Referring to El Paso Natural Gas as “perhaps the most dysfunctional pipeline system in the U.S.,” a group of natural gas producers and marketers last week called on the Federal Energy Regulatory Commission to conclude “all major, pending regulatory matters” related to the Texas-to-California pipeline system on “the most expedited basis possible.”

It is “vitally important for the Commission to remove the uncertainties and problems associated with El Paso’s operations on a significantly expedited basis,” said BP Energy Co., Burlington Resources Oil & Gas Co. LP, Occidental Energy Marketing Inc. and Texaco Natural Gas Inc. in a letter to FERC Chairman Pat Wood last Tuesday. “These issues have been left in an uncertain state far too long.”

The letter referred directly to FERC’s decision to convert the entire El Paso system to contract demand (CD) service, but it also apparently covered other El Paso-related issues pending at the agency. The producers and marketers called FERC’s ruling last May, ordering El Paso’s full-requirements (FR) service shippers to convert to CD service by the end of 2002, a “commendable action” by the agency. But the Commission’s subsequent decision in September, deferring the conversion deadline until May 1, 2003, “has prolonged the uncertainty plaguing the El Paso system,” they said [RP00-336].

They urged FERC to move toward addressing shippers’ requests for clarification and rehearing of the conversion order and other capacity-allocation issues, “at a pace even greater than [the one] the Commission has currently set.” In a recent order, the Commission signaled it plans to act on the issue by Jan. 31, according to the producers and marketers.

“As producers [and marketers] who supply gas through El Paso to its various markets, we see the rationalization of the El Paso system as one of the highest, if not the highest, regulatory priorities for the Commission in the coming weeks and months,” they said. Prompt action by the Commission “will provide a necessary measure of stability and certainty in El Paso’s markets,” the producers and marketers noted, adding that “virtually every day” they face “significant cuts” in nominations for firm service on El Paso out of the San Juan Basin.

“We know that the Commission is acutely aware of the numerous and interrelated matters involving El Paso’s system, which remain obstacles to the full realization of El Paso as a functional and efficient gas transmission system serving the important California and East of California gas markets.”

While the issues remain unresolved, El Paso continues to be “perhaps the most dysfunctional pipeline system in the U.S. in terms of its ability to fairly meet the commercial needs of those shippers and consumers dependent upon it,” they said. “Compounding this situation is that El Paso serves markets, such as California, that have recently experienced considerable controversy in relation to energy matters.”

In addition to the system conversion and capacity-allocation problems challenging the pipeline, El Paso Natural Gas and affiliate El Paso Merchant Energy Co. are at the center of a high-profile complaint case at the Commission [RP00-241]. A FERC judge in September ruled that El Paso pipeline withheld substantial capacity from the California market during the state’s energy crisis, and that the pipeline and El Paso Merchant committed affiliate abuses. Wood has said FERC will rule on the complaint case during the first quarter of 2003.

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