Petal Gas Storage L.L.C. has altered its proposal to beef up thedeliverability capacity of its storage facilities in Mississippi ina way that will benefit affiliates, such as Tennessee Gas Pipeline,at the expense of non-affiliates, say Amoco Production and AmocoEnergy Trading. Both companies urged FERC to reject it.

Petal’s revised application “will further increase Tennessee’smarket power over transportation and related services in the GulfCoast Region, particularly the Gulf of Mexico,” the Amoco companiessaid in a protest filed at FERC [CP00-59]. Its market control inthe Gulf will be “further strengthened” if El Paso Energy’sproposed merger with Coastal Corp. goes through, they noted.Petal’s parent, Crystal Gas Storage Inc., was purchased in Januaryby El Paso Energy, Tennessee’s parent.

Petal amended its original application such that its proposedinterconnects with Transcontinental Gas Pipe Line Corp., SouthernNatural Gas and Destin Pipeline were dropped. Instead, it seeks toexpand its existing interconnect with new affiliate Tennessee,which serves Petal’s storage facilities in Forrest County, MS.Likewise, Tennessee says it plans to ask FERC for authority toexpand its 500 Line to accommodate increased deliveries from Petal.Without the Transco/Southern/Destin interconnects, access to Petalwill be limited to Tennessee and Koch Gateway, according to AmocoProduction, a shipper on Destin.

Indicated Shippers, which include Chevron U.S.A. Inc.,ExxonMobil Gas Marketing Co. and Shell Offshore Inc., want theCommission to either defer the deadline for comments and/orprotests on Petal’s amended application until Tennessee files itcompanion application, or establish a technical conference toexplore the market effects of Petal’s altered proposal.

The Amoco companies and Indicated Shippers believe FERC shouldtake a closer look at whether Petal should be allowed to continueto charge market-based rates for firm and interruptible storageservices. The Commission okayed market-based pricing for Petal aspart of a storage-expansion project it approved earlier this month[CP99-615], but that decision was based on a market-powerevaluation that assumed Petal was going to interconnect to Destin,Transco and Southern, they pointed out.

The Amoco companies want FERC to refuse Petal market-basedpricing authority, but Indicated Shippers didn’t go that far. Buythey did ask that Petal be directed to update its market-powerstudy to reflect the impact of affiliated storage on Petal’sfacilities — specifically, Tennessee’s and Sonat’s Bear CreekStorage Field and Tennessee’s northern storage — and the factthat an affiliate pipeline (Tennessee) connects Petal to theaffiliate storage.

The Amoco companies believe Petal’s amended expansion proposalshould be dismissed for being “incomplete,” citing the apparentinability of the storage company to meet the needs of its firmexpansion customers and the failure of Tennessee to submit acompanion proposal yet. Indicated Shippers agreed the Commissiondidn’t have “sufficient information” at this time to approvePetal’s proposal.

“Petal describes its proposal as a “stand-alone” project, but infact the project appears dependent upon Tennessee’s anticipatedexpansion of the 500 Line,” for which the pipeline has yet toconduct an open season let alone make a filing at FERC, IndicatedShippers said. The “apparent implication” in Petal’s filing is thatit won’t be able to meet the agreed-upon firm deliverability needsof Southern Company Inc. without the Tennessee expansion, theynoted.

Petal’s proposed expansion is based on a 20-year precedentagreement to provide 7 Bcf of new firm storage capacity and 700,000MMBtu/d of firm dliverability to Southern Company, a major powergenerator. Southern Company executed the agreement with Petal underthe original proposal calling for interconnects with Transco,Southern Natural and Destin. It has expressed some reservationsabout whether the combined proposals of Petal and Tennessee will beable to meet its requirements.

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