The multiple protests filed against El Paso Natural Gas’ Bondad Expansion project on its San Juan Basin pipeline system are “based on misstatements of fact, misinterpretations of El Paso’s rate settlement and tariff, and sheer speculation, and should therefore be dismissed,” the pipeline company told FERC in an answer to the protests. Contrary to the claims of Arizona Public Service, Burlington Resources, the California Public Utility Commission, Southern California Gas and several other firms, existing shippers will be no worse off as a result of the project and in fact will be “significantly better off in terms of additional revenue credits, capacity release opportunities and other benefits,” El Paso said.

The $3.6 million project adds compression and boosts capacity by 116.5 MMcf/d on the Bondad line – a northern leg of El Paso’s San Juan Triangle facilities running from the Ignacio receipt point in La Plata County, CO, to its Blanco plant in San Juan County, NM. The “attractiveness” of the project, El Paso said, is that it alleviates constraints on the most constrained area of its pipeline system primarily to benefit three shippers – Enron Capital and Trade, Elm Ridge Resources and Conoco – but without harming existing shippers. Revenues exceeding a certain level will be credited to existing shippers in accordance with a 35/65% revenue sharing formula in its tariff. Incremental gas volumes transported on the expansion must be transported downstream of Blanco only on existing transportation, which provides existing shippers with “enhanced opportunities for capacity release,” El Paso said. And contrary to the protests of Burlington Resources and Arizona customers, El Paso said it has “no obligation to construct new capacity to alleviate [existing] constraints….”

Protesting parties claim El Paso plans to grant the expansion shippers “super priority” or “super preference” when allocating capacity on the Bondad line. But the pipeline said its “keep whole” allocation schedule will preserve the way capacity currently is allocated by dividing capacity up into two blocks – one block for existing shippers and another for expansion shippers – that will be allocated contemporaneously. Expansion shippers are guaranteed access to their capacity, while existing shippers’ access to existing capacity remains the same. Burlington protested El Paso’s rate calculation, saying it excluded the cost of existing pipeline facilities that will be used by expansion shippers, and El Paso conceded the point. But El Paso said if Burlington “believes that existing system costs should be allocated to the project, it may pursue that objective in a future El Paso general rate proceeding. It is not, however, an appropriate matter to pursue here.”

Rocco Canonica

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