Maybe the third time will be a charm for El Paso Natural Gas.After two failed open seasons — one of which ended this week —the pipeline still is left holding the greater part of the 1.35BBtu/d of soon-to-be-available firm capacity on its system. El Pasonow hopes to do a negotiated arrangement for the California-boundcapacity-similar to the one it worked out with Dynegy Marketing andTrade two years ago.

El Paso President Richard Baish said no capacity was awardedduring the second open season, which ended Wednesday. The bidseither were rejected because they failed to meet the “minimumrevenue threshold” requirements for the capacity, were withdrawn bybidders or disqualified because they didn’t satisfy El Paso’scredit requirements. This followed a similarly disappointing firstopen season, during which only one bid was accepted. It was fromWilliams Energy Marketing and Trading for 101,585 MMBtu/d of BlockII firm capacity to California.

The poor results of the second open season were somewhatsurprising, at least to the pipeline, given that none of thecapacity up for bid had a right-of-first-refusal (ROFR) attached toit. Dynegy had the right to match valid bids for the 1.2 BBtu/d itholds on El Paso during the first round, but it lost it in thesubsequent open season. Absent that ROFR threat, Baish had expectedto see more shipper interest the second time around.

But some industry sources said the open seasons were doomedfollowing a September order in which FERC cautioned potentialbidders that any El Paso capacity awarded might be “subject toprospective changes” in delivery point allocation methods. “I thinkthat was a huge factor in their unsuccessful auctions,” oneobserver said. The prospect of changes in delivery rights “has beenprominent in our discussions” about bidding for the capacity. TheCommission order was in response to a complaint accusing El Paso ofoverbooking capacity at its interconnection with SouthernCalifornia Gas (SoCalGas) at Topock, AZ.

During the second open season, “there were quite a number ofbids [about 13], but we didn’t find any that met ourcriteria…..We’ll retain the capacity unless and until someonecomes in and makes an offer, and then we’ll do-and this is the samething that happened last time around-a negotiated deal,” Baish toldNGI. Dynegy was said to be one of the unsuccessful bidders.

“We’ve given everyone who wanted the opportunity [to buy thecapacity] that opportunity. Now we would feel free to go ahead anddo a negotiated deal with anyone who might be interested inacquiring that capacity,” he said.

Baish noted that “a number of people [already] have contracted”El Paso about doing a negotiated deal. “But I really can’t beanymore specific than that. I can’t identify who [the parties are].You got to keep some mystery.”

He said El Paso was open to doing negotiated arrangements forpieces of the remaining package, which includes a total of 1.25BBtu/d of Blocks I, II and III firm capacity for delivery toCalifornia. But, he added, “I’m not ruling…..out” the possibilityof a single deal for the entire package. During the open seasons,however, nobody bid for the entire capacity, an El Paso shippersaid.

Baish refused to say whether Dynegy, whose contract with El Pasoexpires at the end of the year, was one of the parties with whichit was negotiating. And Dynegy was keeping the market guessing. Ina filing at FERC this week, the Houston marketer said “a great dealof the capacity” that it currently holds on El Paso with primaryrights to the Topock, AZ, delivery points “will be sold to newshippers, including, perhaps, Dynegy.”

The remark was included in Dynegy’s protest of a complaintbrought by Amoco Production, Amoco Energy Trading Corp. andBurlington Resources Oil & Gas against El Paso. The complaint,which was filed last month, accused El Paso of overselling thecapacity at its interconnection with SoCalGas at Topock, resultingin the need to allocate capacity among firm shippers to thatdelivery point. As a remedy, they proposed that El Paso be requiredto limit primary delivery points at the interconnection withSoCalGas to the take-away capacity of the LDC’s system (540MMcf/d).

Such a remedy would give Amoco and Burlington higher priority tothe “desired” SoCalGas-Topock delivery point on El Paso, while itwould degrade the rights to the Topock point of the replacementshipper or shippers that purchase the capacity held by Dynegy,according to Dynegy. New shippers would be “effectively locked out”of using the SoCalGas-Topock point, while Burlington and Amocowould have a “corner on the market” for customers behind the LDC’scitygate, it told FERC [RP99-507]. SoCalGas-Topock is the preferreddelivery point of shippers transporting gas from the San Juan Basinto the southern California market.

In a separate filing at FERC, El Paso criticized the”eleventh-hour timing” of the Amoco/Burlington complaint, which wasbrought on Sept. 21 – one week prior to the close of the pipeline’sfirst open season. It was “no coincidence” that it was filed “inthe middle of El Paso’s attempt to remarket a huge amount ofturned-back capacity,” the pipeline said. “Clearly, the complaintwas consciously timed to cause the maximum possible disruption tothe open-season process.”

Moreover, the pipeline said it found the complaint to be “morethan a little ironic,” given Amoco’s and Burlington’s apparent lackof interest in El Paso capacity. “Neither Amoco nor Burlington hasshown any interest in actually paying to acquire a significantportion of the turned-back capacity. Thus, their complaints aboutrestricted access to SoCal’s system at Topock ring hollow.”

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