Oct. 4 (Bloomberg) -- El Paso Corp., owner of the largest U.S. network of interstate natural-gas pipelines, proposed a new line connecting rising production in Rocky Mountain states to the eastern U.S. as hurricanes disrupt output in the Gulf of Mexico.

The Continental Connector would link Rocky Mountain fields with El Paso's system in the southern and eastern U.S., providing an alternative route when storms halt Gulf output or damage undersea lines, the Houston-based company said today in a statement.

El Paso is at least the third major pipeline company this year to plan new lines from the Rockies, which are expected to supplant the Gulf as the largest gas-producing region in the U.S., according to the U.S. Department of Energy. Too few pipelines from the Rockies region leave too much gas that can't be delivered to the major consuming markets to the west and east.

``There will be very, very healthy interest in building this capacity,'' said Nathan Judge, an analyst in London for Atlantic Equities, who rates El Paso shares ``buy'' and doesn't own them. ``There's a definite need to ship western gas to the east because there's a very big price differential.''

Cheaper Fuel

Wholesale natural gas sold yesterday for $10.78 per million British thermal units in Opal, Wyoming, a 30 percent discount to the futures price on the New York Mercantile Exchange, according to Bloomberg data. The Wyoming price was $1.60 less than the price in Chicago.

El Paso said it will take bids from potential users of the 1,000-mile (1,609-kilometer) line beginning tomorrow and ending Nov. 4 to gauge interest. The plan includes a new segment from Greensburg in southwest Kansas across Oklahoma and Arkansas to Perryville in northern Louisiana, spokesman Richard Wheatley said in an interview today. El Paso didn't give a cost estimate.

El Paso's current pipeline system carries Rockies gas to Chicago and the upper Midwest. Gulf supplies flow to the upper Midwest, Southeast and Northeast.

The Rocky Mountain region is expected to have a 37 percent gain in gas output in the next decade and to surpass the Gulf of Mexico as the largest domestic source of the fuel, according to a U.S. Energy Department estimate.

Kinder Morgan Energy Partners LP, based in Houston, and San Diego-based Sempra Energy proposed Aug. 17 a 1,500-mile line from Wyoming to Ohio that would cost $3 billion.

``By going through the southern route, El Paso can do it more quickly,'' Judge said. ``Permits are easier to get.''

Williams, Berkshire Hathaway

Williams Cos., based in Tulsa, Oklahoma, proposed in March expanding its pipeline system to the U.S. Northwest, linking gas fields in Wyoming, Colorado and Utah.

An expansion of a Berkshire Hathaway Inc. unit's Kern River pipeline from Wyoming to California added 884.5 billion cubic feet of shipping capacity in 2003. That pipeline runs about 1,600 miles.

Hurricane Rita stopped all gas and oil production in the Gulf before striking Louisiana Sept. 24. The Gulf normally accounts for 24 percent of U.S. output. Daily gas production yesterday from the region was 72 percent of normal, the U.S. Minerals Management Service reported.

El Paso yesterday declared ``force majeure'' on a portion of its ANR Pipeline under the Gulf after discovering damage by Hurricane Rita. Force majeure allows companies to avoid penalties for failing to fulfill contracts because of unforeseen events.

The company owns and operates 56,000 miles of pipelines in the U.S. Systems include Tennessee Gas, from Texas, Louisiana and the Gulf to the Northeast; Southern Natural Gas, from Louisiana to other Gulf states; and El Paso Natural Gas, from Texas to California.

Shares of El Paso fell 88 cents to $13.04 today in New York Stock Exchange composite trading. The stock has climbed 25 percent this year.

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.

Last Updated: October 4, 2005 16:08 EDT