FERC last week approved Transwestern Pipeline’s proposals tobuild a new Gallup compressor station on the San Juan lateral nearits mainline and to install cooling equipment at two existingcompressor stations also on the lateral. Both measures are designedto alleviate on-going constraints on the lateral and bring thepipeline up to its certificated capacity level of 1.09 Bcf/d fordelivery to California.

The Gallup station would be built near the terminus of the SanJuan lateral near Thoreau, NM, and the cooling equipment would beconstructed at the existing LaPlata “A” and Bloomfield compressorstations.

Transwestern said the $11.6 million Gallup expansion will allowit to maintain its mainline operating pressure from Thoreau west toCalifornia at 950 psig at all times, enabling it to betteraccommodate shifts in market demand to the east without restrictingdelivery capacity to California. In short, the pipeline will beable to once again operate its mainline west of Thoreau at itscertificated capacity of 1.09 Bcf/d on a firm basis (delivering750,000 Mcf/d to Needles, AZ, and 340,000 Mcf/d to Topock, AZ), aswell as meet its demand for gas on the eastern portion of itssystem.

The cooling equipment will cause the lateral and associateddown-field compression to operate more efficiently, creating anadditional 50,000 Mcf/d of incremental firm capacity on theBlanco-to-Thoreau segment of the San Juan lateral, according toTranswestern.

The pipeline has contracted with six shippers for the entire140,000 Mcf/d of capacity that will be created by the Gallupexpansion. They include Southern Energy, Sempra Energy Trading,North Star Steel, Duke Energy Trading and Marketing, Reliant EnergyServices and El Paso Energy Marketing. With the exception of NorthStar Steel and El Paso Energy, all of the transportation contractsare for five years.

FERC approved the pipeline’s proposals over the objections ofSempra Energy, which said the additional 140,000 Mcf/d created bythe projects would further clog deliveries to its gas LDCsubsidiary, Southern California Gas (SoCalGas). It noted thatTranswestern shouldn’t be allowed to sell more primary capacitythan downstream pipelines can handle because it will degradeservice for all upstream and downstream shippers.

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

But FERC concluded the “benefits of Transwestern’s proposedproject will outweigh any potential adverse effects.” It said theGallup expansion passed muster under the new policy statement onpipeline construction. For one, it “will not have an impact onTranswestern’s existing customers [such as SoCalGas] nor will ithave an impact on other pipelines or captive customers, sinceTranswestern is proposing to serve new load not currently served byanother pipeline,” the order said [CP99-522].

The Gallup expansion will not affect the take-away capacity ofdownstream shippers, FERC said. It “will not result in Transwesterntransporting more gas than its certificated capacity level, norwill there be an increase in the certificated delivery capacity toTranswestern’s shippers, including SoCal. The proposals…..willmerely allow Transwestern to provide the level of service that itis 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 willhave little environmental impact, FERC said. Although Transwesterndid not seek rolled-in pricing for the Gallup expansion, theCommission said it may allow it at the pipeline’s next rate case ifsuch pricing will result in lower rates for existing customers notcovered by a 1995-96 rate settlement and for current customers whentheir service agreements subject to the settlement expire.

Over the objections of Sempra Energy, the Commission alsoallowed Transwestern to chargediscounted transportation rates forservice on the Gallup expansion.

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

Susan Parker

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