A Panda Energy International affiliate is seeking a green lightto build one of the biggest “single-project” gas pipelines in termsof capacity to supply what will be the largest combined-cyclegas-fired power generation plant in the United States.

Trans-Union Interstate Pipeline L.P. proposes to build a42-mile, 30-inch high-pressure pipeline to supply at least 430,000Dth/d of gas to a planned 2,700 MW gas-fired facility in southernArkansas, according to the application. In North Central Louisiana,the proposed pipeline would tie into the Sharon interconnectionwith Texas Gas Transmission Corp. and Gulf States Pipeline’sintrastate system, which plans to expand its facilities.

“That’s a lot of gas going to one power plant,” said NedHengerer, a Washington D.C. attorney for Panda Energy. Trans-Unionand Union Power Partners, which will build and operate the powerfacility, are both indirectly owned by privately-held Panda Energy,a developer of merchant power plants.

“They’re clearing for it [the plant] right now. This is going tobe the largest power plant in the country. To put it intoperspective, the generators at the Hoover Dam are around 2,000 MW.This is truly immense,” said Hengerer. When fully operational, theArkansas plant would have 10 on-line generating units, each capableof producing 253.7 MW for a total output of 2,537 MW, which wouldincrease to 2,720 MW during peak usage in the summer.

The generation facility, which will be located on a 310-acresite in El Dorado, AR, will be “right on the Entergy [Corp.]system” adjacent to its 500 kV switching station, enabling it tosell power to wholesale markets in Texas, Louisiana and Arkansas.The region had experienced peak-period “brownouts last summer, andthere’s a lot of old coal and oil units down there in Arkansas,” hesaid in explaining the need for the gas-fired unit.

For financial closing of the $400 million-plus generationfacility to occur next August, Trans-Union urged the Commission toissue a final certificate — a preliminary determination won’t do— for the pipeline by July 1, 2000. Both the pipe and power plantare targeted for in-service in spring of 2002, according to theapplication. Panda Energy said it must finish construction andstart testing the plant’s equipment by January 2000 in order tomeet the peak summer air-conditioning load in the Southeast. “Andgiven the well-documented regional generation shortage, delaying to2003 would be unacceptable and unthinkable for electric consumersand [Union Power] alike.”

Trans-Union is seeking permission to build the pipeline underthe Commission’s Part 157 regulations, which would put it at riskfor the project’s costs of about $41 million. “Right now we’re justgoing from one point to another point,” Hengerer said of thepipelines. The immense size of the generation project has an”unforgiving time-clock” that demands a “straightforward fuel gaspipeline” at this time, the application noted.

“Trans-Union commits to the Commission, however, that if at anytime for any reason it decides to transport gas for others, it willfirst apply to and wait for approval from the Commission for therequisite authorizations, including a Part 284 blanket certificate,corresponding ‘open access’ transportation tariff and fullcost-based rates…”

Panda Energy contends the Trans-Union line, as proposed,complies with FERC’s new policy statement on pipeline construction.Prior to creating Trans-Union, Panda Energy said it “received andevaluated” transportation proposals from Reliant Energy GasTransmission, which it “found to be inferior” and rejected. Reliantproposed to enlarge its existing lines (10, 12 and 16 inches) toserve the generation facility, but still Panda Energy refused theoffers for several reasons, the company noted.

“First, Reliant sought rates generating payments at least two ormore times the amount [Union Power] will reimburse Trans-Union.Second, these new pipelines would access gas supplies that, in[Union Power’s] opinion, are inferior in terms of quantity, pricesand availability…Third, given the magnitude of the gas needs ofthe generation facility, [Union Power] found the pipeline expansionproposals too uncertain in terms of time, future rates and servicequality,” according to the application.

Panda Energy said it opted to begin the Trans-Union system atthe Sharon, LA, interconnection point because it would offer UnionPower “direct access” to Texas Eastern Transmission’s and Texas GasTransmission’s systems that are connected to the huge Carthage hub(in turn providing access to most East Texas supply areas) about100 miles upstream; Texas Gas’ pipeline connecting to thePerryville hub; Koch Gateway Pipeline; and the Pelico intrastatesystem. In addition, through the Sharon interconnection, UnionPower would have indirect access to Gulf States Pipeline’sintrastate system and Transok, Southern Natural Gas, Reliant andTennessee Gas Pipeline.

Union Power noted it is negotiating a letter of intent toreceive gas supplies from El Paso Energy and affiliates, such asGulf States Pipeline. Gulf States plans to build about 30 miles of20-inch pipeline from its existing system and that of Tennessee’sat Bear Creek Storage in Louisiana to Trans-Union at the Sharoninterconnection.

Trans-Union contends the pipeline also will be environmentallysound. The proposed 42-mile route “is almost entirely parallel andadjacent to existing utilities: following [Texas GasTransmission’s] 26-inch mainline for slightly over four miles, andcontinuing almost 38 miles along Entergy’s 500 kV powertransmission line,” the application said.

For now, Panda Energy has about 410 MW of generation capacity inoperation; 2,150 MW of capacity under construction; and about 7,800MW in advanced development. It has confined its generationacitivities mostly to the U.S. — Texas, Maryland, Pennsylvaniaand Arkansas, for example — but it is now reaching out tointernational markets, such as China, Nepal and Brazil. Started in1982, Panda posted annual sales of $74.5 million last year. Earlierthis year, it reported assets of $541.1 million to the Securitiesand Exchange Commission.

Susan Parker

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