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
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 & 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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