FERC’s approval of El Paso’s $3.6 million Bondad Line expansion,which would increase capacity by 117 MMcf/d in October, likely willprovide some relief to Bondad shippers, who have struggled throughmany days of constraints and allocations on the San Juan Basinsystem.

The Commission rejected El Paso’s proposed capacity allocationprocedure, which would have given new shippers priority rights overexisting shippers during constrained periods. And existing shipperswon a battle over the max rates for expansion service. FERC sidedwith protesters Burlington Resources, Southwest Gas and Arizonacustomers, in rejecting a proposed initial recourse rate that wasnearly 9 cents/Dth/d cheaper than the current max rate.

“These provisions together would give project shippers apreferential allocation of constrained capacity on the Bondadsystem, while current shippers would pay higher Part 284 rates forinferior firm service using the same capacity.”

But El Paso clearly won the war. Existing shippers probablywon’t be too thrilled that the Commission upheld El Paso’snegotiated rate contracts, allowing new Bondad shippers to pay atleast 7 cents/Dth/d less for the same service provided to existingshippers. Enron and Elm Ridge will be paying $0.0325 and$0.03575/Dth/d, respectively, while existing shippers pay maximumrecourse rates of $0.10911/Dth/d.

FERC said pipelines can negotiate rates that are not undulydiscriminatory and that treat similarly situated customerssimilarly. It said El Paso has the authority to agree to rates thatare less than the maximum recourse rates paid by other shippers,and protesters did not allege they would incur competitive harm asa result of the negotiated rates. FERC said the cross-subsidizationarguments raised by protesters were inappropriate for the currentproceeding and because of El Paso’s settlement could not be raisedagain until the end of a 10-year moratorium. FERC had the option ofreviewing El Paso’s costs and services under a section 5 proceedingbut said it was not persuaded that was necessary.

El Paso said yesterday it had not made a decision on whether tomove forward with the project or appeal FERC’s decision. Theproject would involve minimum construction, including compressionenhancement and replacement at three stations.

Rocco Canonica

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