UPDATE 3-Louisiana sinkhole roils local natural gas network

Wed Aug 8, 2012 5:47pm EDT

* Chevron orders drawdowns from nearby gas storage

* Pipeline companies halt throughput on local lines

By Jeanine Prezioso

NEW YORK, Aug 8 (Reuters) - A sinkhole the size of a football field in southern Louisiana has forced energy companies to halt nearby natural gas pipeline activity and draw down fuel from a local storage cavern.

Chevron Corp's subsidiary Bridgeline Holdings declared force majeure on new injections into its salt dome storage facility near the sinkhole and the town of Napoleonville, through the rest of the year, according to notice to customers posted on its website.

Customers were also asked to begin reducing their current storage inventory to 40 percent of each of their currently contracted amount, according to the Bridgeline filing.

Natural gas traders said Chevron's move to purge the gas could push an additional 4 billion to 5 billion cubic feet of gas on the market. U.S. September and October futures prices settled lower, while winter months settled higher on Wednesday, and traders said companies could be scrambling to sell supplies while locking in winter gas to meet heating demand.

"Chevron Pipeline Co has elected to take the step of drawing down the NS1 cavern as a precaution to ensure that we are doing everything possible to protect public safety and the environment," said Gareth Johnstone, a Chevron spokesman.

The sinkhole, which local media reported was 372-feet wide (113 meters), was discovered near the cavern on Friday, and has consumed full-grown trees. Sinkholes occur when underground spaces or caverns become so large they can no longer support the land above them, causing a collapse.

There is no indication that gas is leaking from the facility, Johnstone said, adding there was no evidence that the integrity of the cavern was at risk.

Louisiana Commissioner of Conservation James Welsh issued a Declaration of Emergency on Friday due to the sinkhole, located in a region of wooded swamp in Bayou Corne. The Texas Brine Company, which has a plugged salt cavern within 100 yards of the sinkhole, was ordered to investigate the site.

"The objective is to determine if the cavern has a direct relationship to this event," said Mark Cartwright, president of subsidiary Texas Brine Company Saltville, LLC. "The obvious conclusion is of course it does, but we don't know yet."

"This is very puzzling."

Unexplained bubbles discovered in the region in recent months had been under investigation by state, local, and federal agencies.

Tremors were also reported in the area before the sinkhole appeared, state officials said, but the cause was still being investigated.

PIPELINES SHUT

Enterprise Product Partners, owner of the Arcadian Gas Pipeline System, said it was forced to shut two 20-inch gas pipelines near the area, according to a spokesman. The gas has been rerouted so the company has been able to continue deliveries to customers, he added.

A spokeswoman for Crosstex Energy said the company shut a portion of its 36-inch natural gas pipeline near the sinkhole taking about 150 million cubic feet a day of supply offline.

Customers have made other arrangements to source other supplies, the spokeswoman said.

Chevron has three natural gas salt dome storage caverns in the area with a total capacity to hold 12.7 billion cubic feet of gas, according to the company website. The storage sites connect with Acadian Gas Pipeline Company, Gulf South Pipeline Company, and Florida Gas Transmission. Maximum withdrawal was listed as 1.1 bcf per day.

"They are worried about the cavern integrity and the slurry breaching the salt dome that they have," said Genscape senior natural gas analyst Andy Krebs.

"If there was anybody that did have gas in storage looking to play to winter, they're going to have to pull it out now."

Napoleonville is located in Assumption Parish in southeastern Louisiana with a population of 660 as of 2010, according to City-Data.com.

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