Subject: Port Arthur Pipeline, LLC BindingOpen Season Notice
Date:August 21, 2017
Port Arthur Pipeline, LLC (“Port Arthur Pipeline”) hereby announces that it is holding a binding open season (“Open Season”)to solicit bids from potential shippers for long-term, firm transportation service to be provided on new natural gas pipeline facilities that will be constructed, owned and operated by Port Arthur Pipeline. Port Arthur Pipeline is also providing information regarding an enhanced firm service discussed in a previous open season announcement.
Project Description
Port Arthur Pipeline is a new interstate pipeline system that will be constructed and operated primarily to provide transportation of natural gas to the liquefaction and export facility being developed by Port Arthur LNG, LLC (“Port Arthur LNG”) at a site in Jefferson County, Texas (“Liquefaction Project”). In November 2016, Port Arthur Pipeline announced a non-binding open season to solicit interest in a separate pipeline project it is proposing to construct to interconnect with existing intrastate and interstate natural gas pipeline and natural gas storage infrastructure in Orange and Jefferson Counties, Texas, and Cameron Parish, Louisiana, to transport domestic natural gas as feed gas supply to the Liquefaction Project (“Texas Connector Project”). The total firm capacity of the Texas Connector Project currently is anticipated to be 1,950,000 Dth/day. Port Arthur Pipeline filed an application with Federal Energy Regulatory Commission (“FERC”) in Docket No. CP17-21 for a certificate of public convenience and necessity to build, own and operate the Texas Connector Project.
In this Open Season, Port Arthur is providing additional information regarding services discussed in the November 2016 open season announcement, offering an opportunity to request those services, and soliciting binding bids for firm capacity on the Texas Connector Project and on a separate project, the Louisiana Connector Project, as discussed below.
The Louisiana Connector Project facilities will include a 131 mile, 42-inch diameter feed gas pipeline with associated compressor station and interconnect facilities. The Louisiana Connector Project pipeline will originate in Jefferson County, Texas at the proposed Liquefaction Project, and will traverse through Cameron, Calcasieu, Beauregard, Allen, Evangeline, and St. Landry Parishes, terminating at an interconnect in St. Landry Parish. It is anticipated that the project will provide interconnections and associated metering stations with the Liquefaction Project and the pipelines described below. The Louisiana Connector Project facilities will also include a new compressor station consisting of 4 gas turbine driven compressors with approximately 22,500 ISO HP each, as well as new pig launcher/receiver facilities at each end of the pipeline and at approximate MP 63.6. The total firm capacity of the Louisiana Connector Project currently is anticipated to be 2,000,000 Dth/day. The Louisiana Connector Project is currently under consideration in the FERC pre-filing process in Docket No. PF17-5.
A map of the proposed Louisiana Connector and Texas Connector Projects is available on the link to Port Arthur Pipeline’s website provided below.
Although the Louisiana Connector Project facilities have been designed primarily to provide service to the Liquefaction Project, parties interested in subscribing for long-term, firm transportation service for a purpose other than providing feed gas supplies to the Liquefaction Project are also eligible to participate in this binding Open Season. To the extent that additional facilities are required to provide such an alternate service, the rate(s) payable by the firm transportation customer receiving the alternate service may be adjusted to reflect the costs of such additional facilities.
The ultimate size and scope of Port Arthur Pipeline’s proposed facilities, as well as the level of capacity offered by the project, will be based upon the acceptable binding bids received in this Open Season, and Port Arthur Pipeline reserves the right to modify the route, size, configuration, capacity,and/or other aspectsof the project based upon the bids it receives, regulatory considerations, and/or changes in market conditions. The Louisiana Connector Project and the Texas Connector Project are subject to approval by the FERC and any conditions imposed by the FERC and other agencies.
Port Arthur Pipeline tentatively projects placing its facilities in service in the third quarter of 2022. However, the timing of the in-service date of the Port Arthur Pipeline facilities could be impacted by, among other things, any delays in the receipt of regulatory approvals or in the construction schedule of either its pipeline facilities or the Liquefaction Project that will be constructed by Port Arthur LNG.
Services Offered in this Open Season
As described in the November 2016 Texas Connector Project open season announcement, Port Arthur Pipeline will offer a standard firm transportation service in accordance with Rate Schedule FT of the pro formatariff filed by Port Arthur Pipeline with the FERCin its certificate application filed on November 29, 2016 in Docket No. CP17-21. Port Arthur Pipeline will also offer to all of its shippers the option to elect an enhanced service that will supplement the standard firm transportation service pursuant to its Rate Schedule EHFT. Service under Rate Schedule EHFT will, among other things, provide shippers the ability to manage hourly and daily variations in gas flows and to balance differences between receipts and deliveries. A pro formacopy of Rate Schedule EHFT that is part of Port Arthur Pipeline’s pending certificate application is available on the FERC website at Port Arthur Pipeline reserves the right to file to amend its services prior to the date that Port Arthur Pipeline’s tariff becomes effective. Bidders in this Open Season may request service under Rate Schedules FT and EHFT. Further, as contemplated in the November 2016 open season announcement, Port Arthur Pipeline will permit shippers notifying Port Arthur Pipeline prior to the commencement of service to elect service under Rate Schedule EHFT, in lieu of Rate Schedule FT service, subject toagreement on an acceptable rate, the availability of capacity, and terms acceptable to Port Arthur Pipeline.
Timing of Binding Open Season
The binding Open Season period will commence at 8:00 a.m. Central Clock Time (“CCT”) on August 21, 2017 and end at 5:00 p.m. CCT on September 1, 2017, or at such laterdate and/or time as may be announced by Port Arthur Pipeline.
Receipt and Delivery Points
Potential shippers desiring firm transportation servicecan elect to utilize one or more of the following proposed primary firm receipt and delivery point(s), so long as the capacity requested does not exceed the amounts shown below:
Pipeline / Location / Primary Point (Dth/day) / Assumed Min. Pressure at Interconnect (psig)Receipt Points
Louisiana Connector
Centana Intrastate Pipeline / Jefferson County, TX / 300,000 / 1000
Texas Eastern Transmission / Allen Parish, LA / 300,000 / 750
Tennessee Gas Pipeline / Allen Parish, LA / 500,000 / 700
Market Hub Partners-Egan Hub / Evangeline Parish, LA / 750,000 / 825
Pine Prairie Energy Center / Evangeline Parish, LA / 750,000 / 825
Texas Gas Transmission / Evangeline Parish, LA / 750,000 / 825
ANR Pipeline / Evangeline Parish, LA / 750,000 / 825
Columbia Gulf Transmission / Evangeline Parish, LA / 750,000 / 825
Texas Connector
Natural Gas Pipeline Co. of Am. / Cameron Parish, LA / 900,000 / 875
Kinder Morgan La. Pipeline / Cameron Parish, LA / 1,200,000 / 875
Texas Eastern Transmission Co. / Jefferson County, TX / 1,000,000 / 875
Florida Gas Transmission / Jefferson County, TX / 450,000 / 725
Houston Pipeline Co. / Jefferson County, TX / 300,000 / 625
Golden Triangle Storage / Jefferson County, TX / 600,000 / 875
Delivery Point
Port Arthur LNG Terminal (Louisiana Connector) / Jefferson County, TX / 1,950,000 / 1000
Port Arthur LNG Terminal (Texas Connector) / Jefferson County, TX / 2,000,000 / 1000
Potential bidders may propose, and Port Arthur Pipeline may consider, receipt and delivery points other than those specified by Port Arthur Pipeline. However, the acceptance of such proposed alternative receipt and/or delivery points may affect the rate ultimately charged to the shipper. Further, Port Arthur Pipeline undertakes no commitment to construct any alternative receipt and/or delivery points and reserves the right to reject bids that would require Port Arthur Pipeline to construct facilities other than those specified by Port Arthur Pipeline.
Rates
Port Arthur Pipeline will develop cost of service-based recourse ratesfor the Louisiana Connector Project that will be available for firm transportation service and will be included as an addition to the pro forma FERC Gas Tariff and the proposed initial rates for service on the Texas Connector Project pending in Docket No. CP17-21. The initial recourse reservation charge for firm transportation service on the Louisiana Connector Project is currently estimated to be approximately $0.30/Dth/d for service under Rate Schedule FT-1 service and $0.45/Dth/d for service under Rate Schedule EHFT. This preliminary estimate was developed using the current cost inputs for similar facilities and the expected billing determinants for the project as of the date of this Open Season notice. However, the actual initial recourse reservation charge may be higher or lower than the estimated rate and may be subject to adjustment pursuant to proceedings conducted by the FERC under the Natural Gas Act. Port Arthur Pipeline makes no representation or warranty of any kind whatsoever as to the actual recourse reservation charge that will be applicable to the firm transportation service. In addition to the daily reservation charge, recourse rate shippers will be responsible for any applicable usage charges, retainage, the Annual Charge Adjustment, and any surcharges and other charges as approved by the FERC for the firm transportation service.
As an alternative to the recourse rate,Port Arthur Pipeline will consider negotiated rates for service on its facilities. Unless otherwise agreed to by Port Arthur Pipeline, a shipper’s negotiated rates shall be stated as a daily reservation charge and shall be subject to any applicable usage charges, retainage, the Annual Charge Adjustment, and any surcharges and other charges as approved by the FERC for the firm transportation service.
Creditworthiness
Prior to Port Arthur Pipeline executing a Precedent Agreement with any requesting shipper, the shipper will be required to satisfy Port Arthur Pipeline’s creditworthiness standards or commit to provide additional security, all to be applied by Port Arthur Pipeline on a not unduly discriminatory basis. A shipper shall be deemed creditworthy if the shipper’s long term unsecured debt is rated at least “BBB-” by Standard & Poor’s Ratings Service (“S&P”) or at least “Baa3” by Moody's Investors Service, Inc. (“Moody’s”). If the shipper is not rated, the shipper may at its own expense obtain a private rating from S&P, Moody's, or a mutually acceptable independent party.
Open Season Procedures
Any shippers desiring to submit a bindingbid for firm transportation capacity must submit to Port Arthur Pipeline before the close of the binding Open Season, as stated above, a completed BindingTransportation Service Request Form, which must include the total firm transportation quantity requested by the bidder, the desired receipt and delivery point(s), an allocation of the transportation quantity among multiple receipt points, if applicable, the rate proposed by the bidder and the term of the transportation service agreement.Completed bid forms must also include the information for a primary contact person and, if different, the information of a person authorized to discuss and resolve credit issues with Port Arthur Pipeline. The Binding Transportation Service Request Form is attached as Annex 1.
In order to support its proposed facilities, Port Arthur Pipeline anticipates that a minimum term of fifteen (15) years will be required from successful bids. Any bid with a minimum term of less than fifteen (15) years will be considered a non-conforming bid, but may be considered based on anet present value basis.Port Arthur Pipeline reserves the right to reject any conditions for bids submitted during this binding Open Season.
Upon the close of the Open Season period, Port Arthur Pipelinewill contact all bidders that havesubmitted a Binding Transportation Request Form to notify bidders whether capacity will be awarded and to present them with a non-disclosure agreement in the form set forth in Annex 2. Following the Open Season, Port Arthur Pipeline will enter intonegotiations with successful bidders that have signed a non-disclosure agreement for binding precedent agreementsand will finalize the design and capacity of the Port Arthur Pipeline facilities. Prior to the execution of binding precedent agreements, potential shippers will be required to present evidence of creditworthiness pursuant to the terms of this Open Season and the shipper’s precedent agreement.
Potential shippers submitting a bid proposal will be expressing a binding commitment to contract for firm transportation service, subject to the execution of a non-disclosure agreement and thenegotiation and execution of a precedent agreement with Port Arthur Pipeline. All proposals received will be treated as confidential, and will not be shared with other potential shippers. Unless otherwise agreed to by Port Arthur Pipeline on a not unduly discriminatory basis, successful bidders will have thirty (30) days to execute a non-disclosure agreement and a binding precedent agreement (if one has not already been executed) for the amount of capacity awarded in the Open Season. If a successful bidder fails to execute a binding precedent agreement in the allotted time, the awarded capacity may be awarded to the next highest bidder, as specified below. If no other bidder would qualify for such capacity, it may be remarketed in a subsequent open season or in negotiations with other shippers upon request.
Additional Benefits for Foundation Shippers
Potential shippers bidding the maximum recourse rate or an acceptable negotiated rate thatrequest a maximum daily transportation quantity (“MDTQ”) in this Open Season of at least 1,000,000 Dth/dayfor a minimum term of twenty (20) years will be eligible to become “Foundation Shippers.” Foundation Shippers’ bids will not be subject to proration. Foundation Shippers may also receivemore favorable pricing, as well as other rate and rate-related benefits not available to non-Foundation Shippers, including:
-The option to elect one or more unilateral extensions of the shipper’s transportation service agreement at the end of the contract term at the negotiated rate or some other mutually agreed upon rate.
-A contractual right of first refusal on the shipper’s capacity at the end of the shipper’s contract term.
-Flexible contract commencement dates for transportation service agreements.
-Alternate credit support requirements.
Port Arthur Pipeline has executed binding precedent agreements with one shipper for a total of approximately 1.9MMDth/d and 2.0 MMDth/d of firm transportation capacity on the Texas Connector Project and Louisiana Connector Project, respectively, each for twenty (20) year terms. In consideration of this substantial, early commitmentthat is essential to the competitive and economic viability of Port Arthur Pipeline’s facilities, this shipper willqualify as a Foundation Shipper for the purposes of this Open Season. That shipper, along with any other FoundationShippers, will receive priority with regard to the initial allocation of pipeline capacity.
Allocation of Capacity
To the extent Port Arthur Pipeline receives bids for capacity in excess of the capacity made available in this Open Season, capacity will be allocated as follows:
(i)Capacity will be allocated to Foundation Shippers up to the Foundation Shippers’ requested capacity.
(ii)If acceptable requests from qualified Foundation Shippers are less than the capacitymade available in this Open Season, any remaining capacity after Foundation Shippers receive their full request will be allocated to any non-Foundation Shippers that have submitted acceptable bids on a not unduly discriminatory basis, which will include a net present value allocation based on rate, term and quantity with the bids or any combination of bids (including partial bid quantities, if permitted by a shipper’s bid) with the highest net present value receiving priority to the capacity.
To the extent the volume of capacity requested in this Open Season exceeds the available capacity, Port Arthur Pipeline reserves the right, in its sole discretion, to expand or modify the its proposed facilities to accommodate volumes bid by shippers. However, Port Arthur Pipeline assumes no obligation to do so.
To the extent capacity remains available following successful completion of negotiations with all qualifying bidders in the Open Season, Port Arthur Pipeline reserves the right to modify the size and scope of the proposed facilities, to conduct one or more open seasons,and/or to negotiate mutually acceptable precedent agreements with any potential shippers for the remaining project capacity upon request, irrespective of the deadlines set forth herein for the submission of bids or the execution of precedent agreements.
Reservations
This Open Season Notice does not constitute a binding offer from Port Arthur Pipeline, which reserves the right, in its sole discretion, to decline to proceed with the proposed facilities, including all or any portion of the facilities for which the parties have requested service as part of this Open Season. Port Arthur Pipeline also reserves the right to proceed with one or more alternative projects that may be defined through the contracting process and to develop alternative projects from the requests received during this Open Season that may be more representative of the timing requested and markets served. Such alternative projects may be pursued by Port Arthur Pipeline and/or one or more of its affiliates. Port Arthur Pipeline reserves the right to reject any and all bids that do not satisfy the requirements set forth in this Open Season Notice. Without limiting the foregoing, Port Arthur Pipeline may, but is not required to, reject any request for service in which the Binding Transportation Service Request Form is incomplete, is inconsistent with the terms and conditions outlined in this Open Season Notice, contains additional or modified terms, imposes one or more conditions that are not acceptable to Port Arthur Pipeline or is otherwise deficient in any respect. Port Arthur Pipeline reserves the right to request that a potential shipper modify its proposed receipt or delivery point(s), to the extent that Port Arthur Pipeline determines that the nominated point(s) will unduly increase the cost of the overall project or otherwise adversely affect the scope of the project in light of the other nominations received prior to or as part of the Open Season. Port Arthur Pipeline also reserves the right to reject requests for service in the event requesting shippers are unable to meet applicable creditworthiness requirements. No request for service shall be binding on Port Arthur Pipeline unless and until duly authorized representatives of both the requesting shipper and Port Arthur Pipeline have executed a binding Precedent Agreement. Finally, Port Arthur Pipeline reserves the right to cancel or modify the terms of this Open Season, to extend the term of the Binding Open Seasonperiod and the period for negotiation of a precedent agreement, and/or to conduct one or more additional/supplementalopen seasons regarding its proposed facilities.