The Federal Energy Regulatory Commission on Thursday granted Questar Southern Trails Pipeline Co. the go-ahead to sell the 245-mile leg of its natural gas pipeline system located wholly within California.
The transaction includes the sale of Questar Southern Trails' West Zone segment, which consists of a 36-mile active portion from North Needles to Essex, CA, and a 209-mile inactive segment that runs from North Needles to Long Beach, CA. The pipeline said it plans to sell all of the West Zone facilities downstream of the existing North Needles delivery point to a California municipality to provide natural gas to its electric generation facilities.
The East Zone of Southern Trails, which consists of pipe and related facilities from the San Juan Basin in New Mexico to the California border, went into jurisdictional natural gas service in June 2002. The East Zone covers 452 miles of the entire 700-mile, 16-inch Southern Trails system, a converted crude oil pipeline that Questar purchased from Arco in late 1998 for $38 million. It transports approximately 80,000 Dth/d of natural gas supplies.
But the 120,000 Dth/d West Zone, which would run through the heart of industrial and commercial areas in Southern California, has faced opposition from California regulators from the very start. Questar Southern Trails claimed that California regulators and marketing obstacles precluded it from placing the entire West Zone pipeline facilities into jurisdictional service.
The pipeline said its decision to sell the West Zone pipe facilities will not affect the operation of or service through the East Zone to its two existing shippers, BP Energy Co. and Duke Energy Trading and Marketing LLC.
Questar originally proposed Southern Trails as a competitive alternative to Southern California Gas, which has had a lock on the Southern California natural gas market for years. FERC issued a certificate to convert and activate the Southern Trails pipeline in late July 2000.
The proposed sale of the West Zone does not come as a surprise. The company has indicated for more than two years that this was a possibility in the wake of unfavorable regulatory decisions in California.
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