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Abandonment/Conversion Request Pits Texas Gas Against Power Customer

In a skirmish between a power generator looking to cover its intermittent service needs and a natural gas pipeline company attempting to switch some underutilized pipe to liquids service, American Electric Power Service Corp. (AEP) has told FERC it has "serious concerns" about a Texas Gas Transmission proposal to abandon portions of its Eunice, LA-to-Hardinsburg, KY, pipeline.

Abandonment of the Eunice-Hardinsburg pipeline "may compromise existing service to [AEP subsidiary AEP Generating Co.] for its Lawrenceburg [IN] Plant, with no comparable service to replace it," AEP said in a motion to intervene filed with the Federal Energy Regulatory Commission.

In May, Texas Gas filed an application seeking authorization to abandon approximately 623 miles of segments and associated facilities on the pipeline that it said "are underutilized currently by its interstate natural gas customers and are projected to remain underutilized for the foreseeable future."

The facilities to be abandoned consist primarily of one of three looped parallel pipelines that comprise a portion of Texas Gas's mainline facilities between Eunice and Hardinsburg. Texas Gas said its facilities south of Eunice and north of Hardinsburg would remain in interstate transportation service. The segments, which are earmarked for abandonment at the end of the upcoming winter heating season, would be repurposed for use in Boardwalk Pipeline Partners' proposed Bluegrass natural gas liquids pipeline (see Daily GPIApril 30), according to the Texas Gas application.

The change is a direct result of changes in the natural gas industry, according to Texas Gas, which has seen its traditional "long-line" pipeline service transporting Louisiana, Texas and Gulf Coast gas north marginalized by rapid advances in shale gas production. "The displacement of traditional gas supplies has accelerated with the development of the Marcellus Shale and Utica Shale, which are located in close proximity to Texas Gas' Midwest and Northeast markets," the company said.

Texas Gas asserts that AEP "is attempting to maintain a free option to utilize Texas Gas' capacity on an interruptible basis, after electing not to contract for that capacity on a firm basis...AEP seeks to require Texas Gas to retain idle capacity so that AEP may continue to keep open an option to use (or not use) Texas Gas' facilities, based on its business needs." That flies in the face of FERC's abandonment precedent, according to Texas Gas.

But AEP rejects Texas Gas's contention that there will be "sufficient available capacity to meet anticipated demands post-abandonment," saying the company should be required to address AEP's concerns about the loss of direct access to the interstate pipeline grid before FERC allows the abandonment.

AEP said it didn't participate in an open season for firm capacity held by Texas Gas earlier this year due to a Public Utilities Commission of Ohio-ordered corporate separation, but "that does not mean that AEP is insisting on interruptible capacity being made available indefinitely. AEP's real worry is that the pipeline segment between Slaughters, KY, and Lebanon, OH, is expected to have only 69,000 MMBtu/d of firm capacity after the abandonment, compared with 458,000 MMBtu/d now, and far below the 220,000 MMBtu/d the 1,100 MW Lawrenceburg Plant is designed to receive at full load.

"Thus, even if AEP were to purchase the available firm capacity over the segment from Slaughters to Lebanon, it would not be enough to reliably serve the Lawrenceburg Plant after the proposed abandonment," AEP said in its filing. And AEP is considering the option of converting one of its coal-fired generating plants to burn natural gas received via the Texas Gas pipeline.

 Last month, faced with the choice of retiring or refueling with natural gas, AEP said it expects to retire its 585 MW coal-fueled Muskingum River Plant Unit 5 in Beverly, OH, in 2015 (see Daily GPIJuly 12).

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