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Dominion unit cleared to abandon unprofitable Southern Trails gas pipeline


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Dominion unit cleared to abandon unprofitable Southern Trails gas pipeline

The Federal Energy Regulatory Commission granted a request by Questar Southern Trails Pipeline Co. to abandon its 488-mile natural gas pipeline project, which the company said is no longer profitable amid unfavorable market conditions and competition from larger lines.

The Navajo Tribal Utility Authority, which uses the pipe to serve tribal communities, will buy 268 miles of the pipeline. The remaining 220 miles of pipeline will be abandoned in kind, according to a May 9 order.

FERC on April 23 issued an environmental assessment that concluded that abandonment of the entire pipeline system is the best option of a number of alternatives the commission considered. Questar Southern Trails, a subsidiary of Dominion Energy Inc., applied to drop the project in December 2017 after it "experienced consistent and significant operational losses year after year." With the Navajo Nation as its only remaining customer, the company said current and future demand for firm transportation service did not "warrant continued operation."

Questar Southern Trails went into service in 2002 to carry gas from the Blanco Hub serving New Mexico's San Juan Basin to Southern California.

The market value of service on the line is driven by demand for gas in California, which is reflected in the price differential between the San Juan Basin and Southern California. That number has dropped below what is necessary to justify the cost of transportation, the company said. While the annual cost of service was valued at $18.5 million in 2016, total revenue that year was less than $3.1 million, according to Questar Southern Trails. The company's contract with the Navajo Tribal Utility Authority generates about $135,000 a year in revenue.