El Paso Natural Gas “is willing to expand its system” to theCalifornia border if “sufficient support” for such a project can bedemonstrated through long-term capacity contracts, the pipelinetold FERC.

The pipeline’s comments were in response to a Commission inquiryasking El Paso to consider the feasibility of upgrading its proposedLine 2000 crude-oil conversion project to a system expansion to helpease the pipeline capacity crunch in the West (see Daily GPI, Jan. 5). Daniel M. Adamson, director ofFERC’s Office of Energy Projects, raised the prospect in a Jan. 3letter to El Paso, saying that modifying the project “could assist thedifficult situation” now facing the California gas market.

Specifically, the Commission has recommended that El Paso amenda pending application in which it seeks to acquire an existing30-inch diameter, 1,088-mile crude oil pipeline from Plains AllAmerican Pipeline L.P., and convert part of it to natural gastransportation service. The line extends from McCamey, TX, toBakersfield, CA. El Paso plans to convert to gas service a 785-milesegment from McCamey to Ehrenberg, AZ. El Paso proposed the Line2000 project as a loop line to replace existing compression, andnot as a system expansion.

However, “there are several ways that an expansion could beaccomplished,” wrote El Paso Vice President Al Clark on Jan. 15.”El Paso could add compression to the proposed Line 2000 project,or it could replace or recommission the compression that thepending application proposes to abandon in place.” As a thirdoption, he said El Paso could add new compression to its existingsystem or loop either the existing system or Line 2000 project.

The “preferable method will have to be determined by a carefulanalysis of the relative costs and a determination of whereshippers want the capacity, i.e. where they want to put gas into ElPaso’s system and where they want the gas delivered,” Clark said.

As a “first step” towards gauging market support for anexpansion, he noted that El Paso on Jan. 12 posted 1.2 Bcf/d ofCalifornia-bound pipeline capacity for sale effective June 1 ofthis year. The capacity currently is held by affiliate El PasoMerchant Energy, whose contracts expire May 31. When the postingresults are known, “El Paso will determine whether another openseason is needed to solicit expressions of interest in additionalpipeline capacity to serve markets both into and upstream ofCalifornia.”

If El Paso finds there is an “unmet demand for additionalcapacity” on its system, the pipeline at that time “will evaluatewhether an expansion of the existing system or a modification ofthe Line 2000 project, or both, is the appropriate means ofaccomplishing the expansion,” Clark noted.

In the meantime, he urged the Commission to approve El Paso’sapplication for the Line 2000 project as it was filed. Not onlywill the project “increase the operational flexibility” of ElPaso’s current system, but converting the line from oil to gasservice will be a “necessary prerequisite” to any future expansionof the pipeline’s system, according to Clark.

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