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Shippers Challenge El Paso Project
In light of expanding markets being served by El Paso Natural Gas' South Mainline, East-of-California (EOC) shippers have expressed concern with the pipeline's "Line 2000 Project" in which it seeks to abandon six aging compressor facilities and replace them with nearly 785 miles of converted line that would loop much of its southern leg. The rub is that the proposed project, essentially a one-for-one swap, is not expected to create any new capacity, yet El Paso is looking for its shippers to foot the tab.
El Paso "has failed to demonstrate that abandonment of the six existing compressor facilities on the South System is in the public convenience and necessity. Indeed, recent developments in the marketplace suggest there may be a need for both the Line 2000 Project as well as replacement/maintenance of these existing compressor facilities," the EOC shippers told FERC [CP00-422].
Keeping the six compressor facilities, several of which are located in the vicinity of the Wilcox Compressor Station, in service is especially important because of the uncertainty over when the disabled Line 1103 will return to service, market observers said. Some fear the 30-inch line, which ruptured and caused the deadly explosion on El Paso's South Mainline on Aug. 19, could be out for an extended period.
"I don't know how long before that could be repaired. And so if it runs into the first quarter of next year, when the Line 2000 Project is supposed to go on line, that could create problems," said an attorney for one of the EOC shippers. "El Paso's Southern System has been full a good number of days this past summer, which is a major change. We went from two-thirds empty to full......So if you start looking at all these changes on the system, coupled with 1103 being out, it just makes you [wonder whether] El Paso ought to be at least considering whether there is a use for that compression."
Given that El Paso expects to serve "directly or indirectly" a 10,000 MW gas-fired generation facility that currently is under construction or in development, the EOC shippers believe the pipeline's proposal to spend $153 million to acquire and convert a crude oil that won't add any new capacity is senseless and absurd.
"In view of this expected growth in gas demand, proposing a pipeline project that expends a great deal of money without creating any new capacity appears to be short-sighted and not in the best interests of El Paso's customers," said the EOC shippers, especially since they would be the ones footing the bill for converted line. El Paso proposes to recover the costs in its next rate case.
Indicated Shippers said they had a lot of unanswered questions about El Paso's project. "It is...questionable, to say the least, that placing a 785-mile, 30-inch pipeline in service will not result in additional capacity, notwithstanding El Paso's claims to the contrary," the producer group said. Moreover, it pointed out El Paso plans to re-evaluate its need for the aging compressor facilities one year after it abandons them. The group urged the Commission to schedule a technical conference for El Paso to "explain and quantify the benefits and impacts" of its proposed project. Sempra Energy, parent of Southern California Gas and San Diego Gas and Electric, made a similar request.
The EOC shippers did not protest El Paso's proposal, but they asked FERC to order the pipeline to provide the cost estimates of two alternatives that the pipeline considered and rejected: 1) replacing large amounts of existing compressor horsepower on the South Mainline with the construction of additional pipeline looping; and 2) either spending significant operation and maintenance dollars to maintain the existing compressors, which are between 47 and 54 years old, or replace them with new units. Specifically, the shippers want to know if the costs for the rejected alternatives exceeded $153 million.
Also, the EOC shippers believe it would be a "mistake" for FERC to give El Paso the go-ahead to spend the $153 million without it deciding the outcome of the complaint of Amoco Production and Amoco Energy Trading, which accused El Paso of overbooking capacity on its system. But so as not to delay the processing of El Paso's proposed project, they asked that any certificate awarded to the pipeline be conditioned on the outcome of the Amoco complaint proceeding.
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