Tennessee Gas Pipeline is forcing producers upstream of its system to pay extra transportation charges unless they utilize its share of the South Pass 77 pipeline, a 500 MMcf/d system jointly owned with Columbia Gulf but operated by Tennessee, Columbia Gulf said.

This “anticompetitive behavior” has to stop, Columbia told FERC in a complaint, because it violates a leasing arrangement between the two pipeline companies and it is harming producers who have fewer transportation options and less access to markets for their gas.

The additional charges “deprive the producers of a choice of transporters in the region and a choice of markets for their gas,” Columbia said. “Absent prompt intervention by the Commission, this situation is likely to deteriorate further rather than improve.” As a result, Columbia requests fast-track processing of its complaint.

“Columbia Gulf is suffering serious and ongoing economic harm due to Tennessee’s anticompetitive behavior,” Columbia said. “In fact, as of July 1, approximately 75% of the volumes that were flowing on Columbia Gulf’s South Pass 77 capacity are now being transported on Tennessee’s South Pass 77 capacity in order to avoid the new Tennessee charges,” Columbia said.

On April 9, Columbia said it lost two shippers because of the new transportation charges. Then on April 16 Columbia said it was contacted by Murphy Gas Gathering, another of its South Pass 77 shippers. “Murphy had been told by Tennessee that if it continued to transport its gas on Columbia Gulf’s South Pass capacity after May 1, it would be required to pay Tennessee for transport on Tennessee’s mainline,” something no shipper has had to do since a leasing arrangement was put in place in 1997. “Although Murphy asked Tennessee to provide this information in writing, Tennessee refused to do so. Murphy stopped nominating gas on Columbia Gulf’s South Pass capacity as of May 1.”

Columbia said that on June 24, it received a letter from Tennessee providing notice that Murphy was not meeting the gas quality requirements of Tennessee’s tariff. The letter contends that Murphy did not provide proof of gas processing because it had not made arrangements to have its gas transported via Tennessee’s 500 Line to Dynegy’s processing plant in Yscloskey, LA.

Columbia said this problem has brought back a headache that started when Columbia and Tennessee first implemented FERC Order 636. Because Columbia’s mainline is not connected to the South Pass 77 system, shippers were required to pay Tennessee an additional rate for transportation on its mainline to get their South Pass gas to market. This put Columbia at a competitive disadvantage and deprived its South Pass shippers of access to markets served off of Columbia’s mainline. At the same time, Tennessee needed additional capacity rights on South Pass for its own shippers.

The two pipeline companies entered into a reciprocal lease arrangement in 1997 that solved both parties’ problems by giving Tennessee an additional 72,500 Mcf/d of South Pass capacity while giving Columbia 115,000 Mcf/d of capacity on Tennessee from the South Pass system to an interconnect with Columbia Gulf at Egan, LA. The leased capacity on Tennessee was to operate by displacement. When a Columbia shipper delivered gas into Tennessee for transport to Columbia at Egan, Tennessee took the gas and then supplied a like amount at Egan without actually transporting it because gas flows didn’t allow for direct transportation. No charges were to be levied for these services.

The arrangement worked well from 1997 until April 2004, Columbia said. Tennessee now claims that the gas entering its system from Columbia’s share of South Pass must be processed and therefore the shippers must pay an extra 2-cents fee with 1% fuel charges.

“The gas delivered into Tennessee’s mainline from the South Pass 77 system always has been unprocessed gas,” Columbia said. The was the situation in 1997 when the reciprocal lease was approved an implemented.

“Tennessee’s current attempt to reimpose a charge for transportation on its mainline (i.e., re-stack the rates) subjects Columbia Gulf to the same competitive disadvantage it faced before the reciprocal lease was implemented.” As a result, Columbia is requesting that FERC step in and prevent this from continuing.

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