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Destin Gets Go-Ahead for Gemini Expansion

August 3, 1998
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Destin Gets Go-Ahead for Gemini Expansion

FERC disregarded the objections of Viosca Knoll Gathering and waived guaranteed future revenue regulations to let a Destin Pipeline expansion go forward last week. Destin plans to construct 31 miles of pipeline from a platform at Viosca Knoll Block 900 to a tie-in with a Destin lateral in Main Pass Block 279.

In a draft order, FERC waived regulations and accepted an obligation payment provision in agreements between Destin and shippers Chevron and Texaco, which are partners in the offshore Gemini Prospect. The contract provision relating to the FT-2 rate schedule says if over an eight-year period, starting with first production from Gemini, aggregate transportation revenue from Gemini Partners is less than $41.2 million, the partners will make up the difference in a lump-sum payment to Destin.

"Even though the Obligation Payment does guarantee future revenue, the Gemini Partners would nevertheless pay no more than what they would pay under Destin's FT-1 firm rates, which include a reservation charge," the Commission wrote. "Under the circumstances, we find that the Obligation Payment is an appropriate method of assuring the shippers the flexibility they desire, and the pipeline the revenues it needs to make the project viable."

Viosca Knoll Gathering said the proposed facilities would duplicate its existing gathering system and argued against granting Destin rolled-in rate treatment. The Commission said Viosca Knoll did not show Destin's request for rolled-in rates was unfair or discriminatory against gathering companies. "The mere fact that nonjurisdictional gathering facilities are located near the proposed jurisdictional facilities, and will interconnect with the terminus of Destin's mainline, does not require that Destin's proposed jurisdictional service be treated differently from other jurisdictional services." Viosca Knoll had maintained allowing Destin rolled-in rates would allow Destin to unfairly shift costs of the new facilities upstream of Main Pass Block 260 to other shippers, including Viosca Knoll customers that use only the mainline downstream of Main Pass Block 260. Destin had said it needed FERC approval by last Friday to meet a projected March in-service date.

Joe Fisher, Houston

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