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Destin Seeking Waiver at FERC as Costs Nearly Double

Destin Seeking Waiver at FERC as Costs Nearly Double

Destin Pipeline Co. has filed at FERC to have cost limitations on its "CNG Lateral" waived in light of delays that pushed the project's cost to $35.1 million, well above $19.6 million allowed for in the Commission's certification of the project last year (Docket No. CP98-238).

The lateral links two new production platforms in Main Pass blocks 279 and 281 to Destin's mainline at Main Pass 260. While the lateral went into service last December, Destin is just now coming to the Commission because it says it didn't know the project costs limitation would be exceeded until September. "As of the beginning of September, however, the cost overruns were relatively modest, and based upon information at that time, there was no reason to project the large cost overruns that developed over time."

The project was authorized under Destin's blanket certificate authority. However, Destin's application was challenged by competitor Viosca Knoll and the Commission was required to find the CNG Lateral was in the public convenience and necessity. This makes the project cost limitation "less relevant" in Destin's view, although the project is still subject to the prior notice project cost limitations and must comply with a waiver request requirement. "If the Director [of the Office of Pipeline and Producer Regulation] believes that a waiver would not be appropriate in the circumstances presented here, Destin requests that this filing be considered a request to convert its blanket certificate construction authorization for the CNG Lateral Project into a case-specific [Natural Gas Act Section] 7c authorization."

Destin said "it believes that the public interest finding that must be made when a prior notice filing is protested may obviate the need for the same level of scrutiny in enforcing the budget limits."

The fact that the project's cost exceeds by about $22 million the amount the lateral is expected to bring in during its first three years of operation could jeopardize Destin's rolled-in rate treatment for the lateral.

The project, which at the time of its filing had service agreements with CNG Producing, Walter Oil &amp Gas, and Sonat Exploration GOM, was to be in service more than a month earlier, by Nov. 1, 1998. However, it was plagued by increased materials and labor costs as well as weather-related delays.

Joe Fisher, Houston

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