Transwestern Pipeline Co. said its proposed Gallup expansionsatisfies all the requirements of the new policy statement forcertificating pipeline projects and as a result should be”expeditiously” approved by FERC.

The policy statement, which was issued Sept. 15, nixed thepresumption in favor of rolled-in rates for projects that limitrate increases to existing customers to 5%. Instead, new projectsnow are required to stand on their own without any subsidies fromthe pipeline’s existing customers. The policy also requiressponsors to weigh the public benefits of a proposed project againstthe potential adverse impact on existing customers, affectedlandowners and competing pipelines and their captive customers.

In an Oct. 20 letter to FERC, Transwestern outlined how itsGallup project, which proposes to boost deliverability to theCalifornia border by 150,000 Mcf/d, would square with the newpolicy statement. Foremost, it said the proposed expansion wouldn’trequire subsidies from existing customers because the rates for its”current firm customers” are locked in for the entire duration oftheir contracts under the terms of a 1995 global settlement. Themajority of the contracts aren’t due to expire until 2007.

“Therefore, there will be no impact on current firm customersfrom any roll in of costs from the proposed facilities during theterm of current global settlement contracts. In addition, therevenues realized from the proposed expansion will offset some ofthe…$51 million of annual costs for the [turned-back] capacityunder the global settlement…..” Currently, in return for ratecertainty, the settlement customers and the pipeline share thecosts for the turned-back capacity, but the entire burden willrevert to Transwestern beginning Nov. 1, 2001.

As for the Gallup expansion shippers, they have contracted topay rates, which exceed the cost-of-service of the project,Transwestern said. Consequently, “the rates they have agreed to payare greater than an incremental rate would be.”

Moreover, the Gallup expansion will offer system-wide benefitsto existing shippers, the Enron pipeline said. “…[S]ince theproposed expansion facilities will provide additional capacity bothon the San Juan lateral and on the mainline to California, existingshippers will benefit from the project by increased systemreliability and flexibility, and will not experience anydegradation of service.” The project has a targeted in-service dateof February 2000.

Transwestern also said its proposed expansion wouldn’t cut intoa market that’s already being served by a rival pipeline.”Therefore, there is no impact to competing pipelines’ captivecustomers. Furthermore, Transwestern held an open season for suchexpansion capacity and has contracted 100% of the capacity for newmarkets to be served. This further supports that competingpipelines and their customers should not be adversely affected bythe proposed expansion.”

Lastly, “the proposed construction and operation of the subjectfacilities will not have an adverse impact on the environment,landowners or surrounding community. This is supported by the factthat Transwestern has acquired the property where the proposedGallup compressor station will be located,” it said.

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