Sun Devil Pipeline Project

Marketing
-- At our Phoenix meeting, Salt River Project (SRP), the nation's 3rd largest public utility, announced an open season for a new 10 Bcf underground gas storage project just north of Kingman, Arizona.  The project's scope includes a pipe for taking gas from the Kern River system near Las Vegas, delivering to storage, then re-delivering the volume via interconnects with Transwestern, El Paso's north system, plus a new lateral going south reach El Paso near Wenden, AZ.  SRP's partners include Allegheny Energy and Sempra Energy Resources.  There is an opportunity here to combine the project benefits of Sun Devil with the pipeline proposed for the storage facility.  We will pursue this at the open house meeting hosted by SRP next week.  SRP expects regulatory approval in late 2003; the open season runs until February 8, 2002.

--  Met with APS to discuss peaking capability and the possibility of firm Park N Ride services to compete with their storage alternative at Copper Eagle.  The current western gas market has taken much of their urgency out of pursuing underground storage in Phoenix at this time.  We offered to give APS a contract "out" up until we file our FERC application if they would agree to reimburse us for the EIS costs.  We are preparing a written offer to be delivered next week.  

--  Panda Energy:  expect a response to our market proposal during the week of 1/14.  We are formulating a proposal to offer firm Park N Ride services based on the project's hydraulic capability.

Engineering -  a revised project scope has been submitted to reduce compressor and looping costs.  The goal is $100 million in reductions.  Will regroup 1/18 to review  potential reduction areas weighed against operational flexibility and volume.

FERC and El Paso Full Requirements Contracts - The discussion of the Strawman settlement proposal submitted by SRP to FERC did not make it on FERC's January agenda.  At our meeting this week, APS did not put much faith in the Strawman making much forward progress.