evidence to Storage Company of bidder s creditworthiness, as set forth above, which Storage Company may share with its lenders or creditors or any nationally recognized rating agency that is then initiating or maintaining a rating of Storage Company or any of Storage Company s credit facilities. (iv) If any change in ratings or conditions requires bidder to change the manner in which it demonstrates its satisfaction of its creditworthiness requirements, bidder shall make that demonstration (including if necessary the provision of any guarantee or letter of credit) within ten (10) business days of the change in ratings or conditions requiring the new demonstration of creditworthiness. (v) Notwithstanding any statement to the contrary set forth elsewhere in this creditworthiness section, bidder shall at no time during the term of any FTSA executed in connection with this Open Season be required to provide a guaranty or letter of credit in an amount exceeding the remaining anticipated charges under any FTSA executed in connection with this Open Season. (vi) If bidder does not timely pay its invoices under any FTSA executed in connection with this Open Season, then Storage Company, in addition to all other remedies it may have, may accelerate and declare due all of the unpaid transportation charges for the balance of the existing term of such FTSA. Bidders that fail to satisfy the creditworthiness requirements within a reasonable time will have their capacity award withdrawn. Storage Company will treat the financial statements provided by prospective shippers as confidential. 6

7 A. Shipper Name: B. Term of service: OFFER SHEET NOTICE (Previous Notice 16834) Arizona Gas Storage Project Commencing On: The in-service date of the first cavern of the Arizona Gas Storage Project. Terminating On: years from the full in-service date of the Arizona Gas Storage Project. C. Type of Service: Firm No-Notice Transportation (NNT) Service D. Shipper s Requested MDWQ: Mcf/day Will you accept a pro rata allocation of capacity? Yes No Minimum Acceptable MDWQ: Mcf/day E. Rate: Maximum Recourse Reservation Rate; or Negotiated Reservation Rate of $ per dekatherm ( Dth ) per month for each Dth of MDWQ (which, for illustrative purposes, is equivalent to $0.70 per Dth on a daily basis); or Negotiated Reservation Rate with adjustment (as detailed below): Shipper shall pay Storage Company a negotiated monthly reservation rate of $ per dekatherm ( Dth ) for each Dth of MDWQ (which, for illustrative purposes, is equivalent to $0.65 per Dth on a daily basis); provided, however, that if the actual cost of constructing the Project is determined to be greater than or less than the $372,833,538 anticipated cost of construction, the negotiated reservation rate for service will be increased or decreased, as applicable, per the following table: 7

8 F. Other Rates & Charges: Cost of Construction Negotiated Monthly Reservation Rate (per Dth of MDWQ) Equivalent Daily Rate (per Dth of MDWQ) For Illustrative Purposes Only Greater than $417,573,565 $ $ $417,573,565 to $406,388,560 $ $ $406,388,559 to $395,203,553 $ $ $395,203,552 to $384,018,547 $ $ $384,018,546 to $372,833,541 $ $ $372,833,540 to $361,648,535 $ $ $361,648,534 to $350,463,529 $19,2213 $ $350,463,528 to $339,278,522 $18,7495 $ $339,278,521 to $328,093,516 $18,3173 $ $328,093,515 to $316,908,510 $ $ Less than $316,908,510 $ $ Variances in the negotiated reservation rate shall be subject to a minimum rate of $ per Dth (which, for illustrative purposes, is equivalent to $ per Dth on a daily basis) and a maximum rate of $ per Dth (which, for illustrative purposes, is equivalent to $ per Dth on a daily basis). The actual cost of constructing the Project will be estimated at the time the Project is placed into service, and the negotiated rate resulting from that estimate shall be used until such time as Storage Company files the statement of cost of construction required by 18 C.F.R (c)(3), at which time the negotiated rate shall be redetermined and that redetermined negotiated rate will apply prospectively only. In order to facilitate the NNT service contemplated herein, EPNG has agreed to lease to Storage Company, and Storage Company has agreed to lease from EPNG, four hundred thousand (400,000) Mcf per day of pipeline capacity on EPNG s system between the aforementioned Primary Receipt Points and Primary Delivery Points at a monthly lease rate of $ per Dth (which, for illustrative purposes, is equivalent to $ per Dth on a daily basis) ( Leased Capacity Rate ). The Leased Capacity Rate is currently included in the Monthly Reservation Rate set forth above. If the Leased Capacity Rate increases at any time during the term of Shipper s agreement for NNT Service as the result of EPNG being allocated costs in any FERC rate proceeding that are not recovered by the Leased Capacity Rate, then such increase will be incorporated into Shipper s Monthly Reservation Rate. For illustrative purposes and avoidance of doubt, a two-cent ($0.02) increase in the Leased Capacity Rate will result in a two-cent ($0.02) increase in Shipper s Monthly Reservation Rate. Shipper s bid includes the applicable maximum usage rates and maximum usage surcharges, all other maximum rates, charges and surcharges, including ACA, fuel, lost and unaccounted-for gas ( L&U ), retainage and any other authorized surcharges assessed under the applicable Rate Schedule of the FERC Gas Tariff for the Arizona Gas Storage Project, as those amounts may be amended or superseded from time-totime. This includes incremental lateral charges and any third party charges resulting from the use of capacity that Storage Company may hold on other pipelines (other than the capacity leased by Storage Company from EPNG to effectuate firm NNT service). G. Condition to Bid (Check if Applicable) 8

9 Shipper s bid shall be subject to receipt of the approval of bidder s Board of Directors or other appropriate management structure by no later than. Any bid that is made subject to such a condition will be rejected if written evidence of the receipt of such approval is not provided to EPNG by. Shipper s bid shall be subject to receipt of all necessary approvals from bidder s state regulatory commission by no later than. Any bid that is made subject to such a condition will be rejected if written evidence of the receipt of such approval is not provided to EPNG by. 9