FERC last week gave the go-ahead for Destin Pipeline Co. L.L.C.to build lateral pipeline facilities that would connect offshoreproduction with its new 1 Bcf/d mainline system for eventualdelivery into downstream markets.

The proposed facilities would transport gas from two newproduction platforms in the Gulf of Mexico to be located in MainPass Block 279 and 281 to an offshore connection with Destin’s newmainline system at its Main Pass 260 platform, which FERC approvedlast November. There, the gas would be delivered to a processingplant in Mississippi that would interconnect with five interstatepipelines.

The facilities include a 24-inch outside diameter lateralpipeline, a 12-inch OD tie-in pipeline, a 20-inch OD tie-inpipeline, and two receipt points on the Main Pass 279 and Main Pass281 platforms. Three producers – CNG Producing, Walter Oil &Gas and Sonat Exploration GOM – have committed to transport up to230 MMcf/d.

The Commission approved the offshore lateral facilities over thestrenuous objections of Viosca Knoll Gathering Co. L.L.C., whoseexisting gathering facilities would run parallel to Destin’sproposed laterals. Viosca Knoll contends the project isundersubscribed. Specifically, it said the 230 MMcf/d of existingcapacity commitments represent only a little more than 40% of the403 MMcf/d capacity that would be available on the 24-inch ODlateral that Destin proposes to build.

But FERC disagreed on all counts. “The Commission has found thatthe market should determine which project or projects are bestsuited to serve infrastructure needs on the OCS [Outer ContinentalShelf] and to allow for the most reserves and OCS transportationfacilities. We will not substitute our judgment for businessdecisions of private parties in the absence of anticompetitiveactions,” the order said, adding that Destin’s proposal was “notanticompetitive.”

The Commission also gave Destin the authority to roll in thecosts of the $19 million offshore project. The order [CP98-238]said pipeline projects that qualify for authorization under FERC’sblanket certificate procedures, such as Destin’s, automaticallyqualify for presumption in favor of rolled-in prices, and can do sowithout undergoing “a case-specific analysis of system-widebenefits because the resulting rate impact in such situations isusually de minimis.”

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