While most regulated companies have called a cease-fire at FERCduring the holidays, El Paso Natural Gas and its principaldetractors — Amoco Production and Burlington Resources Oil &Gas — are hard at work. For starters, the pipeline has asked theCommission to give it until February to submit a proposal forrevising its controversial capacity-allocation procedures.

“El Paso has been grappling with these issues for the past sixweeks,” but it finds “this task cannot be completed in awell-thought-out manner in sixty days,” the pipeline said. It urgedthe Commission to extend the deadline from Jan. 10 to Feb. 9. Ifit’s allowed more time up-front to fully develop a comprehensiveplan of action, less time would be wasted at a staff technicalconference, the pipeline said.

The Commission ordered the proposal in early November as part of asweeping review of the allocation, scheduling and pooling procedureson El Paso (see Daily GPI, Nov. 11). Ittook this action in response to a producer-marketer complaint thatassailed the pipeline for its atypical methods of allocating capacityat delivery points at the California border (see Daily GPI, Sept. 23). At the time, FERC not onlyfound that these practices “may be unjust and unreasonable,” but itwidened the scope of the review to include El Paso’s allocationmethods at receipt points and its scheduling and pooling procedures.

The Commission, however, was “reluctant to impose a solution” tothe allocation and scheduling problems. Instead, it believed anychanges should be worked out between El Paso and its customers.Toward that aim, it ordered the pipeline to come up with a plan torevise its capacity-allocation procedures, and directed FERC staffto convene a technical conference to discuss the proposal andreport back to the Commission.

FERC has asked El Paso to develop a “new allocation methodologyto be applied system-wide [that] goes far beyond the remedy sought”by Amoco and Burlington Resources in their complaint, El Paso saidin seeking the extension [RP99-507]. “In essence, El Paso has beeninstructed to make a filing that, if implemented, would totallyrevise the capacity contracting and capacity-allocation proceduresthat its firm shippers have operated under the last decade.” Inorder to come up with such a plan, El Paso said it would have toconsider the contractual commitments of its customers, the needs ofits various customers and the operational complexities of itssystem, just to name a few.

However, that is just what is needed, according to KN MarketingLP. In a similar complaint filed recently, KN said the allocationproblems that impacted Amoco and Burlington at Topock, AZ, aren’tconfined to the western end of the pipeline (see Daily GPI, Dec. 20). KN claims it has lost nearly$800,000 and its reputation has been tarnished because at times asmuch as 46% of its contracted firm capacity has been curtailed due tooverbooking on the pipeline primarily between the San Juan Basin anddelivery points in West Texas.

Meanwhile, complainants Amoco and Burlington have asked theCommission to reject El Paso’s attempt to “dilute” the meaning ofthe Nov. 10 order, which called for the review of the pipeline’scapacity-allocation procedures. There is “no ambiguity in theCommission’s Nov. 10 order. The Nov. 10 order in numerous locationsstates the Commission’s intent that El Paso ‘change’ the currentsystem,” Amoco and Burlington said. They urged FERC to “remove anydoubt” that the effect of the order was to require “modification ofEl Paso’s status quo pro-rata capacity allocation methodology.”

El Paso’s assigning of capacity on a pro-rata basis was at thecrux of the complaint brought by Amoco and Burlington. They accusedEl Paso of selling primary delivery capacity point capacity to theSouthern California Gas (SoCalGas) delivery point at Topock, AZ, inexcess of the capacity available at that point. This has resultedin significant curtailments for shippers at SoCalGas-Topock. Amocoand Burlington reported shippers have experienced pro-rata cuts ashigh as 57% of nominations as a result. As a remedy, they proposedEl Paso be required to limit primary delivery point capacity at theinterconnection with SoCalGas to the take-away capacity of theLDC’s system (540MMcf/d). Amoco estimates it’s losing $1-$2 millionannually, while Burlington said it’s losing $3,000/day because ofthe curtailments at the SoCalGas-Topock point.

The two producers also have asked FERC to put a hold on El Paso’snew $38 million contract with Enron that covers 1.25 Bcf/d of firmcapacity to the Southern California border (see Daily GPI, Dec. 20 and Dec. 23). They claim the agreement violatesEl Paso’s major 1996 rate settlement because it grants Enron expandeddelivery point rights at Topock. The one-year contract with Enronreplaces an agreement El Paso signed with Dynegy two years ago. Itremains to be seen how much of the controversy that surroundedDynegy’s holding of that much California-bound capacity will followEnron.

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.