Application Martin No: gr9902 Jones Contents

Amendment FDA3.34

For the access arrangement to be approved, the Commission requires Epic to replace clauses 10.1 – 10.3 of its 29 June 2001 access arrangements with clauses 10.1 to 10.7 of its proposal of 29 August 2001.

Amendment FDA3.35

Amendments to Epic’s proposal of 29 August 2001

Notification of other disputes

For the access arrangement to be approved, the Commission requires Epic to add the following into clause 10.5:

If a Prospective User notifies a dispute in relation to the Spare Capacity which was the subject of an Open Season before the negotiation and conciliation processes have been completed, the Relevant Regulator may consider, in accordance with section 6.3 of the Code, whether an alternative dispute resolution process would be appropriate.

Epic not to agree to allocate spare capacity outside of the queuing policy

For the access arrangement to be approved, the Commission requires Epic to add the following at the start of clause 10.1:

Before the Service Provider agrees to allocate Spare Capacity it must undertake the Open Season process described in clause 10.3.

Qualification of clause 10.4(f)

For the access arrangement to be approved, the Commission requires Epic to add the following to clause 10.4(f) after the words (“Original Requests”):

and only if the conditions in 10.4(d) have been satisfied.

Qualification of clause 10.5(c)

For the access arrangement to be approved, the Commission requires Epic to add the following to clause 10.5(c) after the words ‘clause 8.1 will apply’:

at the close of the period referred to in 10.5(d).

Clarification of clause 10.5(f)

For the access arrangement to be approved, the Commission requires Epic to add the following to clause 10.5(f) after the words ’Spare Capacity’:

pursuant to the alternative dispute resolution process

Clarification of clause 10.5(h)

For the access arrangement to be approved, the Commission requires Epic to add the following to clause 10.5(h) after the words ‘Spare Capacity’:

pursuant to the arbitration process

Amendment FDA3.36

For the access arrangement to be approved, the Commission requires Epic to add the following after clause 10.4(e) of Epic’s proposal of 29 August 2001:

Notwithstanding the above, the Service Provider must allocate capacity in accordance with a dispute resolution process undertaken under the National Gas Pipelines Access Act (South Australia) 1995 and is not required to conduct an open season before contracting for that capacity.

Amendment FDA4.1

For the access arrangement to be approved, the Commission requires Epic to revise the access arrangement information so that it is consistent with the latest revised access arrangement (version 29 June 2001) and the amendments specified in this Final Decision.

Introduction

On 1 April 1999 the Commission received an application from Epic Energy South Australia Pty Limited (Epic) for approval of a proposed access arrangement for its Moomba to Adelaide Pipeline System (MAPS).

The MAPS is a gas transmission system owned and operated by Epic. The system connects the Cooper Basin production and processing facilities at Moomba to markets for natural gas in Adelaide and in regional centres including Port Pirie, Whyalla, and Angaston connected to the main pipeline via laterals. The maximum operating pressure of the MAPS is typically 7,322 kPa, except in certain locations. There are eight compressor stations along the length of the mainline. The Pipeline System is described in clause 2 of the access arrangement, and the system operating characteristics and parameters in Schedule 1.

The application was submitted under section 2.2 of the National Third Party Access Code for Natural Gas Pipeline Systems (Code). Epic lodged access arrangement information for the MAPS with its application. The access arrangement and access arrangement information describe the terms and conditions on which the company proposes to make available access to services over its Pipeline System.

Consultative process and relevant documents

The Code sets out the public consultation process applicable to the Commission as regulator. The Commission must:

• 
  inform interested parties that it has received the access arrangement;
  
• 
  after considering submissions received, issue a Draft Decision that either proposes to approve the access arrangement or proposes not to approve the access arrangement. The regulator must state the amendments (or the nature of the amendments) that have to be made to the access arrangement in order for the regulator to approve it. The regulator must seek submissions following release of the Draft Decision;
  
• 
  after considering any additional submissions and a revised access arrangement (if submitted), issue a Final Decision that either approves or does not approve the access arrangement (or revised access arrangement) and states the amendments (or nature of the amendments) that have to be made to the access arrangement (or revised access arrangement) in order for the Commission to approve it; and
  
• 
  if the amendments are satisfactorily incorporated in a revised access arrangement, issue a final approval. If not, the Commission must draft and approve its own access arrangement for the Pipeline System.
  

The process of reaching this Final Decision is summarised as follows:

• 
  Epic lodged its original access arrangement (version 1 April 1999) and access arrangement information.
  
• 
  Epic submitted revisions to the access arrangement on 16 July 1999.
  
• 
  The Commission released an Issues Paper seeking submissions on the access arrangement on 6 September 1999.
  
• 
  Public submissions on the Issues Paper were published on 15 November 1999.
  
• 
  Epic provided responses to submissions on 14 December 1999 and 1 February 2000.
  
• 
  Epic submitted corrections to the access arrangement on 13 January 2000.
  
• 
  Epic submitted a revised access arrangement on 2 March 2000.
  
• 
  Epic submitted further corrections to the access arrangement on 26 May 2000.
  
• 
  The Commission issued its Draft Decision on 16 August 2000. In association with the release of the Draft Decision the Commission also carried out an extensive consultation process involving meetings with the service provider, industry players and interested parties.
  
• 
  On 11 October 2000, the Commission exercised its powers under section 42 of the Gas Pipelines Access Law (GPAL) to disclose summaries of certain clauses in the existing haulage agreements between Epic and Origin Energy Pty Limited (Origin) and Terra Gas Trader Pty Limited (TGT).
  
• 
  On 2 November 2000 the Commission conducted a pre-decision consultation forum in Adelaide. A Pre-decision Consultation Paper was issued by the Commission on 13 October 2000 in advance of the forum to provide an agenda for discussion on the day.
  
• 
  In November 2000, staff from Epic and the Commission held discussions on the process of reaching a Final Decision. Epic agreed that it would submit a revised access arrangement in response to the Draft Decision and submissions. The Commission wrote to Epic on 5 December 2000 to provide additional guidance on some issues.
  
• 
  Epic submitted a revised access arrangement on 17 May 2001.
  
• 
  The Commission then sought additional submissions on the revised access arrangement and released an issues paper on 25 May 2001.
  
• 
  Epic submitted a further revised access arrangement on 29 June 2001.
  

As can be seen, the process of reaching the Final Decision has been long. The Commission is concerned that the process has been delayed substantially at several points because Epic has not provided information in a timely manner.

MAPS and the relevant regulatory framework

1. 
   The Moomba to Adelaide Pipeline System
   

The MAPS trunkline stretches 781km from north to south, and, at the time of lodgement of the proposed access arrangement, provided about 90 per cent of transmission pipeline capacity in South Australia. The pipeline was built by the South Australian Government in 1969, and was operated by the Pipelines Authority of South Australia (PASA) until 30 June 1995.

In 1995, the pipeline assets of PASA were sold to Tenneco Gas Australia, later to become Tenneco Energy Australia. In 1996, El Paso Energy, a US company, purchased the Australian assets of Tenneco Energy Australia. El Paso Energy later sold down its interest and Tenneco Energy Australia was renamed ‘Epic Energy’.

The ultimate shareholders in Epic are: El Paso Energy (30 per cent), Consolidated Natural Gas Company Inc (30 per cent), AMP Asset Management Australia Limited (10 per cent), Axiom Funds Management Limited (10 per cent), Hastings Funds Management Limited (10 per cent) and Allgas Energy Ltd (10 per cent).

The Epic Energy group of companies has operations in Western Australia, Queensland and South Australia. The group owns 3,300km of pipeline in Australia, and operates another 891km on behalf of other owners.

Regulatory framework

The main legislation and relevant documents regulating access to gas transmission services in South Australia are as follows:

• 
  the Gas Pipelines Access (South Australia) Act 1997¹ which implemented access under the Code in South Australia and established template legislation nationally, known as the GPAL. The GPAL governs conduct of pipeline service providers and other interested parties in respect of access issues and regulatory, dispute resolution and administrative processes.
  
• 
  the Code, which, amongst other things, provides avenues for transmission service providers to submit access arrangements to the Commission for approval. Pipelines covered by the Code when it was implemented are obliged to lodge access arrangements. The MAPS is one such ‘covered pipeline’. Until the MAPS Code access arrangement comes into effect, an access arrangement prepared under the repealed Natural Gas Pipelines Access Act 1995 (SA) will continue to apply to the MAPS.
  

Code and appeals bodies in South Australia with respect to transmission pipelines are:

• 
  the Commission – regulator and arbitrator;
  
• 
  the National Competition Council – coverage advisory body;
  
• 
  the Minister for Minerals and Energy (SA) – coverage decision-maker for intrastate pipelines;
  
• 
  the Gas Review Board (SA) – administrative review of decisions by the SA Minister;
  
• 
  the Federal Court – judicial review body; and
  
• 
  the Australian Competition Tribunal – merits review body.
  

The South Australian Independent Pricing and Access Regulator (SAIPAR) is regulator and arbitrator in South Australia with respect to distribution (reticulation) pipelines.

Criteria for assessing an access arrangement

The Commission may approve a proposed access arrangement only if it is satisfied that it contains the elements and satisfies the principles set out in sections 3.1 to 3.20 of the Code. Those principles are summarised below. The regulator can not reject a proposed access arrangement on the basis that the arrangement does not address a matter that section 3 of the Code does not require it to address. Otherwise, the Commission has broad discretion within the terms of the Code in approving an access arrangement.

An access arrangement must include a policy on the service or services to be offered, which includes a description of the service(s) to be offered. The policy must include one or more services that are likely to be sought by a significant part of the market and any service(s) that, in the Commission’s opinion, should be included in the policy. To the extent practicable and reasonable, users and prospective users must be able to obtain those portions of the service(s) that they require, and the policy must allow for a separate tariff for an element of a service so requested.

An access arrangement must contain one or more reference tariffs. A reference tariff operates as a benchmark for negotiation of terms of supply of a particular service and provides users with a right of access to the specific service at that tariff. The reference tariff will apply in the event an access dispute goes to arbitration. Reference tariffs must be determined according to the principles in section 8 of the Code.

An access arrangement must include the following elements:

• 
  terms and conditions on which the service provider will supply each reference service;
  
• 
  a statement of whether a contract carriage or market carriage capacity management policy is applicable;
  
• 
  a trading policy that enables a user to trade its right to obtain a service (on a contract carriage pipeline) to another person;
  
• 
  a queuing policy to determine users’ priorities in obtaining access to spare and developable capacity on a pipeline;
  
• 
  an extensions/expansions policy to determine the treatment under the Code of an extension or expansion of a pipeline;
  
• 
  a date by which revisions to the arrangement must be submitted; and
  
• 
  a date by which the revisions are intended to commence.
  

In considering whether an access arrangement complies with the Code, the regulator must (pursuant to section 2 of the Code) take into account:

• 
  the legitimate business interests and investment of the service provider;
  
• 
  firm and binding contractual obligations of the service provider or other persons (or both) already using the covered pipeline;
  
• 
  the operational and technical requirements necessary for the safe and reliable operation of the covered pipeline;
  
• 
  the economically efficient operation of the covered pipeline;
  
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  the public interest, including the public interest in having competition in markets (whether or not in Australia);
  
• 
  the interests of users and prospective users; and
  
• 
  any other matters that the Commission considers are relevant.
  
• 
  The Commission’s assessment process
  

This Final Decision assesses the revised access arrangement submitted by Epic on 29 June 2001. As such, the Final Decision does not detail all amendments that would be required to translate Epic’s original proposed access arrangement of 1 April 1999 into the revised access arrangement.

The Commission received numerous submissions from interested parties in response to the revised access arrangement submitted to the Commission by Epic following the Commission’s Draft Decision. Epic made several submissions to the Commission in response to issues raised by other interested parties. The Commission has evaluated the most recent access arrangement submitted by Epic, on 29 June 2001, in the light of submissions both by Epic, and by interested parties. In particular, the Commission has addressed concerns raised by users and potential users that the terms of the access arrangement are too favourable to the service provider.

In this Final Decision the Commission has balanced the interests of Epic and those of users and potential users. On the one hand, the Commission must consider that its principal role as a regulator of gas pipelines is to mitigate the effects of market power, where it arises in gas transportation markets. In this role, the Commission must consider that the tariffs and terms of service offered by a covered pipeline owner may well differ substantially from what would be offered in a competitive market.

On the other hand, the Commission must provide a fair return to the service provider. The Commission also considers that the returns to the service provider must be adequate to attract investment in new pipeline projects into South Australia.

In making its decision the Commission must also consider the requirements of the Code and other relevant legislation.

The Final Decision revisits several issues initially raised in the Draft Decision, particularly the amendments which the Commission suggested Epic make to the access arrangement. In respect of some of these proposed amendments, the Commission is satisfied with Epic’s response; in others, changed circumstances mean that the amendment proposed is no longer necessary. However, the Commission considers that some of the proposed amendments which Epic has not adequately dealt with in its revised access arrangement are of a fundamental nature; accordingly the Commission requires Epic to address these amendments before the access arrangement is approved.

In addition to amendments from the Draft Decision, the Final Decision contains further proposed amendments, some of which arise from submissions by interested parties since the Draft Decision.

Epic will need to comply with the amendments proposed in the Final Decision for its access arrangement to be approved. To do so, Epic must submit a revised access arrangement to the Commission under sections 2.18 and 2.19 of the Code. If Epic does not submit a revised access arrangement by the required date, or does so and the regulator is not satisfied that it incorporates amendments specified in the Final Decision, the regulator must draft and approve its own access arrangement (section 2.20). Such a decision is subject to review on its merits by the Australian Competition Tribunal.

Overview of the Commission’s considerations

In its Final Decision, the Commission has adjusted the Optimised Replacement Cost (ORC) of the pipeline to take into account the extension undertaken for National Power (now Pelican Point Power). The Commission has also moved away from a deferred tax liability approach, and calculated a slightly lower return on equity.

The Commission has required Epic to make significant revisions to its extensions/expansions policy. In the light of criticisms from users of the recent queuing policy submitted by Epic, the Commission has suggested revisions to this aspect of the access arrangement as well.

One of the most significant issues unresolved in the Draft Decision was the issue of the capacity of the MAPS. The service provider and users submitted widely differing estimates of the capacity of the MAPS. In arriving at its Final Decision, the Commission has given consideration to the details of the quality of service offered by Epic, and its relationship to the firm capacity of the MAPS. The Commission has also considered the impact on capacity of the extension of the MAPS carried out by Epic for Pelican Point Power. The firm capacity of the Pipeline System is an important issue for users, given that demand for gas in South Australia considerably exceeds supply at present.

The Final Decision also addresses the issue of whether the access arrangement gives users sufficient flexibility in scheduling gas deliveries. This issue arises particularly in the context of clauses dealing with scheduling and nomination; the ability of users to switch between delivery points; and the capacity to trade imbalances. In arriving at its Final Decision the Commission has weighed the desirability of flexibility against the consideration that too much flexibility might lead to conflicting contractual rights.

The Commission has made several adjustments to clauses of the access arrangement detailing the liability and indemnity of users and the service provider to each other, and to third parties. The Commission considers that some of the clauses of the access arrangement submitted were too favourable to the service provider in this regard. The Commission has adjusted the relevant clauses in accordance with the general principle that the service provider and users should each be liable in respect of situations over which they are able to exercise substantial control.

The Commission has made adjustments to clauses dealing with the preservation of the integrity of the Pipeline System, particularly the clauses dealing with imbalances and with gas quality. In relation to these clauses, the Commission takes the view that firm disciplinary measures are appropriate to preserve pipeline integrity. However, the service provider should be obligated to act reasonably and with due care when it takes steps to enforce such disciplinary measures.

The Commission has also suggested amendments to provisions of the access arrangement that are of a more minor nature. In regard to these matters, the Commission takes the view that the wording of many of the terms and conditions of the access arrangement may have a significant impact on users, and it is appropriate for a regulator to address their concerns, including those that may appear to be minor in scope.

Period of the MAPS access arrangement

Section 2 of the Code requires the service provider to submit a proposed access arrangement (and associated access arrangement information) to the regulator for approval. The service provider is defined in the GPAL (section 2) as ‘in relation to a pipeline or proposed pipeline, the person who is, or is to be, the owner or operator of the whole or any part of the pipeline or proposed pipeline’. Epic currently owns the MAPS. The access arrangement provides for ownership of the MAPS to change over time.² The Commission expects that it would be notified of any change in ownership or operation of the MAPS as those changes occur.

Epic proposed that it would submit revisions to the access arrangement to the Relevant Regulator on 1 July 2005, and that these revisions would commence operation on 1 January 2006. Accordingly, the access arrangement in its current form is to run until 31 December 2005, which is also the termination date of Epic’s main contracts with existing users of the MAPS.

The Commission’s current assessment process relates to the initial access arrangement period. However, it will also impact on subsequent access arrangement periods, notably by determining the initial capital base, which, with adjustments to reflect additions and depreciation during the initial period, sets the capital base for the next period. Although Epic has argued that determination of the capital base should be deferred until the second period, the Code does not give the Commission discretion to do so.

Final Decision

The Commission has now made a Final Decision under section 2.16(b)(ii) of the Code that it proposes not to approve the proposed MAPS access arrangement. In order for the Commission to approve a revised access arrangement under section 2.19, the Commission will have to be satisfied that the amendments specified in this Final Decision are incorporated in a revised document. Epic must submit a revised access arrangement by 30 November 2001. Pursuant to section 2.16(b)(ii), the proposed amendments are set out in the relevant sections of the Final Decision and are brought together in the Executive Summary.

The remainder of this Final Decision sets out the Commission’s analysis of:

• 
  the determination of reference tariffs (chapter 2);
  
• 
  the non-tariff elements of service, that is, the service provider’s proposed access policies, terms and conditions of service and arrangements for review of the access arrangement (chapter 3); and
  
• 
  information provision and performance indicators (chapter 4).
  

Chapter 5 re-states the Commission’s Final Decision on the basis of the analysis preceding that chapter.
Reference tariff elements

The Code specifies a set of elements that an access arrangement must include. This chapter considers Epic’s compliance with the principles to be followed in determining the reference tariff. Specifically, the chapter covers the calculation of Epic’s revenue requirement, including the weighted average cost of capital (WACC), depreciation and capital base. Chapters 3 and 4 discuss Epic’s compliance with the remaining elements of an access arrangement.

Sections 3.3 to 3.5 of the Code require an access arrangement to include a reference tariff for at least one service that is likely to be sought by a significant part of the market and other services for which the Commission considers a reference tariff should be included. An access arrangement must also include a policy describing the principles that are to be used to determine a reference tariff (a reference tariff policy). The reference tariff and reference tariff policy must comply with the reference tariff principles in section 8 of the Code.

In addition to the access arrangement and access arrangement information, Epic has provided the Commission with confidential data such as volumes, revenues and costs, that it used to derive its proposed reference tariff. Aggregates have been publicly disclosed by Epic in the access arrangement information.

Reference tariff methodology

Section 8 of the Code sets out the general principles for a reference tariff and certain factors about which the relevant regulator must be satisfied before the regulator may approve reference tariffs and the reference tariff policy. The general principles are contained in sections 8.1 and 8.2 of the Code.

Section 8.4 of the Code permits a choice of three methodologies for determining the total revenue:

• 
  Cost of service: total revenue is set to recover costs. These costs are calculated on the basis of a rate of return on:
  

• 
  the value of the capital assets that form the covered pipeline (termed the ‘capital base’):
  
• 
  depreciation of the capital base; and
  
• 
  the operating, maintenance and other non-capital costs (collectively termed ‘non-capital costs’) incurred in providing all services over the covered pipeline.
  

The rate of return is set to provide a return commensurate with prevailing conditions in the market for funds and the risk involved in delivering the reference service (sections 8.30 and 8.31 of the Code).

• 
  IRR: total revenue is set to provide an internal rate of return (IRR) for the covered pipeline on the basis of forecast costs and sales, subject to the principles set out in sections 8.30 and 8.31 of the Code.
  
• 
  NPV: total revenue is set to deliver a net present value (NPV) for the covered pipeline (on the basis of forecast costs and sales) equal to zero, using a discount rate that would yield a return consistent with sections 8.30 and 8.31 of the Code.
  

While these methodologies are different ways of assessing the total revenue, their outcomes should be consistent. For example, it is possible to express any NPV calculation in terms of a cost of service calculation by the choice of an appropriate depreciation schedule. In addition, other methodologies (such as a method that provides a real rate of return on an inflation-indexed capital base) are acceptable under section 8.5 of the Code, provided they can be translated into one of these forms.

Epic proposed a cost of service methodology. This methodology is consistent with the Code.

Epic at present has haulage arrangements with three shippers and has advised the Commission that there is no firm capacity available in the pipeline for third party access (see discussion of spare capacity in chapter 3). Consequently, applications for access to the pipeline may involve parties making a capital contribution for new facilities.

Epic proposed a reference tariff that would equate reference service revenues to current contractual revenues (which it submitted are less than its total cost of service requirement). According to Epic, at this tariff level new users would pay the same capital contribution as existing customers.³ Epic stated that it is not requesting the higher tariffs it would need to recover its total cost of service requirement.

The initial capital base

2. 
   Code requirements
   

The Code requires the regulator to approve a value for an existing pipeline (an initial capital base) as part of the first access arrangement for that pipeline. This value carries over into subsequent access arrangement periods, subject to deduction of depreciation and redundant capital and addition of new facilities investment.

The principles for establishing the initial capital base of a pipeline system are set out in section 8 of the Code. These principles distinguish between pipeline systems that come into existence after the commencement of the Code (sections 8.12 and 8.13) and those that were in existence at the commencement of the Code (sections 8.10 and 8.11).

The initial capital base – existing pipelines

For existing pipelines, the Code states (section 8.11) that the value of the initial capital base normally should not fall outside the range of depreciated actual cost (DAC) and depreciated optimised replacement cost (DORC). In establishing the initial capital base, section 8.10 requires the regulator to consider:

• 
  other well recognised asset valuation methodologies (section 8.10(c)) and the advantages and disadvantages of those methodologies (section 8.10(d));
  
• 
  international best practice of pipelines and the impact on the international competitiveness of energy consuming industries (section 8.10(e));
  
• 
  the basis on which tariffs have been (or appear to have been) set in the past, the economic depreciation of the covered pipeline, and the historical returns to the service provider from the covered pipeline (section 8.10(f));
  
• 
  the reasonable expectations of persons under the regulatory regime that applied to the pipeline prior to the commencement of the Code (section 8.10(g));
  
• 
  the impact on the economically efficient utilisation of gas resources (section 8.10(h));
  
• 
  the comparability with the cost structure of new pipelines that may compete with the pipeline in question (for example, a pipeline that may by-pass some or all of the pipeline in question) (section 8.10(i));
  
• 
  the price paid for any asset recently purchased by the service provider and the circumstances of that purchase (section 8.10(j)); and
  
• 
  any other matters considered relevant (section 8.10(k)).
  

General principles

In addition, the Commission is guided by the objectives for the design of a reference tariff and reference tariff policy outlined in section 8.1 of the Code. These objectives are:

1. 
   providing the Service Provider with the opportunity to earn a stream of revenue that recovers the efficient costs of delivering the Reference Service over the expected life of the assets used in delivering that Service;
   
2. 
   replicating the outcome of a competitive market;
   
3. 
   ensuring the safe and reliable operation of the Pipeline;
   
4. 
   not distorting investment decisions in Pipeline transportation systems or in upstream and downstream industries;
   
5. 
   efficiency in the level and structure of the Reference Tariff; and
   
6. 
   providing an incentive to the Service Provider to reduce costs and to develop the market for Reference and other Services.
   
7. 
   Epic’s proposal
   

Epic evaluated the initial capital base using the depreciated optimised replacement cost (DORC) methodology. Epic stated that it had also considered the replacement value and book value of its capital assets.

ORC and DORC

Epic originally calculated a DORC of $353.5m at 31 December 1998. This was based on a capacity of 393 TJ per day. The pipeline has subsequently been expanded to 418 TJ per day.

In estimating the ORC, Epic stated that it made the following assumptions: ⁴

• 
  the best available technology of the day has been utilised for a ‘fit for purpose’ standard, not gold-plated or sub-standard;
  
• 
  each line segment and facility is optimised for the flow at today’s current contracted capacities, using standard sizing;
  
• 
  the construction is a ‘brownfields’ construction, using the existing route but recognising that route conditions of today rather than at the time of first construction would apply;
  
• 
  the costs of possible Native Title compensation and interest on capital during construction were considered; and
  
• 
  Epic did not include any allowance for facilities to provide the service provider with greater control over customers’ actions.
  

Epic based its ORC calculation on the parameters in Table 2..⁵

Table 2.: Parameters for Epic’s ORC calculation

Receipt point pressure	6300 kPa
Maximum capacity	393 TJ per day
Firm capacity	323 TJ per day
Geographic extent of system	As per current
Market size and location	As per current

The four options in Table 2. were priced to provide capacity and redundancy similar to that for the existing system: ⁶

Table 2.: Epic’s ORC options

Option A	The existing 559 mm diameter pipeline at 7.3 Mpa	$643 million
^7Option B	559 mm diameter pipeline at 15 Mpa	$572 million
Option C	864 mm diameter, free flow pipeline	$726 million
Option D	610 mm diameter pipeline at 10 Mpa	$598 million