Southern Union Company has approved construction of the $235 million Red Bluff Project, a 200 MMcf/d natural gas processing plant and associated gathering, compression, and treating facilities, through its midstream segment, Southern Union Gas Services (SUGS).

The Red Bluff Project builds on an existing multi-phase midstream expansion developed as a response to producer needs in the Avalon Shale in the Permian Basin. The new facilities will enable SUGS to accommodate natural gas production from existing and future producer commitments in the rapidly expanding Avalon, Bone Spring, and Wolfcamp plays of West Texas and southeastern New Mexico.

As part of the project, SUGS will construct about 60 miles of pipeline to deliver up to 20,000 bpd of natural gas liquids into Lone Star NGL’s recently-announced Permian-to-Mt. Belvieu pipeline expansion, under a 15-year firm arrangement. The project is expected to be completed in mid-2013.

“This project is a continuation of SUGS’ commitment to being the leading midstream service provider in the Avalon, Bone Spring, and Wolfcamp production areas,” said George L. Lindemann, Southern Union’s chairman and CEO. “With existing Permian Basin midstream infrastructure nearing capacity, Red Bluff provides long-term customer solutions for treating, processing and NGL take-away and significant earnings growth opportunities for our stockholders.”

“The marked increase in Avalon production, combined with growing producer interest and success in the Bone Spring and Wolfcamp plays, highlights the continued need for further expansion of gathering, treating and processing services in the area,” said Eric D. Herschmann, vice chairman, president and COO of Southern Union. “With substantial infrastructure already in place and a disciplined commitment to growth, SUGS is well positioned to continue providing vital midstream services for its Permian Basin customers.”