FERC Thursday denied a request of Tennessee Gas Pipeline to acquire the capacity entitlements that Dynegy Marketing and Trade holds to a portion of Columbia Gulf Transmission’s capacity on offshore Louisiana pipeline facilities.

The offshore system, South Pass 77 System, is co-owned by Columbia Gulf and Tennessee. Last July, Columbia Gulf asked FERC to abandon by assignment to Tennessee its certificated obligations entitling Dynegy to a portion of its South Pass capacity, and Tennessee requested authority to acquire the capacity entitlements by assignment [CP06-413]. The Federal Energy Regulatory Commission said “no” to both requests Thursday.

Gulf Oil Corp., the predecessor in interest to Dynegy, received capacity entitlements because it contributed to the cost of constructing the South Pass 77 System in 1980 and two subsequent expansions. The pipeline facilities extend from South Pass Block 77 offshore Louisiana to Tennessee’s system in Plaquemines Parish, LA.

Gulf Oil eventually merged with Chevron U.S.A. Inc., which assigned the South Pass 77 capacity entitlements to Dynegy Holdings Inc. in March 1997. Dynegy Holdings then assigned the capacity rights to Dynegy. As Gulf Oil’s successor in interest, Dynegy was entitled to 87,866 Mcf/d of Tennessee’s South Pass 77 System capacity and 81,201 Mcf/d of Columbia Gulf’s capacity on the system. Dynegy also acquired the rights to transport 141,860 Dth/d on Tennessee’s downstream pipeline facilities. Dynegy no longer needs any of this capacity, the FERC order said.

In January 2006, the Commission approved Tennessee’s request to abandon its certificate obligation entitling Dynegy to receive transportation service on part of Tennessee’s South Pass 77 System and downstream transportation service. However, it rejected Tennessee’s request to acquire by assignment Dynegy’s entitlements to part of Columbia Gulf’s capacity on the offshore pipeline facilities.

In the latest order, FERC denied the request again, even though Dynegy has not used any of its Columbia Gulf capacity since 1999. “While it appears there would be no adverse affect on Columbia Gulf or its other customers from the proposed abandonment by assignment, the parties have failed to show why the public convenience and necessity require approval of Tennessee’s acquisition of the capacity by assignment,” the order said.

“Tennessee is unable to identify any customers requiring service that would justify its acquisition of additional South Pass 77 System capacity. Indeed, Tennessee already has approximately 15,000,000 Mcf of the South Pass 77 System’s capacity and acknowledges that over the last three years the most throughput it had in any single month was approximately 11,000,000 Dth. Further, only about 4% of Tennessee’s throughput on the South Pass 77 System is under firm transportation contracts,” it noted.

“The applicants contend that Dynegy’s Columbia Gulf capacity will be unused if the Commission refuses to approve the current proposal. However, Tennessee already has the contractual right to use Dynegy’s Columbia Gulf capacity, as well as Columbia Gulf’s other capacity, on an interruptible basis at no charge when it is not being used by Dynegy or Columbia Gulf.”

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