The recent protests of El Paso Natural Gas shippers regarding Natural Gas Clearinghouse’s much tighter grip on westbound firm transportation capacity (1.3 Bcf/d) are just the cries of industry fat cats who would rather avoid increased competition on what they consider their home turf, El Paso told FERC last week (please see stories in NGI 1-12-98, p.1 and 11-10-97, p.1).

Protesters Amoco Energy Trading, Amoco Production, Burlington Resources, Phillips Petroleum and Phillips Gas Marketing had every opportunity to contract for the capacity sold to NGC but chose not to do so, according to El Paso. And now with greater control over California access, NGC apparently is exerting pressure on these companies (who are large San Juan Basin producers and affiliated marketers). Recent market reports reveal that since the NGC contract took effect Jan. 1 transportation on El Paso to California has been tight with little available released firm transportation capacity and virtually no discounted interruptible transportation from the pipeline. In the past, the previous capacity holder, PG&E, regularly released firm to try and help pay for its 32-cent/Dth reservation charge. NGC is only paying a 12-cent/Dth reservation charge (plus about 1.6-cent usage charge). Current price differentials are averaging about 35 cents between San Juan Basin and the Southern California Border. Do the math, and it becomes clear NGC has every incentive to use all of its transportation if possible.

Meanwhile other shippers are scrambling to find space to the California border to take advantage of wide differentials. Some apparently have turned to the Commission for help. El Paso said they have resorted to “the classic tactic of those armed with nothing better, namely, the production of as much smoke as possible in the hope the Commission will assume that there might be a spark within the cloud. It is obvious on analysis that there is nothing more than smoke,” El Paso said last week in what was styled a “motion for leave to file an answer” to the recent protest.

Among other things, the protesters claim El Paso did not follow proper bulletin board posting procedure last year when requesting bids on three contracts (totaling 1.3 Bcf/d) scheduled to be turned back Dec. 31 by Pacific Gas & Electric. They said the pipeline illegally tied all three contracts together, forcing any company bidding on one contract to bid on the others as well. El Paso, however, explained last week that tying the contracts did not violate Commission regulations or any provision in its pipeline tariff.

The protesters also erred, El Paso said, in claiming the contract with NGC violates the revenue crediting provisions of the pipeline’s 10-year settlement with its firm shippers and creates an incentive for El Paso to avoid selling discounted IT. Any revenues from IT sales by El Paso over a specified amount are credited to NGC under the contract rather than to firm shippers who were party to the settlement, the pipeline admitted. But El Paso argued that provision was an essential component of the deal, and the overall pro-competitive impact of the contract is far more important. Besides, El Paso noted, the protesters are not even eligible to receive credits from IT sales revenues.

“As for the incredible claim that El Paso’s ‘historic recourse rate customers are worse off as a result of the NGC deal,’ these customers will share the additional revenues resulting from the [NGC contract, according to the Settlement agreement,] not subsidize them,” El Paso said.

Rocco Canonica

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