Trailblazer Pipeline received a final green light from FERC last week to add 324 MMcf/d of firm capacity to its existing pipeline system in Colorado, Wyoming and Nebraska. The expansion will bring the pipe’s total firm capacity to about 816 MMcf/d in July 2002. However, the Commission denied Trailblazer’s request to modify its right of first refusal process and rejected the pipeline company’s related pro forma tariff sheets. It accepted the incremental rate design of the project, however.

The $58.5 million project will include the addition of two 10,000 hp compressors at a new compressor station (601) in Logan County, CO, two additional 10,000 hp compressors at a new station (603) in Kearney County, NB, one compressor expansion to 10,000 hp from 5,200 hp at the existing station 602 in Lincoln County, NB, and an additional 10,000 hp unit at station 602.

Trailblazer signed 10- or 11-year fixed-rate agreements with six shippers for the additional capacity from interconnects with Colorado Interstate Gas and Public Service Company of Colorado at Rockport, CO, and delivery points to Northern Natural and Natural Gas Pipeline Company of America at Beatrice, NB, which is the eastern terminus of the Trailblazer system. The shippers include CMS Energy Marketing (100,000 Dth/d), Barrett Resources (70,000 Dth/d), Western Gas Resources (57,500), Enron North America (41,000), Devon Energy (33,000) and Pennaco Energy (22,500).

In addition to the negotiated fixed rates Trailblazer offered the current expansion shippers, it also proposed a separate incremental rate with the following components: reservation charges of $3.5931/Dth and a commodity rate of $0.0038/Dth. Trailblazer based its recourse rate on a cost of service of $14.4 million and the expansion capacity of 324,000 Dth/d. It used a 5% depreciation rate and a pre-tax return of 13.99%. In addition, it proposed an initial fuel retention rate of 3.2%. A fuel tracker mechanism would adjust the fuel retention factor on an annual basis.

Trailblazer also proposed to modify its ROFR process such that existing shippers whose contracts expire after the proposed 2002 expansion facilities are in service could be required to pay a rate equal to the incremental expansion rate. The filed pro forma tariff sheets also provide a mechanism for reallocation costs between the historic and the incremental rates so that all the recourse rates remain within Trailblazer’s cost of service. FERC rejected these last two provisions.

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