Williams’ Kern River pipeline, with expansion plans targetingLong Beach, CA, is holding an open season offering termdifferentiated rates (TDR) for firm service representing a discountfrom existing rates of up to 25 cents/Dth. The 15-day open seasonbegan Oct. 23.

Under the TDR agreement, the contract term would determine thetransportation rate a customer would pay. Kern River is offeringrates of 10 years or longer. The 10-year option would yield a ratebetween 47 and 52 cents/Dth. The 15-year option would yield ratesbetween 41 and 46 cents/Dth. Kern River’s existing rate is 66cents/Dth. The pipeline would consider contracts longer than15-years as well, said Greg Snow, business developmentrepresentative.

During the open season, firm shippers will have the opportunityto release existing capacity to satisfy new capacity commitmentsbefore any expansion is built. If interest is shown in the TDRoptions, Kern River will develop new rate schedules to take to theFederal Energy Regulatory Commission for approval.

Kern River will maintain its current cost of service-basedlevelized rate structure through 2007 for shippers not wanting toextend their firm service contracts. Should existing capacity befully subscribed after restructuring existing commitments, KernRiver will expand its mainline. The pipeline can install additionalcompression and expand its system. An expansion of 250,000 Dthwould lower the 15-year TDR rate option to 35 to 40 cents/Dth.

“We are interested in expanding our system to access new gasmarkets emerging because of electric restructuring in Californiaand Nevada and new gas-powered generation facilities,” said KirkMorgan, director of business development. “The ability to reducetransportation costs by subscribing for one of the TDR optionsincreases the value of FT and helps position any Kern River shipperto take advantage of new market opportunities.”

While the new TDR rates would not be predicated on Kern River’spreviously announced expansion into Long Beach, they could boostinterest in the expansion among shippers. Kern’s first majorextension project since beginning operation in 1992 is a 150-milelateral extension to Long Beach (See NGI Sept. 28, 1998). The newpipe would be 24- or 30-inches in diameter and would carry aminimum of 300 MMcf/d. Kern had been spending a fourth yearstudying a possible extension into the city when Questar snuck intoLong Beach this summer with a proposal to convert an existing oilline to flow gas.

The Kern extension currently does not include a related upstreamexpansion. Kern expects Long Beach to be an attractive new marketfor existing throughput. “Right now we have a lot of volume movingon a day-to-day basis fighting that spot market game,” Snow toldNGI last month. “We’re hearing you might be able to line up somelarge base load customers with this.”

Snow said existing shippers were receptive to the TDR rates whenKern River presented them. However, the interest could stem fromtheir desire to release capacity, he conceded. Kern has contactedsome large potential shippers, “but it’s really premature to try toascertain what the market interest might be right now.”

For more information, call Snow, (801)584-7270.

Joe Fisher, Houston

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