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Sale of Florida Gas' South Texas Line Opposed

Sale of Florida Gas' South Texas Line Opposed

Dynegy Inc. and Chevron Corp. want FERC to either block Florida Gas Transmission's (FGT) proposed abandonment and sale of 70 miles of mainline and associated facilities in the southern part of Texas or "at a minimum" ensure the continuity of transportation service there.

FGT seeks to sell the mainline facilities to Copano Pipelines/South Texas, L.P., which has requested that the 20-inch pipeline, compressor units (4,000 horsepower) and measurement facilities be converted for use in intrastate transportation. By selling the facilities, FGT estimates it will avoid paying about $35 million to replace the existing line to maintain current maximum allowable operating pressure (MAOP) in accordance with Department of Transportation standards. Also, it noted that only 38% of the capacity of the line was used in 1998.

The proposed abandonment and sale will have an "enormous detrimental impact" on Dynegy and its customers' existing service if current transportation service isn't continued, said Dynegy and Chevron. Dynegy acts as supplier agent for Chevron, bringing gas into FGT's Texas facilities at the Valero-Nueces point, and Chevron delivers the supplies to shippers under a firm transportation agreement with FGT. Some Chevron's supply customers have more than 10 years remaining on their transportation agreements with FGT, according to Dynegy.

Once the facilities are transferred, Copano has said it intends to reverse the direction of flow of the Texas line so that gas will flow to a new intrastate pipeline interconnect, according to Dynegy. Also, it plans to operate the facilities at a lower pressure. "Based on these facts, continuing to utilize the transferred facilities under an agreement with Copano is not a viable option for Dynegy and its customers who must use the...facilities to bring supplies to FGT's system for ultimate delivery into Florida," Dynegy said in a protest filed at FERC [CP99-233].

FGT has indicated that potentially stranded shippers in Texas would have two options: either to move their gas on other pipelines to Zone 1 interconnects with FGT, or to move their primary receipt points to other supply points within Zone 1 or in other supply zones. Zone 1 extends from FGT's upstream terminus in South Texas to Eunice, LA.

But "these options...are not practicable for Dynegy and its customers," Dynegy countered, because they would mean "additional and prohibitive transportation costs." Therefore, "unless FGT is willing to compensate its stranded customers for any added transmission or supply costs, its proposed abandonment must be rejected," the gas marketer noted.

This "piecemeal jettison of pipeline segments by FGT indicates a pattern of abandoning transportation service to interstate customers that the Commission should halt," Chevron said, adding that such abandonments "continually disrupt ongoing relationships established between buyers and sellers of gas." The producer cited several instances since 1996 in which FGT has abandoned portions of its mainline. "Allowing FGT to continually disrupt ongoing service to its existing customers, for the sole purpose of its own financial gain, is not in the public interest."

Susan Parker

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