Monday August 28, 12:26 pm Eastern Time Press Release

Natural Gas Pipeline Explosion Boosts California Prices and Safety Bill Prospects DULLES, Va.--(BUSINESS WIRE)--Aug. 28, 2000--(NGI)---The explosion and shut-down of a 48-year old natural gas mainline in the New Mexico desert a week ago that killed 12 people, has driven gas prices in the already-stressed California market to more than $6 per MMBtu and offered a wake-up call for regulators charged with oversight of the nation's pipelines, according to a special report by Natural Gas Intelligence.

Representatives of the U.S. Department of Transportation's National Transportation Safety Board (NTSB) and its Office of Pipeline Safety (OPS), --- which has been under fire recently for lax oversight --- scrambled to the scene of the blast near Carlsbad, NM. Finding corrosion in one of the pipe fragments, OPS followed up within days with the most aggressive order it has ever issued, cutting flow on the ruptured 30-inch pipeline and two parallel lines operated by El Paso Natural Gas, a pipeline subsidiary of El Paso Energy, until extensive testing and repairs could be completed.

OPS made clear there would be no gas flowing until it had closely examined testing results and approved a return to service. NTSB Chairman Jim Hall followed up by saying ``no American would want to use any transportation vehicle that would not be properly inspected for 48 years, nor should we have pipelines traveling through any of our communities in this condition.''

Just when all three lines will be returned to service is up for grabs. El Paso hopes to have one line back in service early this week. Stacey Gerard, associate administrator of the Department of Transportation's Office of Pipeline Safety (OPS), told NGI that El Paso must provide ``written documents [in] black and white in the hands of this department'' spelling out testing results before the DOT can make a decision about restoring service on Line 1110. Line 1110 apparently was the line least affected by the Aug. 19 explosion.

The gas market isn't betting on service being restored soon. El Paso provides significant volumes to the strained California market. Wholesale prices at the California border soared into the $6.70s/MMBtu on Friday from an average (bidweek) of $2.32 last year. Prices outside California remained under $5 last week.

While the pipeline claims it is making up about half the outage, or 500 MMcf/d, through storage withdrawals, alternate lines and cutbacks by some customers, the shortfall threatens to make a bad situation in California worse. Gas being drawn from storage will have to be replaced before winter.

What is clear is that consumer advocates and supporters of more rigorous pipeline safety laws now expect legislation to be passed during the current session. After the explosion, Rep. John Dingell (D-MI) called on the General Accounting Office (GAO) to join in the investigation of the fatal pipeline blast. The GAO had issued a Dingell-sponsored report in June, painting a picture of OPS as an agency that was soft on pipeline safety violators.

The accident has drawn the intense scrutiny of regulators on the nation's largest natural gas pipeline operator. El Paso Energy operates 40,000 miles of pipe. OPS already has said it wants the company to submit a plan for examination and testing of its entire 10,000-mile southwestern pipeline run by its El Paso Natural Gas subsidiary.

http://biz.yahoo.com/bw/000828/va_ngi.html

-- Martin Thompson (mthom1927@aol.com), August 28, 2000