Contracts

With overloads of turned-back capacity and a bottoming marketfor long-term pipeline transportation contracts, distributors havefinally picked up some pipeline support for a “generic” departurefrom straight fixed variable (SFV) rates.

In the latest of a yearlong effort to put the brakes to anunwelcome MarketLink project, the state of New Jersey and thestate’s Department of Law and Public Safety called on FERC lastweek to rescind and vacate the certificate approving constructionof the controversial pipeline expansion through the northern partof the state, and to treat sponsor Transcontinental Gas Pipe LineCorp.’s recent request to amend the project as a new application.

Kinder Morgan says an open season for an expansion of TrailblazerPipeline has signed up 300 MMcf/d of fixed rate contracts for aminimum term of 10 years. The company is targeting the fourth quarterof 2002 for completion of the $54 million project. The proposedexpansion of Trailblazer’s 436-mile pipeline would start in Rockport,CO, at a multi-pipeline connection, and end in Gage County,NE. Trailblazer plans to install two new compressor stations, addadditional horsepower at compressor station 602 and perhaps constructsome 36-inch loop. The open season “generated a very strongresponse,” said Richard D. Kinder, chairman of Kinder Morgan EnergyPartners L.P. The company dropped an earlier plan to include anextension to its pipeline system in the open season when it appearedColorado Interstate Gas would have an expansion of its competingMedicine Bow lateral completed before a new Trailblazer line could beconstructed (see Daily GPI, Aug. 8).

After defaulting on multiple contracts last July during a periodof extreme power prices and taking huge losses to make up for theproblem, Cinergy considered getting out of trading entirely.However, it ended up scaling back its national operations to aregional focus and it brought in a large new team of moreexperienced players.

After defaulting on multiple contracts last July during a periodof extreme power prices and taking huge losses to make up for theproblem, Cinergy considered getting out of trading entirely.However, it ended up scaling back its national operations to aregional focus and it brought in a large new team of moreexperienced players.

Leviathan Gas Pipeline Partners LP contracted with MODECInternational LLC for construction of the hull for a floatingplatform to be used as part of its Sunday Silence field developmentproject in Gulf of Mexico Ewing Bank Blocks 958, 959, 1002 and 1003in 1,500 feet of water. MODEC International, which is owned by FMCCorp. and Mitsui Engineering & Shipbuilding, was selected byLeviathan after reviewing four competitive bids.

Pacific Gas and Electric Co. and California’s independent powerproducers with qualifying facility (QF) contracts have cut a dealto free up excess power from the merchant generators to help handledemand spikes anticipated during this summer’s heat waves. TheCalifornia Independent Energy Producers (IEP) expect to have anadvice letter filing with state regulators by the end or April tofree up as much as 1,000 MW of power in the summer. Thin ancillaryservices supplies last summer caused record price spikes.

Allowing interstate gas pipelines to sell long-term turnbackcapacity at market-based rates, without first requiring a showingof a competitive market or mitigation measures, could trigger morealleged “anticompetitive” contract arrangements between pipes andmarketers – similar to the one between Dynegy Marketing and Tradeand El Paso Natural Gas, warned California regulators.

Expiration day at Nymex has been a bull-trader’s worst nightmarerecently because the last several contracts have been ushered offthe board amid a tempest of late selling activity. Septemberslipped 9 cents on its last trading day to cap off a 27.5 centprice decline for the week. Likewise, October and Novemberplummeted 15 cents and 13.6 cents to settle to either side of $2.00at final settlement. And although December’s fate is far fromsealed, Monday’s 6.6-cent losses and $2.097 penultimate settlementprompted traders to wonder if the market might be in for anotherround of expiration-day losses today.