Battling a moves to re-impose the cap on prices paid in the secondary transportation market to California, the Interstate Natural Gas Association of America (INGAA) went on record last week opposing an attempt by Rep. Rick Boucher, D-VA, in a subcommittee mark-up to re-instate the cap legislatively on capacity release and cap transportation rates to the border.

The high rates paid recently are a result of transportation bottlenecks caused by a shortage of intrastate capacity to pick up gas at the border, Jerald Halvorsen, INGAA president said in a letter to Chairman Joe Barton, R-TX, of the Subcommittee on Energy and Air Quality. Halvorsen pointed out that there is 850 MMcf/d of interstate pipeline capacity to the Topock delivery point, but only 540 MMcf/d of intrastate takeaway capacity. Similarly, there is 1 Bcf/d of interstate delivery capacity at the Wheeler Ridge point, while intrastate takeaway capacity is 680 MMcf/d “There is, in other words, a bottleneck that restricts the delivery of an additional 700 MMcf/d of natural gas into and in the state.”

The interstate rates and capacity are not the problem. With increased demand and low storage levels in-state, “higher natural gas prices this winter have reflected the premium paid to get through the delivery bottlenecks and onto the California intrastate gas system.” One of the reasons for that is that interstates, for the most part, have been discouraged from constructing lines beyond border points into the state, Halvorsen added. The California Public Utilities Commission has jurisdiction over what intrastate lines are built.

“Prohibiting shippers from releasing capacity at market rates on sales into California could, in effect, reduce the supply of natural gas into the state because shippers could release their capacity to other markets that value it more,” the INGAA chief said. “Such an effect only will serve to exacerbate the problems that California is currently facing.”

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