Trunkline Gas Co. filed plans with FERC yesterday to remove720-miles of its 26-inch diameter mainline from service permanentlybecause its system has been underutilized and is likely to facecontinued decontracting as more gas pipelines are built into theMidwest from western Canada. Trunkline said it plans to spin downthe asset to another Duke Energy affiliate for conversion tohydrocarbon vapor transportation. The line has the capacity totransport up to 255 MDth/d of gas from Longville, LA, to Bourbon,IL.

Trunkline told the Commission another Duke subsidiary hasentered into an option agreement with Aux Sable Liquid ProductsL.P., one of the Alliance Pipeline project partnerships, to supportits plan to convert the line for the transportation of the gasliquids by-product to the Gulf Coast region from a proposedIllinois processing plant Aux Sable plans to build at the terminusof Alliance. The conversion is expected to be completed by Oct. 1,2000. Alliance, if approved by FERC, will be designed to transport1.4 Bcf/d of high British thermal unit natural gas from WesternCanada to the Chicago-area in late 2000.

“Trunkline is not getting out of the natural gas transportationbusiness,” said Steve Roverud, chairman of Trunkline. “This issimply a more effective use of one of our assets. Overcapacity inthe Midwest has caused Trunkline to transport gas at deeplydiscounted rates for several years. We will continue to haveadequate capacity to serve our long-term, firm transportationcustomers.”

In its application, Trunkline said it has had to sell asubstantial portion of its firm transportation capacity (two-thirdsof its total capacity currently) at a 33% discount from maximumrates. “This is not a recent phenomenon. Trunkline’s systemcontinually has operated at levels well below maximum capacitysince 1988, and only has operated at close to or at full capacityduring the coldest winter heating seasons, i.e., the 1995-1996winter, or as a result of Trunkline deeply discounting firmservices,” the pipeline told FERC. In 1994, the pipeline was forcedto discount 75% of its maximum daily quantity. Since 1995, over 90%of its MDQ has been sold at discounted rates. And still its systemhas had 568 MDth/d of unsold capacity annually. Furthermore, thepipeline said underutilization is likely to increase as at least 2Bcf/d of new firm transportation is added between western Canadaand the Midwest over the next two years.

Trunkline cites a recent study by the American Gas Associationthat shows pipelines entering the Midwest had only 37% of theirfirm capacity under contract through 2001. “[E]ven though thatamount will change as capacity is remarketed, the potential for ahuge amount of unsubscribed capacity will remain in the Midwestregion.” The average term of Trunkline’s current contracts is fouryears. During an open season for available firm service of itssystem in spring of 1995, the pipeline received “no requests” forlong-term transportation.

The abandonment of the 26-inch diameter line will have “noadverse effect on the customers’ service requirements and will notaffect Trunkline’s ability to meet all of its firm serviceobligations,” the pipeline said, adding the line represents onlyabout 1% of the 21,584 MDth/d of interstate pipeline capacityentering the Midwest region.

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