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LNG Storage The Answer, Developer Tells Maine Regulators

The Maine Public Utilities Commission (PUC) is weighing a proposal to create up to 1.3 Bcf of liquefied natural gas (LNG) storage capacity in the state to be used for peak shaving during times of high demand or natural gas supply constraints. Project backers say storage is cheaper than adding new pipeline capacity to the region.

The proposal by Maine Energy Storage (MES) -- a venture of Japan's JGC Corp. and Boston-based Energy Management Inc. LLC -- is a response to an amendment to the state's Energy Cost Reduction Act (ECRA). The original act allowed the PUC to direct utilities to enter into pipeline capacity contracts (see Daily GPI, July 21). The amendment adopted last April allows for utilities to enter into gas storage contracts as well.

Maine, like much of New England, has seen natural gas price spikes during periods of extreme cold or when pipeline capacity to the region is constrained. MES said in its proposal it has secured rights to two sites for proposed LNG storage. One would be served by Maritimes & Northeast Pipeline while the other would be served by Portland Natural Gas Transmission System. Only one storage project would be constructed, and MES put it to regulators to pick which site.

"When the commission selects one of the proposed projects in the proposal, existing infrastructure in the state of Maine will be supplemented by the ability to store up to 1.3 Bcf of natural gas as liquid for use at peak demand periods or when upstream [pipeline] capacity is constrained," MES said.

"The addition of Maine Energy Storage would materially enhance LNG storage capacity in Maine as there are no other comparable facilities in the state and no known underground natural gas storage possible in the New England region. Maine Energy Storage would provide the region with access to lower-cost natural gas supplies at times of regional peak demand, or in the event of upstream natural gas infrastructure disruptions."

Project backers said the storage facility could save state ratepayers $9.9-40.6 million annually "...when compared to the expected cost of subscribing to new pipeline expansion capacity for the same service, i.e., delivery of natural gas supplies in peak periods. Even in a period of low oil prices and no pipeline expansion, Maine Energy Storage would save Maine consumers at least $0.7 million to $2.1 million annually..."

The ECRA allowed for ratepayer funding of up to $75 million of pipeline capacity contracts. The amendment enacted in April allows for up to $25 million of the $75 million to be used for gas storage. In July the PUC voted to adopt the pipeline capacity plan in a move that was contrary to the recommendation of PUC staff (see Daily GPI, July 21).

Spectra Energy's Access Northeast expansion project is one potential beneficiary of Maine's ECRA. However, Access Northeast has stumbled elsewhere lately as its capacity contracts in Massachusetts were invalidated by a state supreme court ruling (see Daily GPI, Aug. 24). The Federal Energy Regulatory Commission also recently rejected a blanket capacity release waiver sought by Spectra's Algonquin Gas Transmission LLC, another setback for Access Northeast (see Daily GPI, Sept. 1).

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