Message-ID: <12693559.1075852173306.JavaMail.evans@thyme> Date: Wed, 10 Oct 2001 08:01:20 -0700 (PDT) From: steven.harris@enron.com To: danny.mccarty@enron.com Subject: RE: Sun Devil Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable X-From: Harris, Steven X-To: McCarty, Danny X-cc: X-bcc: X-Folder: \DMCCARTY (Non-Privileged)\McCarty, Danny\Inbox\TW X-Origin: MCCARTY-D X-FileName: DMCCARTY (Non-Privileged).pst It sounds like the costs will come down some but I have a few comments. Fir= st, I'm not sure that lowering the amount of compression to California sinc= e those shippers are not willing to pay the full rate is a good thing. I be= lieve the California piece may actually be needed to carry the whole projec= t. They may not pay the rate calculated as part of this project but I do be= lieve if our timing is right we can do 300,000/d from San Juan to the borde= r for the PG&E deal at more economic rates. Second, my understanding is tha= t the ROW costs for the Navajo will be taken out of the project in return f= or giving the Navajo equity interest in the project. Centilli needs to make= sure that he reduces the revenue back to ETS by this amount (he may not kn= ow this yet). Also, giving the Navajo an equity interest sets a very diffic= ult precedent with regard to future expansions or ROW extensions (we tried = to stay away from something like that this last round because we knew it wo= uld cost us more in the end). -----Original Message----- From: =09McCarty, Danny =20 Sent:=09Tuesday, October 09, 2001 11:25 AM To:=09Harris, Steven Subject:=09FW: Sun Devil -----Original Message----- From: =09Gadd, Eric =20 Sent:=09Monday, October 08, 2001 6:04 PM To:=09McCarty, Danny Subject:=09Sun Devil Danny, I met with Phil Lowry, Jerry Martin, John Keller, and Kevin Hyatt to discus= s the revised cost estimates for Sun Devil. My blood pressure has eased so= mewhat. I'm hopeful that the estimate will be revised downward to a level = more consistent with the original by the end of the week. The engineers wa= nt to make this project work and have taken some actions away to further sq= ueeze the cost bundle. =20 Here's a quick recap- $580 MM was the Total Project Excl. Int., O/H, etc. used for the open seaso= n. $667 MM was the Total Project Incl. Int., O/H, etc used for the open season= . $912 MM is the latest Total Project Incl. Int, O/H, etc The difference between $912 MM and $667 MM is $245 MM. =20 Of this, $218 MM relates to- -$65 MM for the Panda lateral (not in original scope) -[$44] MM for 36" pipe vs 30" pipe (not in original scope). This amount to= be confirmed by the engineers. -$48 MM for escalation (not broken out per se in the original scope) -$33.2 MM additional cost for Navajo land acquisition -$13.2 MM additional cost for Navajo labor on Navajo lands (not included in= original estimate) -$14.5 MM additional cost for gross receipts tax (not accounted for in the = original scope) We can reduce the estimate by $109 MM just by returning to the original pro= ject scope. Panda will have to pay for the lateral to their plant. We won= 't overbuild with 36" pipe to provide hourly swing capability unless shippe= rs pay a higher rate (or we are content to hold excess capacity for future = shippers). Some additional savings will accrue as a result of reducing the = amount of compression (California shippers have shown no interest in paying= anything close to full rate). Finally, the engineers haven't given up on = finding other potential savings. The remaining $109 MM comes under the category of "identified risks". Esti= mates are provided in current dollars and the "escalation" component highli= ghts the risk of inflation. The reality is that ETS has had very little re= cent experience pricing pipelines in the southwest. The additional costs f= or Navajo land and labor can only be bottomed out through bilateral discuss= ions with the Navajos. I'm still checking the gross receipts tax cost - - = - seems that it was not included in the original estimate, which is a bust.