Destin Pipeline Co. has filed at FERC to have cost limitationson its “CNG Lateral” waived in light of delays that pushed theproject’s cost to $35.1 million, well above $19.6 million allowedfor in the Commission’s certification of the project last year(Docket No. CP98-238).

The lateral links two new production platforms in Main Passblocks 279 and 281 to Destin’s mainline at Main Pass 260. While thelateral went into service last December, Destin is just now comingto the Commission because it says it didn’t know the project costslimitation would be exceeded until September. “As of the beginningof September, however, the cost overruns were relatively modest,and based upon information at that time, there was no reason toproject the large cost overruns that developed over time.”

The project was authorized under Destin’s blanket certificateauthority. However, Destin’s application was challenged bycompetitor Viosca Knoll and the Commission was required to find theCNG Lateral was in the public convenience and necessity. This makesthe project cost limitation “less relevant” in Destin’s view,although the project is still subject to the prior notice projectcost limitations and must comply with a waiver request requirement.”If the Director [of the Office of Pipeline and ProducerRegulation] believes that a waiver would not be appropriate in thecircumstances presented here, Destin requests that this filing beconsidered a request to convert its blanket certificateconstruction authorization for the CNG Lateral Project into acase-specific [Natural Gas Act Section] 7c authorization.”

Destin said “it believes that the public interest finding thatmust be made when a prior notice filing is protested may obviatethe need for the same level of scrutiny in enforcing the budgetlimits.”

The fact that the project’s cost exceeds by about $22 millionthe amount the lateral is expected to bring in during its firstthree years of operation could jeopardize Destin’s rolled-in ratetreatment for the lateral.

The project, which at the time of its filing had serviceagreements with CNG Producing, Walter Oil &amp Gas, and SonatExploration GOM, was to be in service more than a month earlier, byNov. 1, 1998. However, it was plagued by increased materials andlabor costs as well as weather-related delays.

Joe Fisher, Houston

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