Sale of Columbia Project Penny System Opposed
Columbia Gas Transmission's proposed plan to sell its Project
Penny transmission system in western New York and northwestern
Pennsylvania to Norse Pipeline LLC, which seeks to refunctionalize
the facilities as gathering, is a "thinly-veiled attempt to
dramatically increase" rates to move gas on the system at the
producers' expense, charged an independent producer.
"Norse has agreed to purchase the transmission facilities at far
in excess of their current market value, placing [producers] at
risk of paying grossly excessive unregulated gathering charges to
cure Norse's business mistake," said Lomak Petroleum, the largest
producer and transporter on the Project Penny system [CP98-568].
Specifically, Lomak is concerned the 9- to 11-cents/Dth rate
that it's now paying to move gas on the Project Penny system will
"skyrocket" if the proposed sale and the subsequent refunctioning
are approved by FERC. "Producers, like Lomak, with reserves and
production tied into the Project Penny transmission facilities are
effectively captive customers due to the large cost to duplicate
those transmission facilities and the low throughput now in the
system. There may now be no realistic competitive alternative to
the Project Penny transmission facilities," it noted, adding this
could lead to the shut-in of Appalachian Basin production.
The producer has asked FERC to suspend the proceedings until a
technical conference can be held for Columbia and Norse to present
additional information on the sale of the Project Penny facilities.
Lomak believes the Penny Project should remain as transmission.
It noted FERC has repeatedly found that relatively small diameter
lines operated at low pressures in the Appalachian Basin and
elsewhere still can function as jurisdictional transmission
facilities. Further, Lomak noted the fact that the Project Penny
system moves across state lines is another sign that it functions
primarily as a transmission facilities.
In support of its position, Lomak noted that Columbia currently
is petitioning the Commission to refunctionalize its Miley and
Trumball gathering systems as transmission - both of which are
located near the Project Penny facilities and have similar
characteristics such as small outside (10 to 12 inches) diameters
and operate at low pressures.
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