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El Paso proposes new California pipeline capacity

HOUSTON, May 11 -- El Paso Corp. is considering building a new intrastate gas pipeline in California that will run from Bakersfield north towards Antioch and Sacramento.

The company is also gauging customer interest in an expansion of the existing Mojave Pipeline that runs from Topock to Bakersfield. El Paso is holding "open seasons" for both projects May 10-31.

The Mojave Pipeline expansion and extension could interconnect with El Paso Natural Gas, Transwestern Pipeline Co., Kern River Pipeline, Lodi Gas Storage, and California gas producers, according to a company statement.

Pipeline capacity in southern California has been tight for 2 years. El Paso's large interstate pipelines bring gas from producing regions to a point on the border called Topock. But the ability of pipelines to take the gas away for distribution within California has been constrained.

These constraints have contributed to prolonged high and volatile gas prices. "There was a sudden and large increase of price at Topock December 2000," said Catherine Elder, consultant with Navigant Consulting Inc. "The daily market prices have been brutal spiking into the $30-$40/Mcf range as recently as April."

El Paso spokeswoman Kim Wallace said she couldn't estimate at this time how much additional capacity the projects might bring to the tight California intrastate market. But the company can build "as much capacity as the market asks for," she said. "It's hard to know what customers are out there."

Depending on the result of the open season, El Paso will file applications with the Federal Energy Regulatory Commission to build the proposed new pipeline and pipeline expansion, Wallace said. The projects will also require environmental assessments and other local and state California permits.

El Paso is the subject of an upcoming hearing before a FERC appointed administrative law judge. The judge will hear California regulators' charges that El Paso drove up gas prices at the California border through its control over pipeline capacity. The first hearing is set for mid-June. El Paso has denied the allegations.

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