Associated Press file
After a New Mexico pipeline exploded and killed 12 people, the Department of Transportation ordered El Paso Natural Gas to reduce the pressure on its line.
Posted on 10/15/2002 4:21:03 AM PDT by snopercod
El Paso Corp. Chairman William Wise has been writing a lot of letters lately; letters to Congress, letters to newspapers, letters to employees.
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Associated Press file
After a New Mexico pipeline exploded and killed 12 people, the Department of Transportation ordered El Paso Natural Gas to reduce the pressure on its line. |
The message is the same in all of them. Wise is vehemently disputing an administrative law judge's recommendation that the company be penalized because the judge concluded the company held natural gas off the market, raising prices during California's power crisis of 2000-2001.
The judge's recommendation -- which still must be accepted or rejected by the Federal Energy Regulatory Commission -- already has battered the stock and hurt El Paso's credit rating.
So El Paso has cranked its public relations machine into high gear. The Houston energy company has a reputation for vigorously defending itself in the court of public opinion, whether it's a tragedy like the explosion of its pipeline that killed 12 campers, or accusations of wrongdoing by one of its largest shareholders, Oscar Wyatt.
El Paso has been firing off letters to every member of Congress and responding to newspaper editorials that the company believes are off target with lengthy letters to papers, including the Houston Chronicle and the New York Times. It also has run full page ads expressing its position in major newspapers.
Employees of the company say they, too, have been receiving memos from Wise defending the company and criticizing the actions of the FERC judge.
The full-court press against the judge's action comes as the company is under scrutiny from the Securities and Exchange Commission and a federal grand jury in Houston for its energy trading. Some believe if the FERC lowers the boom on El Paso, it could be the coup de grâce for the company.
The judge's recommendation already has cost El Paso. The company's debt rating has been cut to one notch above junk-bond status, and its shares have lost about 27 percent of their value since the recommendation was issued Sept. 23, much of it on that day. The company's market capitalization has fallen from about $4.4 billion the day the order was issued to $3.2 billion on Wednesday.
If the commission decides to act on the judge's recommendation and penalize the company, it would likely open the door for an avalanche of litigation from shareholders, bondholders, consumers and states.
The company's barely investment grade credit rating could be slashed to junk status, which would effectively end its energy trading business and put the company in a precarious financial position.
The commission can act on the judge's recommendation or do nothing. It is expected to make a decision before the end of the year.
The company is defending itself by arguing the judge's reasoning could lead to other pipelines being forced to operate at maximum pressure continuously, which would be a safety hazard.
"Beyond the immediate effects on El Paso, however, the judge's opinion has serious implications for pipeline safety and reliability across the country," according to the letter Wise sent to members of Congress.
The judge based his decision in part on the company's not running its natural gas pipeline into California at maximum pressure when demand was high. But El Paso argues in its letters that it not only would have been unsafe to run the pipeline at that rate, but that it was blocked from doing so by a federal order following the explosion in southern New Mexico.
The question now is whether this pressure will yield positive results for the Houston energy companies.
Letter-writing campaigns can be effective tools for swaying appointed officials such as FERC commissioners and create public concern over an issue like the ones raised by El Paso, said Jim Albertine, president of the American League of Lobbyists in Washington, D.C.
"Certainly appointed positions such as FERC commissioners are responsive to the Congress," Albertine said. "It goes back to the issue of purse strings. This is not an unusual tactic to use in this kind of situation."
A spokesman for El Paso said the letter-writing campaign has elicited bipartisan support from members of Congress.
"The feedback that we have been getting in general is that everyone shares the same safety concerns that we have," said Mel Scott, an El Paso spokesman.
The company's efforts appear to have some support at the Department of Transportation, the agency that ordered the company to reduce pressure in its line to California after the August 2000 explosion.
The department issued a corrective order to the company ordering it to run the line at 80 percent of the rated operating pressure. A spokesman for the department said the line in question is still running at about 80 percent of its maximum-rated pressure.
An official at the Department of Transportation who asked not to be quoted by name said the agency is concerned about the judge's recommendation with regards to the safety issues it raises. The agency has not been a party to any of the FERC proceedings.
The fact that El Paso had been ordered to reduce pressure in its line during the period in question is not disputed by anyone, yet the corrective order that was in effect during the period is not even mentioned in the judge's recommendation.
"The record is clear that El Paso Pipeline could have operated at or near maximum allowable operating pressure without violating the Department of Transportations regulations," according to the recommendation of the FERC chief administrative law judge, Curtis Wagner.
Such letter-writing campaigns can be effective lobbying tools to get out a message and an opposing view, said Jerald Halvorsen, president of the Interstate Natural Gas Association of America, an industry trade and lobbying group that has also taken issue with the FERC judge's ruling.
"We find it usually does have an impact," Halvorsen said. "The regulators read the trade press in Washington and as long as it looks like you have some good arguments, it can help to get your side out."
A company like El Paso also can utilize shareholders to influence the opinion on an issue with their congressional representative.
"If you have several hundred shareholders in a district of a member of Congress, they can send a very effective message," Albertine said.
El Paso Natural Gas CORRECTIVE ACTION ORDER from the DOT
[cover letter removed for brevity]
Purpose and Background
This Corrective Action Order (Order) is being issued, under authority of 49 U.S.C. § 60112 to require El Paso Natural Gas Company (El Paso), a wholly owned subsidiary of the El Paso Energy Corporation, to take the necessary corrective action to protect the public and environment from potential hazards associated with its pipeline. The El Paso Pipeline System is both owned and operated by El Paso. The El Paso Pipeline System operates in Texas, Oklahoma, New Mexico, Colorado, Arizona and California. The Office of Pipeline Safety (OPS) has found that corrective action is necessary to prevent the recurrence of a failure similar to that which occurred on August 19, 2000.
On August 19, 2000, at approximately 5:30 a.m. MDT, El Paso's 30-inch natural gas transmission line 1103 ruptured and ignited near a Pecos River crossing in Eddy County, a rural area approximately 30 miles southeast of Carlsbad, New Mexico. The release and subsequent ignition resulted in eleven deaths and one critical injury.
Pursuant to 49 U.S.C. § 60117, the Southwest Region, OPS initiated an investigation of this incident.
Preliminary Findings
1. On August 19, 2000, at approximately 5:30 a.m. MDT, El Paso's 30-inch natural gas transmission line 1103 (line 1103) ruptured and ignited near a Pecos River crossing in Eddy County, a rural area approximately 30 miles southeast of Carlsbad, New Mexico, and
approximately 3000 feet upstream of El Paso's Pecos River Compressor Station and 300 feet on the east side of the Pecos River. The release and subsequent ignition resulted in eleven deaths and one injury.
2. Line 1103 is both owned and operated by El Paso and transports natural gas from its Keystone Compressor Station in Winkler County, Texas to La Paz County, California. It passes through or near the cities of El Paso, Texas; and Tucson and Phoenix, Arizona.
3. The ruptured pipeline, Line 1103, runs parallel to two other pipelines, Line 1100 and
Line 1110 at the Pecos River crossing Lines 1103 and 1110 are 30 inches in diameter and were built in 1950. Line 1100 is 26 inches in diameter and was built in 1947.
4. Line 1100 and its suspension cable bridge sustained an undetermined amount of damage at the Pecos River crossing, due to the fire. It is still undetermined whether Line 1110 sustained damage.
5. The release occurred on a 30-inch segment of Line 1103 pipeline at a low point in a section of the piping that does not allow an internal cleaning tool to traverse through it. This segment runs from the Keystone Compressor Station to the Pecos River Compressor Station. This segment is constructed with 30-inch, DSAW - X52 pipe with varying wall thicknesses.
6. Line 1103 has a maximum allowable operating pressure (MAOP) of 837 psig and has not been hydrostatically tested in its entirety since its construction in 1950.
7. The Keystone Compressor Station's operating pressure in effect at the time of the rupture at approximately 5:30 a.m. MDT on August 19, 2000 was 781 psig.
8. Preliminary investigation of Line 1103 by OPS and National Transportation Safety Board (NTSB) investigators indicates that significant internal corrosion was visible on the failed section. Internal corrosion may have been a contributing factor in the line failure. The possibility of internal corrosion on other lines in the area is a safety concern.
9. The cause of the incident is currently unknown as the investigation is on-going and all facts have not yet been determined.
10. Metallurgists and investigators are presently at the failure site to perform an evaluation of the failed pipe.
11. The El Paso pipelines are critical suppliers of natural gas to Arizona and Southern California. El Paso has arranged for rerouting gas supply from other storage sites.
Determination of Necessity for Corrective Action Order and Right to Hearing
[snip]
Required Corrective Action
Pursuant to 49 U.S.C. 60112, I hereby order El Paso Natural Gas Company to take the following corrective actions with respect to its pipelines in the vicinity of the Pecos River in New Mexico:
With respect to the line segment between valve no. 6 and the Pecos River Compressor Station on Line 1110,
1. Do not operate this segment until items 2 through 4 are completed and determined acceptable by the OPS Southwest Region Director:
2. Directly assess the integrity of the line pipe at all low points, pig traps, dead end stub lines, and crossover piping that may have a no flow condition, and any other
section of piping that liquids might settle in, and implement any needed corrective action. The direct assessment must include both x-ray and ultrasonic examinations to determine possible metal loss.
3. Hydrostatically test the line segment to 90 percent (90%) specified minimum yield strength (SMYS).
4. After completion of item 3, but before resuming operation, submit a return to service plan to the Region Director for his approval. The return to service plan should include a summary of all findings to date.
5. Once operation is resumed, restrict the maximum allowable operating pressure to 80 percent (80%) of the operating pressure of Line 1103 at the time of failure, which was calculated to be 538 psig.
6. Maintain the pressure restrictions until written authorization is given to exceed them by the Associate Administrator for Pipeline Safety. The Associate Administrator will review within ten (10) working days, and consider removing, this pressure restriction following receipt of additional information about the factors that may have played a role in the accident of August 19, 2000 and the applicability of those factors to the operation of Line 1110.
With respect to the line segment between valve no. 6 and the Pecos River Compressor Station on Line 1103,
7. Do not operate this segment until a review of additional information about the factors that may have played a role in the accident of August 19, 2000, and the applicability of those factors to the operation of Line 1103.
With respect to the line segment between station 2482+52 to the Pecos River Compressor Station on Line 1100,
8. Do not operate this segment it shall remain out of service until items 9 through 12 are completed and determined acceptable by the OPS Southwest Region Director:
9. Submit the design for the temporary crossing of the Pecos River to the Region Director for his approval.
10. Directly assess the integrity of the line pipe at all low points, pig traps, dead end stub lines, crossover piping that may have a no flow condition, and any other section of piping that liquids might settle in, and implement any needed corrective action. The direct assessment must include both x-ray and ultrasonic examinations.
11. After installation of the new crossing, but before operating the segment, hydrostatically test it to 90 percent (90%) SMYS.
12. After completion of item 11, but before resuming operation, submit a return to service plan to the Region Director for his approval. The return to service plan should include a summary of all findings to date.
13. Once operation is resumed, restrict the maximum allowable operating pressure to 80 percent (80%) of the operating pressure of Line 1103 at the time of failure, which was calculated to be 538 psig.
14. Maintain the pressure restrictions until written authorization is given to exceed them by the Associate Administrator for Pipeline Safety. The Associate Administrator will review within ten (10) working days, and consider removing, this pressure restriction following receipt of additional information about the factors that may have played a role in the accident of August 19, 2000 and the applicability of these factors to the operation of Line 1100.
With respect to the line segments between the Keystone Compressor Station and the Guadalupe Compressor Station on Lines 1110 and 1103, and between the Eunice Compressor Station and the Guadalupe Compressor Station on Line 1100,
15. Take immediate steps to restrict the maximum allowable operating pressure to 668 psig, which is 80 percent (80%) of the maximum operating pressure. The required pressure restriction must be achieved within five (5) days of the receipt of this Order.
16. Maintain the pressure restrictions until written authorization is given to exceed them by the Associate Administrator for Pipeline Safety. The Associate Administrator will review within ten (10) working days, and consider removing, this pressure restriction following receipt of additional information about the factors that may have played a role in the accident of August 19, 2000, the applicability of these factors to the operation of Line 1110 and Line 1100, and the satisfactory completion of items 17 through 19.
17. Identify all crossings that cannot be traversed with an internal cleaning tool, similar to the Pecos River crossing, areas of no flow, and areas that include, but are not limited to, dead end pipe stubs, pig traps, valved off cross-overs, low spots, and any other section of piping that liquids might settle in.
18. After completion of item 17, develop a risk based plan to inspect, assess, and correct, as necessary, all of the areas identified in item 17 for signs of internal corrosion or other metal loss. Perform those inspections and provide the OPS Southwest Region Director with the results of the inspections.
19. Within 90 days of issuance of this Order, provide the Region Director an analysis of the continued safe operation of Line 1100, Line 1103, and Line 1110 based on the testing and inspection required under this Order, what is discovered about the failure of August 19, 2000, and other information available to the operator about the integrity of these pipelines.
With respect to all segments and all other areas mentioned in this Order:
20. Prior to implementing any correction action, which includes, but should not be limited to, repairs or replacements, submit a corrective action plan to the OPS Southwest Region Director for review and approval. The plan must describe the criteria for evaluating the corrosive area and the criteria used for selecting the corrective action. The corrective action must also meet current industrial standards and regulatory requirements.
21. In order to fully evaluate the information requested in this order, submit to the National Pipeline Mapping System (NPMS) all El Paso geospatial pipeline data that was not included in the Tennessee Gas Pipeline Company submission to the NPMS. If unable to include metadata initially, include both the geospatial and attribute data as discussed in the NPMS Operator Standards. Submit the data by August 24, 2000.
22. Submit any design for permanent Pecos River crossings for the OPS Southwest Region Director's approval. All permanent designs must include, but not be limited to, the ability of these segments to be traversed by an internal inspection tool.
23. Provide OPS with 48 hours advance notice prior to beginning the direct assessments, hydrotesting, and any corrective action required by this order to allow OPS to observe the actions.
24. Based on the results of the above requested information, develop a plan to assess the integrity of the remainder of the El Paso Pipeline System. The plan should include, but not be limited to, the actions required in Items 17 through 19.
25. The OPS Southwest Region Director may extend the time for compliance with any of the terms of this order for good cause. Extension requests must be in writing.
The procedures for the issuance of this Order are described in Part 190, Title 49, Code of Federal Regulations. Section 190.233, a copy of which is enclosed, is made part of this Order and describes the Respondent's procedural rights relative to this Order.
Failure to comply with this Order may result in the assessment of civil penalties of not more than $25,000 per day and in referral to the Attorney General for appropriate relief in United States District Court.
Sincerely,
Stacey Gerard
Associate Administrator for Pipeline Safety
It also makes no sense to me that integrated oil companies' stock is not rising. With war looming in the Gulf, and oil and natural gas prices at relatively high levels already, their stock should be soaring. Instead, it's been declining.
I couldn't help myself. Call me a fool, but I just bought 1000 @ 6.94 for my 401(k).
Good find Snoper!
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HeHeHe!!!
I was thinking the same thing....
I only got in on half the runup, but making 7% in one day is not bad. It feels SO GOOD to actually make some money in the market again. (Hope I don't look like a goat tomorrow.)
I noted that this latest EP run started on the 8th, and the Chron article came out on the 10th. Coincidence?
Hello! Is anybody out there? New information here. Hello???
Maybe tomorrow.
An administrative law judge is one who specializes in handling laws and regulations within a particular department of government. In this case, the judge works for the Federal Energy Regulatory Commission.
It looks like Wagner was originally appointed by Ford.
Chief Judge Curtis L. Wagner, Jr.
Chief Judge Curtis L. Wagner, Jr. received his law degree from the University of Tennessee in 1951 and received his pre- legal education at Tennessee Polytechnic Institute. He was admitted to the Tennessee. Bar on March 31, l952.His government service includes both the Criminal and Civil Divisions of the U.S. Department of Justice, and serving in a civilian capacity as Chief of the Regulatory Law Division in the Army's Office of The Judge Advocate General.
Prior to entering Government Service, Chief Judge Wagner was in the private practice of the law with Kramer, Dye, McNabb & Greenwood in Knoxville, Tennessee.
Chief Judge Wagner has extensive experience in mediation and other forms of alternative dispute resolution. He has successfully resolved many large multi-party cases at the Commission and has given many lectures on the subject.
He has been an Administrative Law Judge at FERC and its predecessor, the FPC, since l974, and has been Chief Judge since l978.
Chief Judge Wagner has received numerous awards including the Department of the Army's highest award, the Decoration For Exceptional Civilian Service. He appears in four separate editions of Who's Who.
There is obviously more to this story than has yet seen the light of day.
For some reason, this DOT order does not appear to have been referenced in the original FERC recommendation (http://www.ferc.fed.us/RP00-241-006-09-23-02.pdf). That is most likely because it was never introduced by the defendants.
The defendants, El Paso and its subsidiaries, did claim in the trial to have often pumped at MAOP. So either they were violating one order by pumping too much, or they were violating another regulation by pumping too little.
I've made some wonderful one-day paper profits.
The original decision does not separately name or consider the three lines. Nor does the DOT's Office of Pipeline Safety have any reference to the current status of line 1003's pressure restriction. It isn't clear to me what the relative capacties are.
It is surprising to me how old these gas lines are. One was built in 1947, another in 1950.
The last decision by the judge was the result of a second investigation:
Dec. 19, 2001, 9:27PM
WASHINGTON -- Federal regulators on Wednesday ordered a judge to gather more evidence before deciding whether Houston-based El Paso Corp. used its ability to control natural gas supplies in California to drive up prices there.
The Federal Energy Regulatory Commission instructed Chief Administrative Law Judge Curtis L. Wagner Jr. to conduct another hearing to determine whether El Paso withheld capacity on a key gas pipeline when gas demand was on the rise last winter.
Two months ago, Wagner ruled that while El Paso and its affiliates had the ability to abuse their strong position, "the record is not at all clear than they in fact exercised market power."
The commission, however, wants more data to back up that conclusion.
"The existing record in this proceeding does not provide an adequate basis for resolution of this issue," the commission wrote.
Doug Atnipp, a partner with the law firm Porter & Hedges in Houston, said the decision means "the can of worms has been reopened."
El Paso officials downplayed the significance of the commission's order, calling it "limited" and "narrow."
"Given the high level of publicity that this case has engendered, it is not surprising that the FERC seeks to ensure that every question raised has been answered," Peggy Heeg, El Paso's general counsel, said in a prepared statement. "We are confident chief Judge Wagner will reconfirm his conclusion."
While the scope of the new hearing may be limited, Atnipp said that "an adverse finding would be profoundly negative on El Paso."
California's regulators and utilities accused El Paso of using its market power to increase energy bills for the state's consumers by $3.7 billion. They also said the reduced gas supplies worsened the state's electricity shortage.
The commission wants El Paso to provide daily capacity data for the pipeline from November 2000 through March 2001.
"The question of whether El Paso Pipeline made all of its capacity available at its California delivery points is a uniquely important issue that requires further development," the panel said.
California Gov. Gray Davis' office did not immediately respond to a request for comment.
Natural gas spot prices in Southern California spiked as high as $60 per thousand cubic feet, the commission noted. On Wednesday, gas was selling in the region for $2.50 per thousand cubic feet.
The pipeline at issue transports natural gas from gas-producing basins in West Texas, Oklahoma and other areas to Southern California.
For years, California's utilities Pacific Gas & Electric and Southern California Edison, as well as a local distribution company, Southern California Gas, owned the rights to transport gas along the pipeline system. But as California moved to deregulate its electric industry, the state prodded the utilities to give up their capacity on the line.
In February 2000, El Paso opened bidding for gas marketing firms interested in purchasing a third of the capacity on the line, representing about one-sixth of the total pipeline capacity to Southern California.
An El Paso affiliate, El Paso Merchant Energy Co., won the rights to that capacity for a 15-month period with a bid of $38.5 million.
The California Public Utilities Commission objected and asked federal regulators to force El Paso to give back any profits earned under the arrangement.
The case gained great attention when rolling blackouts hit California. El Paso officials argued that the run-up in gas prices was caused, not by their decisions, but by an unanticipated -- and unprecedented -- surge in demand.
Also Wednesday, the commission proposed requiring utilities to report the results of their derivatives trading in government filings.
And after the collapse of Enron Corp., a huge derivatives trader, the commission is considering requiring independent power companies such as Enron to report the results of such trades as well.
A derivative is a security whose value is based upon a change in the value of some other commodity.
When 1103 ruptured, it was ordered that line 1110 be taken out of service for inspection, so a major source of natural gas for California was cut off. So far, I haven't been able to find the date of the corrective action order, but it looks like line 1103 was out of service for 11 months.
El Paso Natural Gas Returns Line 1103 to Service
HOUSTON, TEXAS, July 11, 2001 - El Paso Natural Gas Company, a subsidiary of El Paso Corporation (NYSE:EPG), announced the return to service of its 1103 pipeline near Carlsbad, New Mexico. The company has been working closely with the Office of Pipeline Safety (OPS), an agency of the Department of Transportation, to verify the integrity of this line and ensure its safety following a rupture that occurred on August 19, 2000. After a review of El Paso's inspection data and verification of the integrity of the 1103 line, the OPS approved El Paso's request to return the line to service at a reduced pressure on July 6, 2001.
Following the incident on August 19, the Office of Pipeline Safety issued a Corrective Action Order outlining, among other things, the steps it required El Paso Natural Gas to follow before allowing the pipeline's return to service. El Paso has completed all of the steps relating to returning Line 1103 to service and has reviewed the inspection data with the OPS to ensure that all requirements were satisfactorily completed. El Paso is committed to ensuring that its pipeline integrity program meets or exceeds all safety regulations and that all requirements of the Corrective Action Order are fulfilled.
Returning Line 1103 to service will not have an immediate effect on transportation volumes on the El Paso Natural Gas system because an adjacent line, Line 1110, was simultaneously taken out of service on July 6 so that the company may begin performing work on that line.
The company continues to review, identify, and modify the remainder of its system to ensure that the integrity of the pipeline continues to meet or exceed all industry and safety standards. The company will continue to enhance this program as new technologies and information become available.
Though they are not detailed, I presume that the capacity figures for that period would not have included Line 1003. I read some of El Paso's other press releases regarding the lawsuit and California energy crisis and they never mention the restriction on Line 1003 or the fact that it was out of service.
Only about this particular judge I hope. Most of the judges involved in the various suits will be in California and will be more politically active. Stay suspicious.
In the first place, I believe that El Paso provides almost half of California's imported natural gas. (I got that from a table on www.energy.ca.gov). California only provides 16% of it's requirements from in-state sources. For analysis purposes, let's just say EP provides 40% of all the gas used in California. Can anyone confirm this?
After the fire on August 19, 2001 (I don't know exactly when, since the DoT order is not dated), EP was told to take all three lines out of service for inspection. (See the Corrective Action Order items 1, 7, and 8). I have no idea how long this took, but I would think at least one month to do the X-rays, visual inspections, and hydrostat. It was probably longer.
Furthermore, a temporary line crossing had to be built on line 1100. (Item 9). That was "after submitting a design to the OPS", and those bureaucrats aren't too speedy, I'm guessing.
Finally, when all this stuff was done, all three lines could only be operated at 80% capacity. (Items 5, 13, and 15).
Now the first NG price spike in California occurred in December, 2000, before the fire (See chart in Natural-Gas Companies Find Unexpected Lift in California). That spike may well have been caused by the imminent bankruptcy of PG&E in, which was announced in January, 2001. A number of wholesalers refused to sell any gas to PG&E. PG&E Warns That Natural Gas Shortage on Horizon.
Anyone have a chart of natural gas prices for 2001-2002 so we can continue this discussion?
Natural Gas Intelligence
the weekly gas market newsletter
published : September 4, 2000Prices Ease as 700 MMcf/d Resumes Flow on El Paso's South Line
Less than two weeks after the deadly explosion on El Paso Natural Gas' system in southeastern New Mexico, the pipeline on Friday had more than 700 MMcf/d of capacity restored to its South Mainline, which is designed to feed a total of 1.1 Bcf/d to markets between Texas and California.
At mid-day Friday (Mountain time), El Paso said it began running about 260 MMcf/d through Line 1100 after it received the go-ahead from the federal Office of Pipeline Safety (OPS), according to company spokeswoman Kim Wallace. El Paso was able to re-start partial service on the 26-inch line after it built a 16-inch temporary connector line between Line 1110 and Line 1100, which was approved by OPS.
The temporary connector was installed just east of the Pecos River explosion site, about 30 miles from Carlsbad, NM. Wallace said Line 1100 would carry the gas from Eunice, NM, just Northeast of the Pecos River Compressor Station, to the connector with Line 1110, which then would transport it westward across the Pecos River Bridge where it would meet up with Line 1100 further downstream. Meanwhile, Wallace said El Paso submitted to OPS last week the test results and a preliminary return-to-service plan for Line 1100.
Three days prior, the OPS had given El Paso permission to restore service to parallel Line 1110 from the Keystone Station through the Pecos River Compressor Station at a reduced level. The pipeline re-opened the line at about 400 MMcf/d, and gradually increased it to 480 MMcf/d by Friday. This is "still within the limits it [OPS] set" for Line 1110, Wallace said.
The OPS restricted El Paso's Line 1110 to 80% of the operating pressure of Line 1103 at the time it ruptured, according to Department of Transportation Spokeswoman Debbie Hinz. She said this put the line at a pressure of about 538 pounds per square inch.
The OPS-ordered shutdown of Line 1110 lasted 10 days, during which the agency ordered El Paso to conduct extensive hydrostatic, ultrasound and X-ray tests to determine their safety, and to submit a plan for restoring service to the line.
As for the future of Line 1103, which is the line that ruptured, Wallace said repairs on it would not begin until after the investigation of the explosion is completed, which will "probably be nine to 12 months."
The restoration of service couldn't come soon enough for El Paso customers who have been scrambling for transportation capacity ever since federal investigators and regulators closed down the three lines that make up El Paso's South Main leg in the wake of the blast that killed 11 people and critically injured one. El Paso and some of its California customers have been using gas from storage to meet their gas needs during the service interruption. The Department of Energy has set up a task force to evaluate the effects of the explosion and shutdown on the gas market.
As service was being re-started on the disabled lines, California border prices began falling last week. When the OPS first announced the shutdown of the three lines on El Paso South Mainline in late August, Southern California border basis got as high as plus 260-65, putting some fixed prices in the $7.20s. But with the resumption of partial service on Line 1110 last week, the price slid back down. NGI's Southern California Border Index for September was $6.31/MMBtu.
Meanwhile, the fallout from the deadly Aug. 19 explosion last week was building nationwide and is likely to intensify.
All eyes will be on Congress this week as it returns from its August recess to see what it will do with the pipeline safety reauthorization bills pending before it. Many observers, including pipeline officials, believe lawmakers will move to put even more teeth in the legislation in the wake of what is being called the deadliest gas pipeline explosion in more than a decade, and will pass a bill before they adjourn for the year.
Last week, the OPS issued an industry-wide bulletin advising operators and owners of gas transmission pipelines to review their monitoring programs and operations for detecting the presence of internal corrosion on their systems. The OPS took this action after it and the National Transportation Safety Board (NTSB) said they had found corrosion inside the El Paso South Mainline pipeline (Line 1103) that ruptured.
Also, the first civil lawsuit was brought against El Paso Natural Gas last week, accusing the pipeline of negligence in failing to properly maintain and operate its system. The suit seeks undetermined damages.
As for the advisory bulletin, the OPS said its review of incident reports and inspections "indicated that better industry guidance is needed to determine the best practices for monitoring the potential for internal corrosion in operator pipelines."
It advised gas pipelines to refer to the recommended corrosion-monitoring practices of the national consensus standards organizations, including the American Petroleum Institute, the National Association of Corrosion Engineers, and the Gas Piping Technology Committee (GPTC). The OPS said that the GPTC is considering modifying its "Guide for Gas Transmission and Distribution Piping Systems" to address design considerations, corrective measures and detection techniques for internal corrosion.
It recommended that gas pipelines give "special attention" to a number of specific conditions, including flow characteristics, pipe location (especially drips, deadlegs and sags, which are on-line segments that are not cleaned by pigging or other methods), fittings and/or "stabbed" connections which could affect gas flow, operating temperature and pressure, water content, carbon dioxide and hydrogen sulfide content, carbon dioxide partial pressure, presence of oxygen and/or bacteria, and sediment deposits.
The OPS further urged gas pipelines to focus their review on segments downstream of gas production and storage fields, where it said corrosive elements most often accumulate. Also, "review conditions in pipeline segments with low spots, sharp bends, sudden diameter changes, and fittings that restrict flow or velocity, and segments in unusual terrain. These features can contribute to the formation of internal corrosion by allowing condensates to settle of the gas stream."
But industry downplayed the incidence of internal corrosion in pipelines. Internal corrosion on large-diameter, long-distance pipelines is rare, according to an "Analysis of Internal Corrosion Incidents" issued by the Interstate Natural Gas Association of America (INGAA).
The consulting firm Kiefner & Associates reports that of 1,376 total incidents on transmission and gathering pipelines filed with the OPS since July 1984, only 180 incidents (13.1%) were caused by internal corrosion, the INGAA analysis said. Of those, 18 (1.3%) occurred on long-distance pipelines of 24 inches or more in diameter, and there were no injuries or fatalities.
El Paso has had 40 ruptures on its pipeline system since 1984, many of which were due to third-party damage and only a few to corrosion, according to DOT's Hinz. Prior to 1984, an explosion in 1975 on El Paso led to three fatalities, and another fatality was reported in a 1973 incident, she said. The cause of the 1975 incident was internal corrosion, according to DOT, while the 1973 blast was due to a leak in a valve.
Last Tuesday, Jennifer Smith, a Carlsbad, NM, resident, filed a wrongful death lawsuit in U.S. District Court in Albuquerque on behalf of her husband, Bobby Earl Smith, who died two days after the Aug. 19 blast in a Lubbock, TX, hospital.
Others who died as a result of the explosion on El Paso's South Mainline were Bobby Smith's two adult children, a son-in-law, five grandchildren and his daughter-in-law's parents. The sole survivor is his daughter-in-law, Amanda Smith, 25. She remains in critical condition at the University Medical Center in Lubbock. Funerals for the dead were held last weekend.
The 11 victims were "picnicking, fishing and recreating in a lawful manner in an area adjacent to the El Paso pipeline" when one of three lines that make up El Paso's South Mainline ruptured, causing the explosion and fireball, the lawsuit said.
The lawsuit seeks undetermined damages for "personal injury and wrongful death," and punitive damages from "El Paso, their agents, employees and representatives" for their "willful, wanton and careless conduct and utter disregard and utter indifference in this matter," and to "deter and punish the defendant in the future."
Although the lawsuit names El Paso as the sole defendant now, it could be expanded in the future. "I think as the investigation proceeds and further acts of negligence are uncovered, that certainly could open the door for additional defendants to be named, and those defendants might be corporate defendants," said a lawyer close to the lawsuit.
There is no criminal investigation into the accident at this time. "I think that is very preliminary.....There could be circumstances which one would personally feel that criminal actions might be necessary. I don't know if it would be appropriate under the law, and I certainly don't think it's appropriate at this time. But when something this horrible happens.....you really think along those lines," the lawyer noted.
Nor is OPS considering a fine against El Paso at this time, as it did with Olympic Pipeline in the Bellingham, WA, explosion that killed three. "I have not heard a word about it. That doesn't mean it would never happen," said DOT's Hinz.
Specifically, the civil lawsuit accuses El Paso of failing to "properly comply with state and federal rules, regulations, opinions and orders while operating an interstate gas transmission line" at or near Carlsbad.
Moreover, it said El Paso "was negligent in failing to properly inspect, maintain and operate their interstate gas transmission line at all times." The transmission of natural gas "is an ultra-hazardous activity and undertaking," the lawsuit noted, adding that El Paso's failure to provide "the highest degree of care and.....safety" to persons in the vicinity of its system makes it "strictly liable" to Bobby Smith and the others who died or were injured as a result of the explosion.
The lawsuit is being handled by two law firms: The Branch Law Firm in Albuquerque, NM, and Baker, Brown & Dixon in Arlington, TX.
Susan Parker
Thanks so much for this information. It explains a lot. It seems now that the price spike in December 2000 was entirely attributable to the accident on line 1103, and the ensuing outages. But IIRC, the press never mentioned it.
On the NGI site I found the place to create a chart with the same info as the one on Cal Energy site's which they also got from NGI http://www.energy.ca.gov/naturalgas/2001_weekly_updates/2001_naturalgasprices_graph.gif (2001 Chart). However it isn't postable as it is created on-the-fly.
Here is a summary of the results:
I plotted weekly spot prices for Southern California Average and Henry Hub, in Louisiana for the past year. The two tracked each other fairly closely through the winter, then in April Henry Hub gets more expensive, about 10% more. This continues through ups and downs until now, the difference is about 5%. The lows were at the end of November '01 and the end of January '02 (about $2.00 per MMBtu), the highs are now (HH about $4.20, Socal about $3.80)
In other words, the chart bears little resemblance to the 2001 chart with its huge spike in February '01 in Socal above $30 while Henry Hub was about $6.
The chart can be created from this page: http://intelligencepress.com/data/weekly/select_weekly_graph.html
The fire reduced the capacity of the three lines from 1.1 Bcf/d to 0 Bcf/d for two weeks, before returning to 700 MMcf/d in September '00. If you think that a 400 MMcf/d deficit is enough to create a major price spike, then the 345 MMcf/d that El Paso has been found to have witheld on top of that surely pushed the prices higher yet.
OK, all three lines were shut down on Aug 19, 2000 [sheesh]. About two weeks later, around Sept. 1st, line 1110 was returned to service at reduced capacity, "400 MMcf/d, …gradually increas[ing] it to 480 MMcf/d by Friday".
Apparently line 1100 was spliced into line 1110 with a 16" temporary connector. "At mid-day Friday (Mountain time), El Paso said it began running about 260 MMcf/d through Line 1100 after it received the go-ahead from the federal Office of Pipeline Safety (OPS)".
Since the feed from line 1100 was now connected to line 1110, I think the "700 MMcf/d" in the title referred to the sum of the two capacities - the 260MMcf/d plus the 400-480MMcf/d.
I can’t figure out whether the "rated capacity of 1.1 bcf/d" .refers to line 1110 by itself, or lines 1110 and 1100 together. The third article mentions a "certificated capacity of 2.594 Bcf/d", which would work out to 1.1 + 1.1 + 0.394 for lines 1110, 1103, and 1100 respectively. That sounds about right to me.
I am also wondering how operating pressure is related to mass flow. IOW, what percentage of gas would flow at 80% rated pressure? They seem to use the terms interchangeably, but I think that’s wrong.
Also, the second article from July, 2001 gave the throughput of the system as 920 MMcf/d, up from the previous 700. I am thinking that they must have built a new crossing for line 1100 and unconnected it from line 1110. That would give an additional 280MMcf/d or so, so the numbers are about right.
Well, enough number crunching for this morning.
In the article you posted in #35, it said "others cited "inconsistencies" with Wagner's capacity calculations for the El Paso system, and claimed the decision was politically motivated (see related story).".
Any chance you could post the related story?
I am under the impression that the combined capacity of lines 1103, 1100, and 1110 was 1.1 Bcf/d. But your calculations make sense too. I haven't been able to find a nice explicit list of all El Paso's lines into California and their capacities.
I posted this table in the last thread, but if anyone is interested, here it is again.
Pipeline |
Current Capacity |
Capacity Additions |
2002 Total Capacity |
|
PG&E El Paso Transwestern Kern River Southern Trails |
1,920 3,290 1,090 700 -- |
200 500 -- 125 90 |
2,120 3,790 1,090 825 90 |
|
Total |
7,000 |
915 |
7,915 |
|
Notes: 1) PG&E Gas Transmission delivery capacity to California is impacted by its deliveries to the Tuscarora Pipeline, which has a rated capacity of 125 MMcfd. Cold weather in the Pacific Northwest can reduce deliveries to California by 350 MMcfd. 2) Kern River has filed with the FERC for 125 MMcfd in capacity additions but can increase its capacity by another 375 MMcfd by adding additional compression stations along its pipeline. Kern River is also exploring extending its pipeline into the Los Angeles basin with a 300 MMcfd pipeline lateral. The pipeline extension would not increase Kern River delivery capacity to California. 3) Southern Trails will also have the capacity to deliver up to 125 MMcfd to points inside the California border. It will have interties with other pipelines in California. 4) El Paso’s Plains All American Pipeline conversion was assumed to be new capacity. |
|||
Almost everything is in PDF, so I can't post the pictures, but they do have a map of El Paso's various pipelines into California. There are six that I count: 1000, 1001, 1100, 1103, 1110, and 1600. http://www.viadata.com/ntsb/225852.pdf Apparently not all of them were in operation at the time.
From another PDF at that site is this listing of neighboring lines:
D. Pipeline system near the accident site on August 19, 2000Line 1000 – Pipeline number 1000, referred to as the Jal-El Paso "A" line, is a 16-inch OD natural gas transmission pipeline that was out of service and filled with nitrogen at the time of the accident. The pipeline crosses the Pecos River on a pipeline suspension bridge, which is adjacent to the concrete bridge.
Line 1001 – Pipeline number 1001, referred to as the Jal-El Paso "B" line, was a 16-inch OD natural gas transmission pipeline that was not operated by El Paso at the time of the accident. The pipeline crossed the Pecos River on the west side of the concrete bridge.
Line 1100 – Pipeline number 1100, referred to as the California "A" line, is a 26-inch OD natural gas transmission pipeline that begins at the Eunice Plant located in Lea County in the SE corner of New Mexico. The pipeline transports gas west to the California-Arizona border near Ehrenberg, Arizona. The segment of pipeline near the accident site transports gas from Eunice Plant to Pecos River Compressor Station through approximately 53 miles of pipe. The pipeline crosses the Pecos River on a suspension bridge located between the suspension bridge that supports line 1000 and the concrete bridge. Approximately 1300 feet upstream of the river crossing there was a 16-inch OD crossover (branch line with valves) to line 1103; this crossover was removed after the accident. Approximately 1700 feet upstream of the river, there was a pig receiver at block valve number 5; this receiver was removed after the accident. There is no drip in the pipeline between he pig receiver and the Pecos River Compressor Station.
Line 1101 – Pipeline number 1101, referred to as the Jal-Pecos River line, is a 16-inch OD natural gas pipeline that had been sold to another operator and was not operated by El Paso at the time if the accident.
Line 1103 -- Pipeline number 1103, referred to as the California "B" line, is a 26, 30 and 31-inch OD natural gas transmission pipeline that begins at Keystone Compressor Station in Winkler County, Texas near the SE corner of New Mexico. The pipeline transports gas west to the California-Arizona border near Ehrenberg, Arizona. The segment of pipeline in which the failure occurred is 30-inch OD and transports gas from Keystone Compressor Station to Pecos River Compressor Station through approximately 57 miles of pipe. The 26 and 31-inch OD pipe is all downstream of the Pecos River Compressor Station. The pipeline crosses the Pecos River supported on the east side of the concrete bridge, which is adjacent to the pipeline suspension bridges. The accident site is approximately one mile upstream of the Pecos River Compressor Station on the south side of the Pecos River. There was a drip in the pipeline between the pig receiver and the Pecos River. Between the pig receiver and the drip, a 16-inch OD crossover (branch line with valves) connected line 1103 to line 1100. The drip and the crossover were removed after the accident.
Line 1110 – Pipeline number 1110, referred to as the California "C" line, is a 26 and 30- inch OD natural gas transmission pipeline that begins at a connection with line 1103 approximately 9-1/2 miles downstream of Keystone Compressor Station. The pipeline transports gas west to Hueco Compressor Station in Hudspeth County, Texas and runs intermittently to the California border. The 26-inch OD pipe is all downstream of the Pecos River Compressor Station. The segment of pipeline near the accident site transports gas from Keystone Compressor Station to Pecos River Compressor Station through approximately 48 miles of pipe. The pipeline crosses the Pecos River supported on the west side of the concrete bridge (same bridge as line 1103), which is adjacent to the pipeline suspension bridge. There was a drip in the pipeline between the pig receiver and the Pecos River; this drip was removed after the accident.
Line 3191 –– Pipeline number 3191 is a 16-inch OD natural gas pipeline that begins at the South Carlsbad Compressor Station in Eddy County, NM. The pipeline transports gas south through approximately 25 miles of pipe and connects to lines 1103 and 1110 upstream of the Pecos River Compressor Station. The pipeline does not cross the Pecos River near the accident site.
The table you posted was the very same that I used to come up with the percentage of Kali's gas provided by EP. It shows El Paso's "current capacity" as 3290 MMcf/d, which exactly matches the information in post #35:
El Paso was bound by FERC regulations and its 1996 global settlement with its customers to deliver 3.29 Bcf/d of natural gas to the California border, but it "provided only 79% of the certificated capacity [or 2.594 Bcf/d] to its customers during the relevant period,"
I posted this table in the last thread What last thread? Did I miss something?
What last thread? Did I miss something?
No, you were there.
http://www.freerepublic.com/focus/news/756374/posts
This last article (#44) has some useful info relevant to the discussion. Let me excerpt from two paragraphs.
A witness for SoCal Edison last week estimated that, prior to the rupture on the pipeline last August in New Mexico, there was as much as 500 MMcf/d of "unavailable" capacity on El Paso that couldn't be explained away by operational factors. After the rupture, he said the figure dropped to about 200-400 MMcf/d. The estimates, the witness testified, excluded the capacity that was "unavailable" to the California market last year as a result of the August pipeline explosion, maintenance work and the increased demand of El Paso's east-of-California (EOC) shippers.These two quotes tell me that the the mandated MAOP reduction was brought up at the evidentiary hearing and that, one way or another, it was factored in to the calculations that Chief Judge Wagner made.In his second appearance before the hearing, John Somerhalder, president of the El Paso Pipeline Group, yesterday countered that SoCal Edison's 500 MMcf/d estimate for unexplained, unavailable capacity failed to take into consideration three other factors. These included: a 185 MMcf/d reduction in El Paso's peak-day capacity due to production-area deliveries; an additional 196 MMcf/d capacity reduction due to higher, summer ambient air temperatures on the pipeline; and a further cut of roughly 200 MMcf/d due to El Paso's inability to run at maximum allowed operating pressure (MAOP) conditions, he said.
The biggest question I have right now is whether the El Paso piplelines had 1.1 Bcf/d capacity or 3.3 Bcf/d. In other articles they mention that El Paso Merchant, which is a natural gas provider, had contracted with 1.22 Bcf/d of capacity from El Paso Pipeline Group. Yet there were other suppliers also using El Paso pipelines. Either the combined capacity of the three lines we've been discussing was 3.2 Bcf/d, or there are other pipelines that El Paso controls.
Also, from this map, it looks to me like the Topoc Hub supplies Northern and Central California, and the one in Blythe suppies Southern California.
The answers to some of these questions may be here: Natural Gas Intelligencer, July 31, 2000:
A basis blowout of immense proportions has occurred between Rocky Mountain region supply basins and the Southern California border this month and it appears to be expanding as we enter August, leading to widespread speculation and controversy in the industry about its causes.
The heat in the Southwest and the soaring power market in California over the past few weeks undoubtedly have a lot to do with the extreme natural gas prices at the border. Gas demand for electric generation in California has grown in "double digits" this year, said El Paso Natural Gas President Patricia Shelton, "and I know there is less hydro [available to the market]. And I know in the east-of-California market there's a lot of electric generation demand also. But beyond that, I [can't speculate]."
"What we're seeing is that demand has increased by about 300 MMcf/d over last year," said Shelton. However, SoCal Border prices between $4.60 and $4.70/MMBtu for today's flow are about $2.30 more than prices at the same time last year and are by far (40-50 cents) the highest spot gas prices in the nation, even higher than PG&E citygate prices in Northern California. Furthermore, the basis spread between the border and Rocky Mountain and southwestern supply points has ballooned to more than $1/MMBtu from 33 cents during July 1999. Basis, which is about 46 cents more than current maximum transportation rates on El Paso Natural Gas, is much wider than market fundamentals warrant, according to many observers.
After blowing out to an average of 36 cents in 1998, the bidweek price spread between the San Juan Basin (El Paso Blanco) and the Southern California border narrowed to an average of 26 cents last year and has averaged 28 cents since the beginning of this year through June bidweek. In June, the spread widened to 48 cents. During July bidweek it averaged 74 cents, and since July 1 the daily basis spread has average 94 cents. It went from an average of 82.3 cents/MMBtu from July 1 through July 12 to average of 1.03/MMBtu since July 13. Meanwhile, El Paso Natural Gas' maximum firm transportation rates are about 54 cents including the current cost of the 3.88% in-kind fuel charge.
"Someone is trying to artificially set the border high in an attempt to widen the border-basin basis," said one marketer, echoing the comments of many others. "There are fundamental factors in the state of California that are already pushing in a certain direction and that has permitted them to do that," he said. "Without the fundamentals already pointing in this direction, would they still be able to push things around? Probably not."
Another unusual phenomenon that has occurred is the divergence of the Topock, AZ, border prices from the rest of the border points. There are four main Southern California border delivery points: Ehrenburg, which is El Paso Natural Gas' south mainline into SoCalGas only; Needles, which is Transwestern Pipeline into both SoCalGas and PG&E; Kern River Station, which is PG&E into SoCalGas; and Topock, which is El Paso's north mainline into both SoCal and PG&E.
Spot gas at Topock has been trading at a premium this month and for August delivery compared to the other border points and general border-non-specific gas, and this is causing problems in the market, said one gas trader. "If we either trade gas at a border non-specific point or pull gas out of in-state storage and try to hedge that with a published SoCal Border number, our hedge gets busted because there is a 10 cent differential in the price.
"That's where this whole thing unravels," he said. "Why are Ehrenburg, Needles, storage gas and the other points discounted off of Topock this month during a strong demand period? If the fundamental reason was because the load out west was so strong, then the other points would be trading at a premium because gas flows better through those points." Topock is limited to about 540 MMcf/d, whereas Ehrenburg can handle up to 1.2 Bcf/d, he noted.
El Paso Natural Gas has come under a lot of fire because of its capacity allocation methods, particularly at Topock. (See NGI, July 10) The pipeline allows anyone who owns capacity on its system to use Topock as a primary delivery point, which overloads the location and causes a significant portion of nominations to be curtailed on a regular basis. However, that leads one to believe Topock would be a less attractive delivery point compared to the others because of the likelihood that much of what is nominated to Topock will be cut.
Some have questioned, however, whether some traders may have developed a gaming strategy based on not having to deliver contracted volumes. An end user might favor a Topock over a non-Topock delivery because if and when his capacity is cut, he may be able to turn around and buy second cycle gas at 10 to 20 cents less than he originally paid. "We were forced to unload some gas into Erhenburg at $4.50 that was originally sold (but later cut) at $4.70 at Topock," a marketer said, adding it is not unusual for 30% to 40% of nominations at Topock to be cut.
Several other traders hypothesized that Topock might be trading at a premium because it gets exclusive treatment on EnronOnline, which boasts up to 2,000 mainly gas and power transactions each day and has done $90 billion in business since Jan. 1. "You always have a Topock buyer in EnronOnline," one source noted.
"EnronOnline has come out and publicized the price where they will buy and where they will sell, and no one has really done it like that before," he added. "Basically they are saying the market is this..... and they have backed that up with the willingness to transact."
"Everyone who does business in the West is looking at EOL," another marketer said.
"The reason Topock is so high is that the quantity of basis and financial transactions is heavily weighted toward Topock," said yet another observer.
Others speculate that the 1.5 Bcf/d of firm transportation capacity on El Paso Natural Gas held by El Paso Merchant Energy has something to do with the basis spread. When Dynegy held that space several years ago, it frequently was accused of holding capacity off the market in an attempt to drive up the spread. However, one source claims El Paso Merchant currently is having difficulty finding a buyer for its capacity.
Harvey Morris, an attorney with the California Public Utility Commission, said he is very interested in this topic. He believes putting so much firm transportation capacity into the hands of one market player enables not only that player, but also many others to manipulate prices to a great degree.
"We have a complaint against El Paso and El Paso Merchant Energy about the same anticompetitive conduct we were worried that Dynegy had done," said Morris. "Obviously it is getting worse." (See NGI, April 10)
The large gas marketers have grown even larger and are much more able to wield market power, "and that is particularly possible when one market player, El Paso Merchant, has entered into a giant arrangement and the others can now take advantage of it. The issue isn't can you get gas to market; the issue is when one big player withholds capacity or jacks up the price for that capacity, the fight for the remaining capacity goes up likewise. When one major player is doing a lot of artificiality in the marketplace then you cause a snowballing effect among the prices from everyone else. El Paso Merchant is the artificial player right now."
The current price situation "doesn't make sense," Morris noted, "because it's not like we're using up all the molecules on all the interstate pipelines to California, and we're still in a physical excess pipeline capacity situation."
The CPUC's complaint against the El Paso Natural-El Paso Merchant Energy contract is pending at FERC. Morris said the Commission recently granted discovery, which will take place over the next few weeks. The CPUC intends to make a decision on where it plans to take this case by the end of August. Its appeal of the El Paso-Dynegy decision also is pending in the U.S. Court of Appeals.
(Note to Price Survey Participants: NGI is investigating the possibility of changing its coverage of the Southern California border in its price tables by adding two additional pricing points: Southern California Border/Topock and Southern California Border/Non-Topock. NGI would continue to publish a Southern California Border Average. NGI is asking for cooperation in specifying the border delivery point when reporting transactions. It would like to make these additions as soon as possible. NGI also welcomes input on this subject. Please call Dexter Steis at 703-318-8848).
Rocco Canonica
Topock is limited to about 540 MMcf/d, whereas Ehrenburg can handle up to 1.2 Bcf/d, he noted.We're only halfway to the 3.2 Bcf/d that El Paso supposedly handles.
Most interstate pipelines delivering natural gas to California end at the state line. Currently, these interstate pipelines have the capacity to deliver more natural gas to the border of California than can be taken away by intrastate pipelines in the State. While interstate natural gas pipeline facilities are regulated by the Federal Energy Regulatory Commission, these intrastate pipelines are not regulated by FERC but rather by the California Public Utility Commission (CPUC). They are not required to be "open access" like FERC-jurisdictional pipelines and the CPUC has the exclusive authority for approving new intrastate capacity expansions.This mismatch between capacity at the Southern California border and the capacity within the SoCal Gas system is the fundamental problem in California. Unfortunately, the State of California has a long history of discouraging the construction of interstate natural gas pipelines in the State. The only interstate pipelines currently operating in California are Mohave and Kern River. These facilities were built in the late 1980s and early ‘90s mainly to serve oil fields in Southern California. These pipelines were vigorously opposed at that time by the CPUC and the California utilities. (See the attached chart.)
As the California Energy Commission has reported, the higher demand, coupled with an inadequate natural gas infrastructure on the SoCal Gas systems, limited the ability of California to receive natural gas. This was a factor that contributed to high prices for natural gas experienced in California in late 2000 and early 2001. This insufficient receipt capacity in California limited the flow of natural gas on interstate pipelines serving California. The resulting high prices reflected at the California border were mainly the result of a premium being paid by non-firm capacity customers to obtain transportation on the intrastate systems. When demand (for capacity) exceeds supply, price is the means to rationalize the market.
So the "unused capacity" on the El Paso lines may have been due to the fact that California couldn't accept any more.
Now that is revealing!
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