Gas Quality and Interchangeability

Issues

From Gulf South Pipeline’s Perspective

by Mike McMahon - Sr. Vice President and General Counsel

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GULF SOUTH PIPELINE

Interstate Receipt Points

Legend

Intrastate Receipt Points

Interstate Delivery Points

Intrastate Delivery Points

Major Processing Plants

Interstate/Intrastate Pipelines

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GAS QUALITY ISSUES

In the last five years, Gulf South has received a limited number of quality based customer complaints

Complaints are typically related to specific operational upsets

Hydrocarbon dew point or liquid fallout has not been an issue

Average winter ambient temperature 55° F (New Orleans 5-year average)

Over the last five years, Gulf South has only been notified twice of quality concerns by other interstate pipelines (CO2, hydrocarbon dew point). Both of these notices were last fall and the gas being delivered by Gulf South was within its tariff specifications

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Access to wellhead supplies

Increased gas costs for on-system customers

On Gulf South, LDCs are currently buying gas at small individual receipt points that are not necessarily located behind a processing plant

A change in policy will make Gulf Coast intrastate pipelines more attractive especially to:

Small producers Production that is not located behind a processing plant Marginal wells

Will tend to favor the production area facilities of the incumbent interstate pipeline

COMPETITTIVE EFFECTS OF FERC’S GAS QUALITY POLICY

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GULF SOUTH PIPELINE’S PROPOSAL

A safe harbor should be created for interstate pipelines that deliver gas in the production area to other interstates provided that the gas being delivered meets the delivering pipeline’s tariff specifications.

This proposal will:

Facilitate the movement of gas between interstate pipelines

Continue to provide safe pipeline operations

Maintain a level competitive playing field between all pipelines

Continue to provide customers access to lower cost wellhead gas supplies