FERC ruled last week the six-month suspension of Destin PipelineCo. L.L.C.’s blanket certificate authority does not apply to theconstruction of interconnects for two projects currently beingbuilt in Mississippi.

In an order granting clarification, the Commission said Destincould proceed with the construction ofan interconnect under itsblanket-certificate authority for a 1,000 MW new generationfacility (Plant Daniel) being developed by Mississippi Power Co. inJackson County, MS. It took similar action with respect to aprocessing plant that is being constructed by Kahuna Gas L.L.C. totreat gas produced by Rebel Drilling Co. in Wayne County, MS.Kahuna currently is building a 5.7 non-jurisdictional line from theprocessing facility to Destin’s system.

“Because this is the first time the Commission has imposed theremedy of suspending a blanket certificate, we will not delay thesubject interconnections until Destin’s suspension ends inSeptember…. we clarify that Destin’s certificate suspension doesnot apply to these [two] projects,” the order said [CP98-238-003].

Destin and Rebel and Kahuna jointly argued the suspension ofDestin’s blanket-certificate authority shouldn’t apply to thembecause their projects were begun before the suspension went intoeffect in mid-March. They also argued that they shouldn’t bepunished for Destin’s misconduct. Kahuna claimed it would becomeinsolvent without the hook-up to Destin, and Rebel’s gas would beshut in for a long period. Southern Company, which owns MississippiPower, said it would be forced to halt construction on PlantDaniel, which would mean higher construction costs and delays inbringing the project on line.

FERC yanked Destin’s blanket-certificate authority because itgrossly exceeded the cost cap earmarked for construction of anoffshore lateral, and for dragging its feet in reporting the costoverrun to the Commission. The maximum cost allowed by theCommission for blanket-certificate projects is $19.6 million;Destin projected the cost for its lateral would be $19.5 million.

In the end, it spent a total of $35.1 million to build thelateral to transport gas from two production platforms in the Gulfof Mexico to an offshore connection with its mainline system at itsMain Pass 260 platform, and did not notify FERC of the overrunsuntil two months after the lateral was placed into service inDecember 1999.

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