Investment Entity: Magnum Energy, LLC
Geography: Utah
Sector: Gas Storage
Investment Fund: Fund III
Initial Investment: January 2008
During 2006 - 2008, as continued increases in natural gas production from the Rocky Mountains region developed, it became apparent to Haddington that natural gas storage infrastructure in the region was significantly underdeveloped. Haddington estimated that storage capacity in the Rocky Mountains region needed to grow by 70 billion cubic feet of working gas (BCFW) to catch up with the Gulf Coast region (as a percentage of production volumes) and then grow by another 40 BCFW by 2011 to keep up with additional Rockies production. Daily gas price volatility in the region, a major driver for value in gas storage, was higher in the Rockies than anywhere else in the country. Haddington initiated a search to identify potential greenfield projects sites in the region that could access multiple pipelines.
After consideration of several projects, Haddington was approached by the management team for Magnum Energy. The Magnum team had begun the process of obtaining rights to an underground salt structure in Utah from the U.S. Bureau of Land management. Two of the principals of Magnum were well known to Haddington, and Magnum was well aware of Haddington’s past success in natural gas storage development. Magnum was proposing to develop a greenfield energy storage hub project near Delta, Utah. The initial natural gas storage phase would be followed by potential expansion into compressed air energy storage and/or petroleum products storage, hence the term “Energy Hub”.
To date, the team has acquired approximately 11,000 acres of salt rights, has purchased approximately 4,000 acres of fee lands, and has acquired rights to approximately 4,000 acre feet of water. Magnum drilled a core well to collect salt samples and after extensive
testing, Magnum has received positive results for suitability of the salt for natural gas storage from Sandia National Labs. On the market side, the team held a successful, non-binding “Open Season” for 11.2 BCFW of gas storage service and initiated pre-filing procedures with the Federal Energy Regulatory Commission for a certificate of public necessity and convenience pursuant to Section 7(c) of the federal Natural Gas Act. In March 2011, Magnum accepted the 7 (C) certificate issued by FERC, authorizing construction and operation of its planned natural gas storage facility in Delta, Utah.
