Kern River Gets Speedy OK; Breathitt Questions Hasty Action

FERC moved with record speed to issue a certificate last week to Kern River Gas Transmission for its 135 MMcf/d mostly compression expansion to the natural gas-starved California market, but not all of the commissioners were happy with the sure-footed manner in which the project was approved.

"The speed with which the Commission has acted in this proceeding is something which will no doubt be touted as a great effort," but the "precedent we have created could be a double-edged sword," warned Commissioner Linda Breathitt in a partial dissent of the decision. Although she voted in favor of the certificate in the end, she questioned whether FERC " willing to sacrifice careful review for speedy action."

Breathitt further said she seriously doubted the so-called California Action expansion of the 900-mile,Wyoming-to-California Kern River system merited the "extraordinary regulatory treatment" that the Commission gave it. Critics claim that the $81 million project will not flow any more gas to the Wheeler Ridge Interconnection in California than is currently available there, she noted, adding that it would simply displace existing gas.

"...[I]t will not necessarily result in any net increase of natural gas in the California marketplace. This makes it difficult to understand just how our approval of Kern River's proposal is going to assist in increasing electric generation in California this summer," Breathitt said. If anything, she noted the project could make the congestion problem at Wheeler Ridge even worse than it is.

There should have been a "fuller airing of this issue" at FERC before the project was certificated, she noted. "It would be counterproductive for this Commission to act precipitously on projects related to California without ensuring that they will, in reality, benefit specific markets --- and more importantly, that they will cause no further harm."

The Commission majority, however, readily dismissed protests of Pacific Gas and Electric (PG&E), Southern California Gas and other California customers, that claim the Kern River expansion would degrade service to existing customers. They requested that existing customers be given priority over expansion shippers.

"We conclude that the California Action Project will not have undue negative impacts on existing shippers or competing pipelines," the order said [CP01-106. For starters, "the record does not show that pro-rata allocations of primary firm capacity have been a problem at Wheeler Ridge." Kern River reports that the aggregate primary firm delivery rights of its shippers at Wheeler Ridge will increase to about 527 MMcf/d from 450 MMcf/d as a result of this project. At the same time, the design delivery capacity at the Wheeler Ridge Meter Station will be increased to about 800 MMcf/d from 598 MMcf/d to accommodate existing shippers, new expansion shippers and Mojave Pipeline shippers, it noted.

"Therefore, the expanded delivery point capacity at Wheeler Ridge will be greater than the sum of the combined Kern River and Mojave contract volumes. The Commission recognizes that this does not factor in the volumes attributable to both PG&E and local production that are also delivered to Wheeler Ridge. However, our emphasis is on Kern River being able to provide sufficient delivery point capacity for its customers," the order said.

"The solution to the problem of pro-rata allocations of any services at Wheeler Ridge lies not with the interstate pipelines, but rather in fixing the problem with the take-away capacity and the lack of firm transportation path rights on SoCalGas, a matter which is beyond our jurisdiction."

The project would increase the "limited-term, incremental transportation capacity" of Kern River by 135 MMcf/d from Wyoming to California to help address the urgent need for additional gas in the West. An estimated 53,900 horsepower would be added to the pipeline, including three new compressor stations, and upgraded facilities at three existing compressor stations and an existing meter station. The project, which has been fully subscribed, has a targeted in-service date of July 1 of this year.

Kern River plans to use a mix of permanent and temporary facilities on the project, with the temporary facilities intended to be subsequently replaced by permanent 2002 California Expansion Project facilities (which are pending at FERC), and the permanent facilities to be incorporated into the design of the pipeline's 2002 and 2003 California Expansion Projects. The 2003 project recently underwent an open season.

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