NGI The Weekly Gas Market Report
In light of expanding markets being served by El Paso NaturalGas’ South Mainline, East-of-California (EOC) shippers haveexpressed concern with the pipeline’s “Line 2000 Project” in whichit seeks to abandon six aging compressor facilities and replacethem with nearly 785 miles of converted line that would loop muchof its southern leg. The rub is that the proposed project,essentially a one-for-one swap, is not expected to create any newcapacity, yet El Paso is looking for its shippers to foot the tab.
El Paso “has failed to demonstrate that abandonment of the sixexisting compressor facilities on the South System is in the publicconvenience and necessity. Indeed, recent developments in themarketplace suggest there may be a need for both the Line 2000Project as well as replacement/maintenance of these existingcompressor facilities,” the EOC shippers told FERC [CP00-422].
Keeping the six compressor facilities, several of which arelocated in the vicinity of the Wilcox Compressor Station, inservice is especially important because of the uncertainty overwhen the disabled Line 1103 will return to service, marketobservers said. Some fear the 30-inch line, which ruptured andcaused the deadly explosion on El Paso’s South Mainline on Aug. 19,could be out for an extended period.
“I don’t know how long before that could be repaired. And so ifit runs into the first quarter of next year, when the Line 2000Project is supposed to go on line, that could create problems,”said an attorney for one of the EOC shippers. “El Paso’s SouthernSystem has been full a good number of days this past summer, whichis a major change. We went from two-thirds empty to full……So ifyou start looking at all these changes on the system, coupled with1103 being out, it just makes you [wonder whether] El Paso ought tobe at least considering whether there is a use for thatcompression.”
Given that El Paso expects to serve “directly or indirectly” a10,000 MW gas-fired generation facility that currently is underconstruction or in development, the EOC shippers believe thepipeline’s proposal to spend $153 million to acquire and convert acrude oil that won’t add any new capacity is senseless and absurd.
“In view of this expected growth in gas demand, proposing apipeline project that expends a great deal of money withoutcreating any new capacity appears to be short-sighted and not inthe best interests of El Paso’s customers,” said the EOC shippers,especially since they would be the ones footing the bill forconverted line. El Paso proposes to recover the costs in its nextrate case.
Indicated Shippers said they had a lot of unanswered questionsabout El Paso’s project. “It is…questionable, to say the least,that placing a 785-mile, 30-inch pipeline in service will notresult in additional capacity, notwithstanding El Paso’s claims tothe contrary,” the producer group said. Moreover, it pointed out ElPaso plans to re-evaluate its need for the aging compressorfacilities one year after it abandons them. The group urged theCommission to schedule a technical conference for El Paso to”explain and quantify the benefits and impacts” of its proposedproject. Sempra Energy, parent of Southern California Gas and SanDiego Gas and Electric, made a similar request.
The EOC shippers did not protest El Paso’s proposal, but theyasked FERC to order the pipeline to provide the cost estimates oftwo alternatives that the pipeline considered and rejected: 1)replacing large amounts of existing compressor horsepower on theSouth Mainline with the construction of additional pipelinelooping; and 2) either spending significant operation andmaintenance dollars to maintain the existing compressors, which arebetween 47 and 54 years old, or replace them with new units.Specifically, the shippers want to know if the costs for therejected alternatives exceeded $153 million.
Also, the EOC shippers believe it would be a “mistake” for FERCto give El Paso the go-ahead to spend the $153 million without itdeciding the outcome of the complaint of Amoco Production and AmocoEnergy Trading, which accused El Paso of overbooking capacity onits system. But so as not to delay the processing of El Paso’sproposed project, they asked that any certificate awarded to thepipeline be conditioned on the outcome of the Amoco complaintproceeding.
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