FERC last week gave the green light for Transcontinental Gas Pipe Line to spin off its South Texas mainline and lateral facilities to an unaffiliated Texas intrastate pipeline, Enbridge Pipelines LP.

The move was widely opposed by producers and other customers served by the system, who claimed approval of the sale by the Federal Energy Regulatory Commission would bifurcate Transco’s pipeline system into jurisdictional and non-jurisdictional segments and force shippers to deal with a patchwork of rates, schedules and nominations.

But FERC said the South Texas system had been significantly underutilized for years and had been a drain on the pipeline’s finances, and would be better used in the Texas intrastate market by Enbridge. It noted that upon transfer to Enbridge, the pipeline facilities would turn from interstate to intrastate, making them exempt from Commission jurisdiction.

Included in the sale are 258 miles of 10- to 26-inch diameter mainline facilities originating in Hidalgo and Cameron Counties, TX, which receive natural gas from offshore and onshore gathering lines and transport it to Transco’s Station 30 in Wharton County, TX; a 139-mile, 24-inch diameter lateral starting in McMullen County, TX, that ships gas to Station 30; four other interconnected laterals that range from 3.4 to 23 miles in length and 6 to 20 inches in diameter; and an 8,800 horsepower compressor station [CP02-141].

Transco will retain the portion of its system from the Gulf of Mexico to onshore Texas, and all facilities downstream of Station 30 through Georgia to New York, according to the application it filed last April [CP02-141]. In effect, the Transco system will be severed into three segments — two of which will be FERC jurisdictional, and one subject to state oversight.

But this interweaving of interstate and intrastate pipelines is common near the Gulf of Mexico, FERC said. “That is the nature of many Gulf coast pipeline systems. Thus, Enbridge’s integration of the South Texas Pipeline facilities into its existing intrastate system would be neither unique nor impede our jurisdictional oversight,” the order said.

As for the producer protests, FERC said Enbridge has “satisfactorily demonstrated its willingness and ability to provide comparable unbundled open-access…transportation service to shippers and producers” on the South Texas Pipeline facilities. But the agency conceded that customers could wind up paying more for service when Enbridge’s rate for transportation on the South Texas facilities is combined with Transco’s rate for downstream service. “We will not, however, make that consideration dispositive” in this case, the order said.

The Commission rejected Transco’s request to partially abandon firm transportation service to Sunoco Inc. in violation of a 1992 settlement, which requires Transco to provide service to Sunoco for 20 years at certain receipt points. “As a condition of the abandonment…we will require Transco, after transfer of the facilities to Enbridge, to acquire the subject capacity at subject receipt points from Enbridge and assign it to Sunoco at rates, terms and conditions consistent with the 1992 settlement.”

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