FERC Grants Exemption to Atmos Energy Subsidiary For New Gas Gathering System in Eastern Kentucky

Business Wire, Oct 6, 2006

DALLAS -- Atmos Energy Corporation (NYSE:ATO) said today that the Federal Energy Regulatory Commission (FERC) has issued a declaratory order finding that its Straight Creek Gathering, L.P., unit will perform a gathering function and that the facilities it plans to build in eastern Kentucky will be exempt from FERC jurisdiction.

Atmos Energy said the Straight Creek Gas Gathering System should help relieve severe gas gathering and transportation constraints that historically have burdened natural gas producers in the area and should improve delivery reliability to natural gas customers.

"The comments submitted by the federal and state representatives and local producers demonstrate a strong support for the need for the Straight Creek facilities," FERC stated in its order (Docket No. CP06-369-000). The commission also found the goals of providing additional supplies of natural gas to the public and promoting competition within the areas of the proposed facilities are consistent with public policy set out in the federal Natural Gas Act and Natural Gas Policy Act of 1978.

"Our Straight Creek Gathering project represents an incremental, but important, strategic step for Atmos Energy," said Robert W. Best, chairman, president and chief executive officer of Atmos Energy Corporation. "Upstream gathering projects like this offer a new opportunity for Atmos Energy to apply its expertise in a closely related line of business that we think could benefit our shareholders and customers in the future."

When all its facilities are completed, the Straight Creek Gathering System will consist of a 60-mile, 20-inch diameter gathering backbone, with several smaller-diameter gathering laterals extending off the backbone. The system will gather natural gas from producing fields throughout eight counties in eastern Kentucky.

"We believe that our Straight Creek project not only can help deliver more natural gas to consumers, but also can encourage producers in the Big Sandy region of Kentucky to drill more wells," said Mark H. Johnson, senior vice president, nonutility operations, of Atmos Energy Corporation. "Producers will be able to depend on our gathering system year-round, and the competition and added gas supplies should benefit customers as more natural gas is brought to market," Johnson said.

From its origin point in Floyd County, Kentucky, the Straight Creek system will gather local gas production from producing fields located along the entire length of the gathering system. Operating at relatively low pressures, the system will be able to accept unprocessed gas, which will be processed and treated at the Straight Creek Processing Plant to be constructed at the northern end of the system in Carter County, Kentucky. The gas will be delivered into Tennessee Gas Pipeline Company's interstate pipeline.

The project is estimated to cost between $75 million to $80 million, according to Johnson. He said that Kinzer Drilling Company, a major independent oil and gas producer in the region, will own an interest in the project. More than a dozen other gas producers have executed agreements committing volumes to the Straight Creek system.

Johnson said that the project's construction is expected to begin in the fall of 2006 as soon as all required regulatory approvals are received. The gathering system is intended to go into operation as early as possible in 2007, with a goal to make producers' gas available to support storage injections and market demands next summer.

"This project should provide important economic benefits for gas producers in the region and consumers in Kentucky and the northeastern United States," Johnson said. He noted that the East Kentucky Oil and Gas Producers Association estimates the economic benefits to Kentucky of the new gathering system could exceed $150 million a year. A substantial volume of local natural gas has been unavailable to the consuming public, and the state has lost wellhead sales revenues, severance taxes, property taxes and royalty owner revenues.

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