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El Paso Tries to Revive Bondad Expansion Project

El Paso Tries to Revive Bondad Expansion Project

El Paso Natural Gas has given up on its first attempt to de-bottleneck the constrained Bondad System in the San Juan Basin (see Daily GPI, Oct. 19), but is approaching FERC again in hopes that a second try will be more fruitful in adding capacity to a point that some gas traders sarcastically call "Bondage."

Enron Capital &amp Trade Resources, which took most (100 MMcf/d) of a proposed 116.5 MMcf/d expansion of Bondad capacity in an open season last year, exercised its option Nov. 18 to back out of an expansion service agreement with El Paso. ECT said it based the action on FERC's Aug. 31 order approving the expansion project because the commission "substantially altered the proposed rate design, cost allocation and tariff revisions." Following the order, ECT and El Paso were unsuccessful in talks to reach a mutually acceptable approach on going forward with the project, according to a letter terminating the agreement by Colleen Sullivan, ECT managing director.

El Paso's original filing sought to treat the expansion space as a block separate from Bondad's existing capacity of 567.7 MMcf/d. That would have allowed the three expansion shippers (besides ECT, Elm Ridge Resources and Conoco divided up the remaining volume) to use all of their contracted service rights when they needed them, but any unused expansion space was to be allocated to other firm Bondad shippers.

However, FERC rejected the separate allocation and told El Paso to use rolled-in rates for the expansion capacity instead of incremental ones. That meant whenever future Bondad nominations exceeded capacity, the pipeline would have to allocate both existing and expansion capacity on a prorata basis among all firm shippers, President Richard Baish told Daily GPI back in October. Thus the expansion shippers would be denied some of the extra space that they alone would be paying for, he added.

Last week El Paso filed a letter by Baish informing FERC of ECT's decision, which effectively killed the expansion project as it then stood, and asking the commission "to act expeditiously on our request for rehearing" of the Aug. 31 order, said Al Clark, the pipeline's vice president of marketing. According to the letter, "The Enron termination evidences the market's unwillingness to subscribe to expansion capacity which can be pre-empted for the benefit of El Paso's existing system shippers during periods of capacity constraint."

Assuming El Paso gets a favorable rehearing, it will try for another open season to resell that capacity, Clark said Wednesday. "But the only way we can do it is to establish that people who buy the expansion space would get first dibs on it. Otherwise it won't get built."

It's tough to say whether Enron Capital &amp Trade would again seek a large chunk of expanded Bondad capacity if El Paso is able to offer it without the adverse FERC conditions, said Mark Palmer, the former ECT vice president of public relations who was recently promoted to vice president of Enron Corp. "You've got to take a look at market conditions and see if it makes economic sense." Conditions have changed considerably in the year-plus since ECT agreed to become the expansion's anchor shipper, Palmer said, so he found it "impossible to speculate at this time" on future strategy.

Roger Tanner, Houston

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