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FERC OKs Transwestern's Gallup Expansion

FERC OKs Transwestern's Gallup Expansion

FERC last week approved Transwestern Pipeline's proposals to build a new Gallup compressor station on the San Juan lateral near its mainline and to install cooling equipment at two existing compressor stations also on the lateral. Both measures are designed to alleviate on-going constraints on the lateral and bring the pipeline up to its certificated capacity level of 1.09 Bcf/d for delivery to California.

The Gallup station would be built near the terminus of the San Juan lateral near Thoreau, NM, and the cooling equipment would be constructed at the existing LaPlata "A" and Bloomfield compressor stations.

Transwestern said the $11.6 million Gallup expansion will allow it to maintain its mainline operating pressure from Thoreau west to California at 950 psig at all times, enabling it to better accommodate shifts in market demand to the east without restricting delivery capacity to California. In short, the pipeline will be able to once again operate its mainline west of Thoreau at its certificated capacity of 1.09 Bcf/d on a firm basis (delivering 750,000 Mcf/d to Needles, AZ, and 340,000 Mcf/d to Topock, AZ), as well as meet its demand for gas on the eastern portion of its system.

The cooling equipment will cause the lateral and associated down-field compression to operate more efficiently, creating an additional 50,000 Mcf/d of incremental firm capacity on the Blanco-to-Thoreau segment of the San Juan lateral, according to Transwestern.

The pipeline has contracted with six shippers for the entire 140,000 Mcf/d of capacity that will be created by the Gallup expansion. They include Southern Energy, Sempra Energy Trading, North Star Steel, Duke Energy Trading and Marketing, Reliant Energy Services and El Paso Energy Marketing. With the exception of North Star Steel and El Paso Energy, all of the transportation contracts are for five years.

FERC approved the pipeline's proposals over the objections of Sempra Energy, which said the additional 140,000 Mcf/d created by the projects would further clog deliveries to its gas LDC subsidiary, Southern California Gas (SoCalGas). It noted that Transwestern shouldn't be allowed to sell more primary capacity than downstream pipelines can handle because it will degrade service for all upstream and downstream shippers.

Further, Sempra Energy questioned the need for Transwestern's project, adding that if offered to turn back between 80,000-100,000 Mcf/d of capacity from points east of Thoreau to California on the mainline. Also, it said the discounted rate that Transwestern offered to the expansion shippers was discriminatory.

But FERC concluded the "benefits of Transwestern's proposed project will outweigh any potential adverse effects." It said the Gallup expansion passed muster under the new policy statement on pipeline construction. For one, it "will not have an impact on Transwestern's existing customers [such as SoCalGas] nor will it have an impact on other pipelines or captive customers, since Transwestern is proposing to serve new load not currently served by another pipeline," the order said [CP99-522].

The Gallup expansion will not affect the take-away capacity of downstream shippers, FERC said. It "will not result in Transwestern transporting more gas than its certificated capacity level, nor will there be an increase in the certificated delivery capacity to Transwestern's shippers, including SoCal. The proposals.....will merely allow Transwestern to provide the level of service that it is already authorized to provide to Needles and Topock."

Also in the project's favor is the fact that it's 100% subscribed; will not be subsidized by existing customers; and will have little environmental impact, FERC said. Although Transwestern did not seek rolled-in pricing for the Gallup expansion, the Commission said it may allow it at the pipeline's next rate case if such pricing will result in lower rates for existing customers not covered by a 1995-96 rate settlement and for current customers when their service agreements subject to the settlement expire.

Over the objections of Sempra Energy, the Commission also allowed Transwestern to charge discounted transportation rates for service on the Gallup expansion.

The Commission also disagreed with Sempra Energy's claim that SoCalGas' offering of turned-back capacity mooted any need for the Gallup expansion. It pointed out that SoCalGas offered to release only 80,000 Mcf/d of capacity from points east of Thoreau to California on the mainline, while the market desired 140,000 Mcf/d of additional capacity from Thoreau west to California. Also, SoCalGas offered the capacity at a rate that was deemed too high by the market.

Susan Parker

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