FERC has given the go-ahead for Destin Pipeline Co. L.L.C. tobuild lateral pipeline facilities that would connect offshoreproduction with its new 1 Bcf/d mainline system for eventualdelivery into downstream markets.

The proposed facilities would transport gas from two newproduction platforms in the Gulf of Mexico to be located in MainPass Block 279 and 281 to an offshore connection with Destin’s newmainline system at its Main Pass 260 platform, which FERC approvedlast November. There, the gas would be delivered to a processingplant in Mississippi that would interconnect with five interstatepipelines.

The facilities include a 24-inch outside diameter lateralpipeline, a 12-inch OD tie-in pipeline, a 20-inch OD tie-inpipeline, and two receipt points on the Main Pass 279 and Main Pass281 platforms. Three producers — CNG Producing, Walter Oil &ampGas and Sonat Exploration GOM — have committed to transport up to230 MMcf/d.

The Commission approved the offshore lateral facilities over thestrenuous objections of Viosca Knoll Gathering Co. L.L.C., whoseexisting gathering facilities would run parallel to Destin’sproposed laterals. Viosca Knoll contends the project isundersubscribed. Specifically, it said the 230 MMcf/d of existingcapacity commitments represent only a little more than 40% of the403 MMcf/d capacity that would be available on the 24-inch ODlateral that Destin proposes to build.

But FERC disagreed on all counts. “The Commission has found thatthe market should determine which project or projects are bestsuited to serve infrastructure needs on the OCS [Outer ContinentalShelf] and to allow for the most reserves and OCS transportationfacilities. We will not substitute our judgment for businessdecisions of private parties in the absence of anticompetitiveactions,” the order said, adding that Destin’s proposal was “notanticompetitive.”

The Commission also gave Destin the authority to roll in thecosts of the $19 million offshore project. The order [CP98-238]noted that pipeline projects that qualify for authorization underFERC’s blanket certificate procedures, such as Destin’s,automatically qualify for presumption in favor of rolled-in prices,and can do so without undergoing “a case-specific analysis ofsystem-wide benefits because the resulting rate impact in suchsituations is usually de minimis.” Susan Parker

The CEO of the newly merged Sempra Energy has indicated heexpects Southern California Gas to announce in August the winningbidders for its future rights to buy the California portion of KernRiver and Mojave interstate gas pipelines. And he said Kern andMojave may turn out to be the winners, although he didn’t rule outthe possibility of a “third party” winning the bidding. SoCalGas isone of two principal utility subsidiaries under Sempra, and itssale of its rights was one of the requirements laid down byregulators in exchange for their approval of the $6.2-billionmerger. SoCalGas holds the exclusive right to buy 370 miles oflarge-diameter pipeline and related facilities that move 1.1 Bcf/dof gas from Rocky Mountain and Southwest supply basins.

Louis Dreyfus Natural Gas received a payment of $40 million forearly termination of a long-term, fixed-price gas sales contract.The terminated contract, which was with an independent powerproducer, covered 4 Bcf/year of gas which would have been deliveredthrough 2006. The total volumes of 33 Bcf, covered by thisterminated contract, are now available to be sold to othercustomers or in the spot market. Proceeds will be used to reducebank debt. The payment monetizes a portion of the value of Dreyfus’portfolio of long-term, fixed-price contracts. The value of thesecontracts is not reflected on its balance sheet. In the aggregate,the remaining contracts have a present value (discounted 10%) inexcess of market of about $125 million.

Enron Energy Services has signed General Cable Corp. to anenergy management and supply contract covering 22 U.S. facilitiesthat will tie the price level mainly to General Cable’s business.Pricing for the multi-year contract valued at $120 million will betied to the pounds of copper consumed, feet of cable produced andweather conditions experienced during the company’s productionprocess. The rationale is that if more cable is produced, moreenergy will be used and the unit price then would be lower. Enronclaims a first for this type of agreement for a retail energycustomers. Besides taking over the energy management for GeneralCable’s Highland Heights, KY, headquarters and other facilities,Enron also will provide electricity to the company’s Sanger, CA,data communications wire and cable manufacturing plant and willmanage energy procurement at other locations. Other servicesinclude financing and construction of a substation and chillers andinstallation of meters featuring Enron’s two-way interactivesystem. The agreement, running between five and 10 years, calls forEnron to guarantee savings through comprehensive energy managementand efficiency projects.

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