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Redraft of Petal Expansion Draws Fire

Redraft of Petal Expansion Draws Fire

Major natural gas producers are seeing red flags everywhere in the wake of Petal Gas Storage L.L.C's decision to scrap its original proposal to build three new pipeline interconnects to its storage facilities in Mississippi. They contend the proposal has been amended to benefit Petal's new-found affiliates at the expense of non-affiliated customers.

At the eye of the storm is Petal's move to eliminate proposed interconnects with Transcontinental Gas Pipe Line, Southern Natural Gas and Destin Pipeline, which were included in its original application. Instead, Petal now seeks to expand its existing interconnect with new affiliate Tennessee Gas Pipeline, which serves Petal's storage facilities in Forrest County, MS. Likewise, Tennessee says it plans to ask FERC for authority to expand its 500 Line to accommodate increased deliveries from Petal. El Paso Energy, parent of Tennessee, also owns Petal Gas, having purchased its parent company in January.

Indicated Shippers, which include Chevron U.S.A., ExxonMobil Gas Marketing, and Shell Offshore, want the Commission to either defer the deadline for comments and/or protests to Petal's amended application until Tennessee files its companion application, or establish a technical conference to explore the market effects of Petal's altered proposal.

Producers believe FERC should take a closer look at whether Petal should be allowed to continue to charge market-based rates for storage services in light of the new proposal. The Commission okayed market-based pricing for Petal as part of a storage-expansion project it approved last month [CP99-615], but that decision was based on a market-power evaluation that assumed Petal was going to interconnect to Destin, Transco and Southern, they pointed out. Without the Transco/Southern/Destin interconnects, shippers contend access to Petal's storage facilities will be limited to Tennessee and Koch Gateway.

Although some favor FERC stripping Petal of its market-based pricing authority, Indicated Shippers didn't go that far. However, they did ask that Petal be directed to update its market-power study to reflect the impact of affiliated storage on Petal's facilities - specifically, Tennessee's and Sonat's Bear Creek Storage Field and Tennessee's northern storage - and the fact that an affiliate pipeline (Tennessee) connects Petal to the affiliate storage.

"Petal describes its proposal as a "stand-alone" project, but in fact the project appears dependent upon Tennessee's anticipated expansion of the 500 Line," for which the pipeline has yet to conduct an open season let alone make a filing at FERC, Indicated Shippers said. The "apparent implication" in Petal's filing is that it won't be able to meet the agreed-upon firm deliverability needs of Southern Company without the Tennessee expansion, they noted.

Petal's proposed expansion is based on a 20-year precedent agreement to provide 7 Bcf of new firm storage capacity and 700,000 MMBtu/d of firm deliverability to Southern Company, a major power generator. Southern Company executed the agreement with Petal under the original proposal calling for interconnects with Transco, Southern Natural and Destin. It has expressed some reservations about whether the combined proposals of Petal and Tennessee will be able to meet its requirements.

Susan Parker

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ISSN © 2577-9877 | ISSN © 1532-1266
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