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FERC OKs Conversion of Trunkline Segment

FERC OKs Conversion of Trunkline Segment

FERC last week gave the green light to Trunkline Gas to abandon a 720-mile segment of its mainline gas transmission system in the Midwest region to affiliate CMS Trunkline Pipeline Holdings Inc. and partners for conversion to a refined products pipeline.

Despite protests from some shippers, the Commission order said the abandonment of the Trunkline segment would not leave gas customers capacity short in the Midwest, nor would it drive up transportation rates [CP00-114]. It noted the gas that would be removed from the Midwest market as a result of the abandonment would be more than made up by the Canadian gas flowing on Northern Border Pipeline's extension into Chicago and the new Alliance Pipeline.

The abandonment of the so-called Line 100-1 would reduce Trunkline certificated system-wide capacity by 255 MDth/d, or 14%, to 1.5 MMDth/d from 1.8 MMDth/d, according to the pipeline (See NGI, July 2, 1998). Even with this reduction, Trunkline contends it will have enough capacity to meet demand, which it pegged at 1.43 MMDth/d.

"Our engineering analysis confirms that the loss of 255 MDth/d of certificated capacity will not interfere with Trunkline's ability to transport its post-abandonment projections of contract demand," the order said. "Moreover, if needed, there are alternative pipeline transporters available at receipt/delivery points along Trunkline's system. Thus, no shipper should be deprived of transportation service as a result of the abandonment."

Ironically, the very shippers that are protesting the abandonment only want Trunkline's capacity if it is available on an interruptible basis at discounted rates, the order noted. "Such preference indicates that those customers do not highly value Trunkline's capacity."

Claims that the abandonment would put upward pressure on transportation rates also were rejected. "The capacity proposed to be abandoned is neither substantial in relation to Trunkline's system or the entire Midwest market, nor highly valued by Trunkline's customers. " Consequently, it "should have no measurable effect on Trunkline's jurisdictional transportation rates," the order said.

Under its proposal, the 26-inch diameter Line 100-1 (one of three loops to Trunkline's mainline) is scheduled to be taken out of gas service on April 1 of this year, with deliveries to the pipeline's remaining customers to continue over loop Lines 100-2 and 100-3.

CMS Trunkline Pipeline Holdings and partners - Ashland Petroleum LLC and Texas Eastern Products Pipeline Co. LP (TEPPCO) - will push ahead to convert the line to a liquids petroleum products service. The three will have an equal interest in a limited liability company, which will own and operate the converted line. The partners will pay an estimated $10 million for the abandoned Line 100-1 and to reconnect Trunkline's remaining two loop mainlines. They expect the conversion to be completed later this year.

The joint venture intends to build a 70-mile, 24-inch diameter pipeline connecting TEPPCO's facility in Beaumont, TX, with the start of the converted pipeline extending from Longville, LA, to Bourbon, IL. The line, called Centennial Pipeline, will pass through portions of seven states --- Texas, Louisiana, Arkansas, Mississippi, Tennessee, Kentucky and Illinois. The Centennial Pipeline will intersect with TEPPCO's existing mainline near Lick Creek, IL, where a new two-million-barrel refined petroleum products storage terminal will be built.

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