Sabine Pipe Line Co. last week got the go-ahead from FERC tosell a small segment of its pipeline system in Texas and Louisianaas part of its effort to restructure its business into a limitedliability company.

The Commission approved for sale to Texaco PetrochemicalPipeline LLC approximately 43 miles of Sabine’s 16-inch mainlinepipeline that runs from a point west of the Neches River inJefferson County, TX, to a point east of the Calcasieu River inCalcasieu Parish, LA. Texaco plans to convert the line to a liquidsservice. The sale price will be at a depreciated net book value ofabout $1 million.

The sale would reduce the firm capacity of Sabine’s system by65,000 Dth/d, but only one firm customer would be directly affected- Texaco Natural Gas Inc. – and it has not protested theabandonment of the facilities.

FERC also approved the restructuring of Sabine’s business into alimited liability company. It calls for Sabine to abandon all ofits jurisdictional pipeline facilities to Sabine LLC, which willown and operate them in the future. Sabine has about 188 miles ofpipelines and laterals, ranging from 22 to 14 inches in diameter,in Louisiana, Texas and in the Gulf of Mexico. The main part of itssystem extends from the Henry Hub at Erath, LA, to Port Arthur, TX.

Sabine LLC is a limited liability company wholly owned by TexacoExploration and Production Inc. One of the reasons stated fortransferring the pipeline assets to Sabine LLC was to create a”more efficient business structure” for the operation of thefacilities, the order said [CP00-24, CP00-25]. As a limitedliability company, it would be able to take advantage of certainstate and franchise tax benefits and gain greater flexibility toraise capital.

Sabine told FERC that the annual usage of the pipelinefacilities to be sold to Texaco Petrochemical had declined over thelast couple of years. It has dropped from an average of 80,260Dth/d in 1995 to 20,950 Dth/d last year. Sabine said the declinewould have been even more pronounced had it not been forsubstantial discounting.

Shippers historically have used this segment of Sabine’s systemto take advantage of the pricing differentials between Texas andLouisiana. But “since such differentials have been flat for sometime, and are expected to continue to be flat for the foreseeablefuture, shippers no longer have this incentive. Instead, it is moreefficient to move gas directly to the consuming markets,” the FERCorder said in approving the sale of part of Sabine’s system.

“The proposed abandonment will permit Sabine LLC to concentrateits efforts on those assets that are of greatest value to itscustomers and avoid the costly maintenance expenses and reduceoperational costs on an under-utilized section of the pipeline.”

Susan Parker

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