A proposal of Trunkline Gas to sell one third of its mainlinegas system – about 720 miles – to an affiliate for transportationof ethane and other hydrocarbons came under heavy attack at FERCfrom the pipeline’s shippers this week.
Most argued Trunkline’s system still is considered a key link inthe Midwest pipeline grid, even in light of all the new pipelineconstruction coming into that market. They disputed Trunkline’sclaims that firm capacity commitments on this part of its system(Line 100-1) were expected to dwindle over the next couple ofyears.
Trunkline seeks to sell this segment of its pipeline, whichspans from Louisiana to Illinois, for $32 million ($10 million inbook value plus $22 million in additional costs) to a newaffiliate, Trunkline A.P. Pipeline Co. The line would be convertedto transportation of hydrocarbon vapor, and thus permanentlyremoved from natural gas service. The sale, if approved by theCommission, would reduce Trunkline’s capacity of about 1,810 MDth/dby 255 MDth/d, or by about 14%.
Trunkline has predicted that firm contracts on its system willdrop sharply by 947 MDth/d. or by 43%, by Nov. 1, 1999. But”Trunkline’s pessimistic firm-contract prediction ignores the factthat the demand for firm natural gas transportation on its systemhas steadily increased and remains strong,” said Memphis Light, Gasand Water in comments at FERC [CP98-645]. It noted that reportsfiled at the Commission showed that the pipeline’s firm contractsrose 21% from 1,812 MDth/d in 1996 to 2,189 MDth/d in early 1998.
Likewise, Amoco Production disputed the pipeline’s claim thatits post-abandonment capacity of 1,555 MDth/d would be more thansufficient to meet firm commitments for transportation service inNovember 1999. It said Trunkline’s Form 11 reports indicate thatthroughput on the pipeline’s system has been more than 2,000 MDth/din past winter months, which is 455 MDth/d more than would be lefton its system.
Indicated Shippers also said Trunkline’s request was notjustified since the transfer of 14% of Trunkline’s capacity wouldreduce the pipeline’s cost-of-service by only $3 million, or about1.8%. “…[A] case for abandonment might be made if it would resultin a cost-of-service reduction that was proportionately larger thanthe capacity to be abandoned,” the group noted.
“But this is not the case under Trunkline’s proposedabandonment. Here the abandonment will only increase the burden onshippers in the form of higher rates resulting from adisproportionately high loss of throughput and design units incomparison to the reduction in cost of service.”
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