TransColorado Seeks 3rd Party Operator

A legal battle between Kinder Morgan and Questar over their TransColorado Gas Transmission partnership could lead to a third party entering the picture to operate the 292-mile pipeline. In a bulletin board notice last week, TransColorado invited third parties interested in the job to provide statements of qualification in order to receive requests for proposals.

"Because there is a lawsuit between the two companies and [the partnership is being dissolved], we have decided to look for a third party operator," said Kinder Morgan spokesman Larry Pierce. The third party will perform, or engage others to perform, administrative, legal, regulatory and marketing functions currently performed by the partners, the bulletin board announcement said. Candidates must provide a statement of qualifications by Jan. 24. The RFP will be sent by Jan. 31.

KN TransColorado, a subsidiary of Kinder Morgan, Inc., filed a lawsuit in Colorado District Court in Garfield County on June 15, 2000 against Questar and several of its affiliates for various breaches of fiduciary duty, misrepresentation, dissolution of the TransColorado partnership and other charges pertaining to the operation of the TransColorado Pipeline. A trial date has been set for February of 2002. The suit was filed after Questar announced plans to build a competing pipeline extension off of its own system to deliver natural gas from the Uinta/Piceance area to an interconnection with Kern River Pipeline, which is TransColorado's competitor. The gas would then be transported to California. Questar filed an application with the FERC on Jan. 10, 2000 to construct and operate the competing project.

"We are dismayed and disappointed that our own partner has made a decision to build a pipeline that competes with TransColorado," Kinder Morgan said in a statement at the time. "Questar's plans to build a competing pipeline project make it impossible for Questar to fulfill its fiduciary obligations to TransColorado. Under the circumstances, we don't feel that we have any choice except to seek dissolution of the partnership.

"Questar's actions...discouraged third-party shippers from entering into long or short-term transportation agreements with TransColorado. In fact, Questar has entered into agreements with TransColorado's principal competitor (CIG) to carry to California the very same gas that Questar had agreed should be transported on the TransColorado Pipeline," the company said.

Pierce noted that it would be a long time before this issue is settled. Kinder Morgan has been operating the pipeline since the legal scuffle began, but to avoid any additional conflict a third party has to step in and perform day-to-day operations, he said.

The TransColorado system consists of 292 miles of 22-inch and 24-inch diameter pipe extending from Piceance Basin near Meeker, CO, to San Juan Basin near Blanco, NM. Phase I was completed in 1996 and Phase II was completed in 1999.

To obtain details of the bulletin board notice, including an organizational chart, call Dianne Barrett at (303) 763-3676 or Evelyn Zimmerman at (801) 324-5564.

Rocco Canonica

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