Pa.'s EQT selling distribution business to Peoples

PITTSBURGH (AP) -- EQT Corp. is selling its natural gas transmission business to Peoples Natural Gas in exchange for $720 million and about 200 miles of Pennsylvania pipeline that EQT will use to move gas from its Marcellus Shale wells.

Under the deal announced Thursday, Peoples also will buy 35 billion cubic feet of gas a year from Pittsburgh-based EQT.

Experts said the specifics of the long-term agreement may be the most important part of the sale.

"I'm very curious as to the details of the long-term contract for gas delivery," said Jay Apt, an expert in energy policy at Carnegie Mellon University. "I'll bet that's where the deal turns."

Peoples spokesman Barry Kukovich said the details will become public as regulators review the contract. The deal must be approved by federal regulators and those in Pennsylvania, West Virginia and Kentucky.

The Marcellus Shale lies beneath large parts of Pennsylvania, West Virginia, Ohio, Maryland and New York. Though intensive drilling began only about five years ago in Pennsylvania and Virginia, federal energy experts say the Marcellus has already become the most productive natural gas field in the country.

Production has surged so rapidly the industry hasn't always had enough pipeline to take the gas to markets and the wholesale price of natural gas has dropped, putting more pressure on EQT and other companies that operate wells.

EQT said the money from the sale will help fund more drilling on land already under lease. The company said its pipeline assets in the deal should generate at least $40 million in revenue annually before interest, taxes, depreciation and other expenses.

Peoples is also entering into long-term transmission, supply and storage contracts with EQT. Peoples said the combined operations from the deal will allow the companies to avoid significant upcoming replacement costs. The company said savings will be passed on to customers.