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FERC waiver lets Kinder Morgan unit spend more on Delaware Basin pipe expansion

The Federal Energy Regulatory Commission allowed El Paso Natural Gas Co. LLC to spend more than the maximum cost estimated for a project that would add up to 320,000 Dth/d of firm gas transportation capacity in the northern Delaware Basin.

FERC staff on Aug. 7 granted a waiver of the blanket certificate cost limits to the Northern Delaware Basin expansion project, which includes the construction of a roughly 14-mile, 24-inch-diameter loop line of its existing 20-inch-diameter Line No. 3162 in Winkler County, Texas, and the hydrostatic testing of about 51 miles of its Line No. 1105 that crosses Winkler, Ector and Crane counties in Texas. El Paso filed a request for a waiver July 29 after the project's estimated cost broke FERC's blanket-certificate cost ceiling.

The Kinder Morgan Inc. subsidiary had estimated the project cost at about $33 million. But due to higher contractor costs and a more expensive hydrostatic test that would allow El Paso to prevent service interruptions to some customers and operators, the estimate was raised to about $43 million, exceeding the cost ceiling set by the commission.

In its letter granting the waiver, FERC observed that El Paso "made a good faith effort" to build the project under the guidelines and cost limits in the blanket certificate. "Based on the specific facts and circumstances of this project, waiver of the cost limitations in this instance is granted," the commission wrote.

Still, FERC told El Paso to "make every effort in the future to ensure that it is using realistic and accurate cost estimates to avoid any appearances of underestimating costs in order to rely on its blanket certificate construction authority for non-qualifying projects."

El Paso filed an application to build the expansion project in December 2018. Underpinned by firm contracts with shippers, the project would satisfy demand for takeaway transportation capacity to help handle growing gas production in the greater Permian Basin, which includes the Delaware sub-basin. (FERC docket CP19-28)