Spin-down of Trunkline Line Comes Under Fire
Producers and utilities last week registered strong protests to
Trunkline Gas Co.'s proposal to spin down 720 miles of its 26-inch
diameter natural gas mainline to an affiliate, saying that while
this action may be in the pipeline's best interest it's not "in the
"The basis for Trunkline's application is that there is an
excess amount of pipeline capacity serving [its] market areas, and
that this excess capacity has forced Trunkline to heavily discount
its transportation services," said Indicated Shippers, a group of
six major and independent producers. Trunkline contends the
situation will only worsen in the years ahead.
The "applicable standard" for whether FERC should approve
Trunkline's proposed abandonment is not whether it's "potentially
profitable" for Trunkline and its affiliate, CMS Trunkline Pipeline
Holdings Inc., but rather whether it's in the public interest, the
producers said. "A transfer at less than market value is not in the
public interest, particularly given the detriments of abandonment
Northern Indiana Public Service Co. and Northern Indiana Fuel
and Light Co. agreed, saying Trunkline's proposal was inconsistent
with the "public convenience and necessity" standard under Section
7 of the Natural Gas Act [CP00-114]. And Memphis Light, Gas and
Water doesn't think the situation on the 26-inch Line is as bad as
Trunkline portrays it.
".....[I]nformation provided by Trunkline establishes that its
contract levels have been increasing over the last five years and,
absent action by Trunkline, there is no indication that these
levels will decrease." Also, as a result of its recent rate case,
"the need to provide discounts will be significantly decreased,"
the gas distributor said.
Trunkline proposes to spin down the line to another subsidiary,
CMS Trunkline Pipeline Holdings, that plans to use it to transport
ethane and other hydrocarbon vapors to the Gulf Coast from the Aux
Sable Liquid Products processing plant, which is under construction
at the terminus of Alliance Pipeline. The 26-inch line stretches
from Longville, LA, to Bourbon, IL.
Trunkline seeks to transfer the 26-inch line to CMS Holdings at
net book value, which it estimated at about $10.2 million. A new
venture company, which would include CMS Holdings and other
entities, would reimburse Trunkline for the costs associated with
the abandonment of the line and for reconnecting existing customers
to the mainline (an estimated $10 million). The transfer of the
line would reduce the mainline market capacity of Trunkline's
system by 255 MDth/d, or 14%, to 1,555 MDth/d. Trunkline said it
would slice its annual cost of service by about $3.3 million, which
some critics believe is an overestimation.
"This means that under the proposed abandonment, ratepayers
would be trading a 3.2% reduction in cost responsibility in return
for a 14% reduction in pipeline capacity. This arrangement would
not serve to alleviate the burden on shippers attributable to
deeply discounted or unused capacity. Instead, abandonment would
only increase the burden," Indicated Shippers told FERC [CP00-114].
Memphis Light estimates that, if the abandonment is granted,
Trunkline customers would face a rate increase of up to 11%.
".....[T]he fact that Trunkline is not able to extract its full
tariff rates from shippers is not justification for the pipeline to
abandon the capacity --- capacity that has essentially been paid
for by Trunkline's shippers --- simply in order for Trunkline's
affiliate to benefit economically from a new venture," producers