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RCED-83-237 1 (1983-08-31)

handle is hein.gao/gaobabndm0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 August 31, 1983 RESOURCES, COMMUNITY, AND ECONOMIC DEVELOPMENT DIVISION ~. AccoUnti; ', 7'sod ::,; c :{: , : 8S e i ca p o a B-205030 by cti.e d e o . h,, :Olv cd O H~at eooral 91ue Ok uhg ~ £ ~~; D1 Specaic apoa The Honorable Charles H. Percy hcatiofl5 Chairman, Subcommittee on Energy, Nuclear Proliferation and RELEASED Government Processes Committee on Governmental Affairs United States Senate 122626 Dear Mr. Chairman: Subject: Capital Cost Associated With the Trunkline Liquefied Natural Gas Lake Charles Facility (GAO/RCED-83-237) In response to your February 28, 1983, request and subsequent discussions with your office concerning the Liquefied Natural Gas (LNG) facility constructed by Trunkline LNG Company1 near Lake Charles, Louisiana, we are furnishing you the information on the (1) principal elements in the cost per unit of natural gas from the facility, (2) capital costs associated with constructing the facility, and (3) status of the Federal Energy Regulatory Commission's (FERC's) review of these costs to determine which costs will be included in the rate charged for natural gas. As agreed with your office, this is an interim report. When FERC completes its process of determining which LNG facility capi- tal costs are reasonable and will be included in the rate charged for the natural gas, we plan to initiate a review to examine FERC's procedures for evaluating and allowing capital costs of the facility in the rate base. In summary, the actual cost of constructing the LNG facility was about $589 million, an increase of approximately 258 percent over the $164 million cost estimate approved by the Federal Power Commission (FPC) in 1977. According to reports submitted by Trunkline LNG, the reasons for the increases included extensive modifications to plant design to ensure safe and reliable con- struction and greater operating efficiency and compliance with State and Federal regulations. Also, extension beyond the origi- nal estimated completion date, various labor problems, and general inflation resulted in increased labor and interest costs. lTrunkline LNG Company, a wholly owned subsidiary of Panhandle Eastern Corporation, is a natural gas company engaged in import- ing and selling liquefied natural gas. (308557)

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