NGI The Weekly Gas Market Report
Despite the objections of potential competitor SouthernCalifornia Gas (SoCal), FERC last week awarded Questar SouthernTrails Pipeline Co. a certificate to build a new 693-mile pipelinethat would directly serve customers in southern California —territory that has long been dominated by SoCal.
The certificate gives Southern Trails, a subsidiary of QuestarPipeline, two years to build and place into service the $155million line, which would provide 207,500 Dth/d of firmtransportation from the Four Corners area (near the borders of NewMexico, Arizona, Utah and Colorado) to the southern California gasmarket.
The pipeline has acquired a former crude oil pipeline fromanother Questar company and is converting it for its project, andalso plans new construction of pipe replacement and realignmentfacilities. The line will be divided into two zones – the East Zoneand the West Zone. The East Zone will originate in the San JuanBasin in New Mexico and end at the California border, and will have87,500 Dth/d of available capacity. The West Zone will operatewholly within California and will have 120,000 Dth/d of availablecapacity.
Questar has envisioned Southern Trails as the last leg of athree-part chain (TransColorado Gas Transmission-Questar-SouthernTrails) that would ship cheaper gas supplies to customers in thesouthern California market in direct competition with LDC SoCal.Questar owns a 50% interest in TransColorado.
Both SoCal and the California Public Utilities Commission haveopposed the Southern Trails project, saying it would create excesspipeline capacity in the state and could result in a bypass ofSoCal and other utilities serving the area, creating strandedcosts.
But FERC wasn’t convinced, and rejected SoCal’s request forrehearing of the preliminary determination granted to SouthernTrails last October. “SoCal continues to express concerns ofexcessive capacity and resultant financial detriment of aspeculative nature without presenting any objective evidence tosubstantiate that the proposed expansion would result in unfaircompetition or other material harm,” the order said [CP99-163-001].
Furthermore, FERC noted the pipeline received an automaticpresumption of public need in light of the fact that SouthernTrails sought approval of its project under the Commission’soptional-certificate regulations, which put the pipeline at riskfor all of the project’s costs. This presumption will continueuntil or unless a third-party can successfully rebut it, the ordersaid, adding that “SoCal has presented no new arguments to rebutit.”
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