Business, Energy, WV PSC

Hope Gas reaches agreement with Diversified Midstream to buy Red Lines, seeks PSC approval

MORGANTOWN – Hope Gas’ proposal to abandon its Red Lines and convert about 479 customers to propane or electricity took a significant turn this week. Hope announced an arrangement with Diversified Midstream for Diversified to acquire the Red Lines.

Hope told The Dominion Post in an email exchange, that the agreement resulted from what Hope learned at three town hall meetings held in early December. “This agreement will mean those Red Lines are not decommissioned as proposed in Hope’s original filing. As a result, producers will retain the ability to transport their gas on these lines and royalty owners will continue to see the benefits of their arrangements with producers.”

The amended proposal awaits PSC approval.

Hope submitted an amended filing to the Public Service Commission and contacted The Dominion Post on Thursday, and answered some questions about the new direction on Friday.

Hope told The Dominion Post, “This amended filing does not change Hope’s proposed plan to potentially convert approximately 479 customers to propane. Upon PSC approval, Hope Gas will meet with each of these customers individually to consider their specific situation. In some cases, natural gas pipelines may be close by. In those cases, Hope Gas will transfer the customer’s service to the nearby natural gas pipeline instead of converting the home to propane.”

Based on the amended filing, Hope said it wants customers to know: [BEGIN LIST]

Royalty owners along the Red Lines will continue to see the benefits of their arrangements with producers.

Producers who use the Red Lines to transport gas will have an outlet and market for their gas.

Hope Gas customers who received communication from Hope Gas about this project will be met with individually to assess their specific situation. These direct consultations will be scheduled with the customers only if and after the PSC approves the project.

Any Hope Gas customers who have not been directly contacted about this project are not affected.

[END LIST]

Diversified Midstream is a subsidiary of Diversified Energy. Diversified’s affiliate companies, Hope told the PSC, own and produce more than more than 32% of the natural and and operate 44% of the production meters along the Red Lines.

Hope had originally proposed to abandon in place or transfer to other companies the Red Lines, which it previously acquired from Equitrans and Dominion Gathering and Processing. Hope bought about 3,000 miles of pipeline, it said, with about 14,800 farm-tap customers.

About 1,069 miles are no longer necessary or useful, Hope said, and that providing safe, reliable, economic service to the farm-tap customers along those lines is in jeopardy because existing service “is either unsafe, unreliable, uneconomical, or any combination of the three.”

The full number of potentially affected customers cited in prior filings and news stories was 629, but Hope clarified on Friday that the additional 150 customers are not associated with Red Lines; they are part of a group of Hope customers connected to third party gathering pipelines. “Hope does not plan to move forward converting these customers unless we experience issues with service reliability to those customers.”

Hope told the PSC that while it reached out to a number of producers, but only Diversified “sincerely engaged” in discussions.

Alabama-based Diversified operates about 67,000 wells across the Appalachian basin: conventional and unconventional natural gas, natural gas liquids, and oil producing wells. It’s the single-largest well operator in West Virginia, with more than 23,000 conventional wells across the state, including Monongalia, Preston and Marion counties. Diversified also operates 17,000 miles of natural gas gathering pipelines and a network of compression stations and processing facilities.

Hope told the PSC on Thursday that Diversified has made millions of dollars worth of charitable contributions and has paid a total $24 million in state severance taxes in 2023 and 2024.

Hope reiterated some of the reasons it wants to transfer the Red Lines in its Thursday filing. Among them is the expense: about $11 million per year to operate and maintain the lines. It would take three to five years to convert all the affected customers to propane, costing $33 million to $55 million. The estimated replacement cost is $600 million.

“For Hope, continuing to incur the increasing costs to operate and maintain the Red Lines (and potential capital investment to replace them as required over time) is a significant, increasing expense that Hope’s customers … should not continue to bear over the long term,” it said.

Hope notes that Diversified is aware of the expense and is stepping forward nonetheless. “Diversified, not Hope and its customers, will take over the cost to operate and maintain the Red Lines upon closing.”

Hope is asking the PSC for an order no later than March 1, subject to the processes and procedures Hope spelled out in a Dec. 17 filing (reported on at length here). Hope told the PSC it plans to convert all the affected farm tap customers to propane (or electricity service from another provider, if they prefer) within two years of closing the transaction.

In the meantime, the agreement indicates, Diversified will cooperate with Hope to ensure reliable service for all the affected customers, including adequate pressure and volume.