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Kern River 2010 Expansion Gets Certificate

Kern River Gas Transmission's fully subscribed 2010 Expansion of capacity from Lincoln County, WY, to Kern County, CA, was certificated by FERC last Thursday, despite the protest of a real estate developer that claims higher pipeline operating pressures will scare buyers away from its master-planned community west of the Las Vegas Valley.

Hughes (as in the late Howard Hughes) Properties contends that Kern River is precluded from raising the pressure on its pipeline above 1,200 pounds per square inch gauge (psig) by a 1993 easement agreement between the pipeline and developer. The developer is pursuing the matter in court, but the Federal Energy Regulatory Commission said that fact "has no bearing on the Commission's authority to process Kern River's application and issue any certificate..."

The property development in question is called Summerlin, after Hughes' paternal grandmother, and is the largest of the Howard Hughes Corp.'s properties, according to the firm's website.

"There is no evidence supporting Hughes Properties' allegation that Kern River's proposal will adversely impact the economic health of the affected communities," FERC said. "The issue of the adequacy of the compensation for such impacts on Hughes Properties will be addressed, if relevant, in eminent domain proceedings in state or federal court."

FERC also found that the expansion would not harm interstate Mojave Pipeline -- the only existing pipeline to serve the same market as Kern River -- or Mojave's captive customers "because the [Kern River] proposal is for new incremental service and is not intended to replace existing service on any other existing pipeline."

The Commission also is allowing Kern River to roll the costs of the 2010 Expansion into its 2003 Expansion.

"...[T]he estimated total annual revenues of $34.3 million from the 2010 Expansion service at the 2003 Expansion rates will exceed the $10.4 million total annual costs of the project," FERC said. "Thus, absent a significant change in circumstance, rolling the 2010 Expansion costs into those of the 2003 Expansion for rate purposes will not result in subsidization of the 2010 Expansion by the 2003 Expansion shippers, but, rather, should provide a benefit to the 2003 Expansion shippers."

Kern River received a favorable environmental assessment for the project last November (see NGI, Dec. 1, 2008).

The 2010 Expansion includes a 20,500 hp gas-driven compressor unit and restaging of five compressor units at the existing Muddy Creek Compressor Station in Lincoln County; restaging of two compressor units at the existing Painter Compressor Station in Uinta County, WY; and installation of additional metering facilities at the Opal Meter Station in Lincoln County and at the Kramer Junction Meter Station in San Bernardino County, CA. The project also calls for Kern River to increase the maximum allowable operating pressure for 1,680 miles of pipeline from 1,200 psig to 1,333 psig and increase the MAOP of the meter stations and compressor stations along its Wyoming-to-California system from 1,250 psig to 1,350 psig.

The project would boost Kern River capacity by 145 MMcf/d, resulting in a design capacity of 1.9 Bcf/d when completed. The pipeline expects the expansion to be in service late in 2010.

Kern River originates in Lincoln County and runs westward through southwestern Wyoming, Utah, Nevada and southeastern California before it interconnects with Mojave Pipeline in San Bernardino County. Kern River owns 1,380 miles of pipeline; it owns an additional 300 miles -- referred to as common facilities -- jointly with Mojave.

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