Opinion ID: 2633380
Heading Depth: 2
Heading Rank: 2

Heading: How the Gas Moves from the Wellhead to the Pipeline

Text: There are numerous gas purchase contracts and gathering, dehydration, and compression contracts that were submitted as exhibits in this case. The gas purchase contracts provide specific details for the purchase of the gas both at the well and away from the well. The gathering, compression, and dehydration contracts provide for agreements regarding how the gas is to be processed. Some of these contracts also contain provisions for the sale of the gas after these processes have been completed. The various contracts provide specific details regarding how the gas is processed, including details regarding quantity, price, purity, heating value, and temperature requirements for the gas. The contracts provide the framework for how the gas moves through the system from the well, through processing, and eventually to the interstate pipeline. [4] It appears that initially most of the contracts, which were executed in the 1970's between the lessees and the gas companies that bought the gas, provided for the gas to be sold at the wellhead, with the buyer of the gas undertaking the performance of the gathering, compression, and dehydration necessary for the gas to subsequently enter the pipeline. In general, the purchaser of this gas was also the company that transported the gas through the pipeline. In the late 1980's and early 1990's, a number of the contracts were amended to provide for sale of the gas away from the well, in addition to continued provisions for the sale of the gas at the well. In general, these amended contracts provided for an alternate point of sale, usually directly to an interconnection point of a gathering system and the buyer's pipeline. Under these amendments, the gas was sold to the buyer, with the point of delivery being a gathering system, instead of at the well. The amendments resulted in the buyer contracting with another company, usually Yuma Gathering System, who would perform gathering, compression, and dehydration of the gas, and transport the processed gas directly to the buyer at the interstate pipeline. Finally, the record reflects other contracts which were entered into between the lessees and Yuma Gathering System, which provided for the sale of gas directly to Yuma Gathering System. Under these contracts, Yuma Gathering System would receive the gas directly from the lessees, process the gas, and subsequently sell the gas to a third party at the interstate pipeline.