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Rehearing Sought of FERC Order Rejecting KeySpan LNG Conversion Project

Citing the growing need for natural gas supplies in New England, KeySpan LNG LP and BG LNG Services LLC last Thursday asked FERC to reconsider its decision rejecting a proposal to convert a liquefied natural gas (LNG) peak-shaving facility in Providence, RI, to a full-fledged import terminal.

The Federal Energy Regulatory Commission last month denied the proposal to upgrade the KeySpan LNG facility because it failed to meet current federal safety standards for "new" construction (see NGI, July 4). KeySpan and BG LNG are partners in the project.

"The Commission's conclusion that the [KeySpan LNG] project is not in the public interest [was] based not on any evidence of unsafe operation or unsafe conditions, but on its arbitrary declaration that the proposed upgrade is 'in essence' a 'new LNG import terminal,'" and its rigid and discriminatory application of safety regulations promulgated by another agency [Department of Transportation]," KeySpan and BG LNG said in their rehearing request [CP04-223, CP04-293, CP04-358].

They contend that FERC erred by requiring both KeySpan's existing LNG facilities, which were built in 1971 and 1972, and the proposed new facilities to meet the current safety standards for "new" construction. FERC has "no authority to apply new construction standards" to KeySpan LNG's existing facilities under the Natural Gas Pipeline Safety Act, they said.

The companies pointed out that FERC gave authorization for upgrades and expansions at four other existing LNG terminals between 1999 and 2004, without requiring them to satisfy the new construction standards. Several of these facilities were first constructed and operated in the 1970s, the same time period when the Providence LNG facility was built, they said.

"There is no question that all [of KeySpan's] new facilities -- including all facilities associated with the proposed new import terminaling capabilities -- will meet all new construction standards. All of the facilities proposed for the new project are being designed in accordance with the current requirements of the federal safety standards... Every single change -- whether related to marine deliveries or vaporization capacity -- will meet new construction standards," according to KeySpan and BG LNG.

In addition, "the existing components of the project meet and will continue to meet all current federal safety standards for existing facilities," they said, adding that the existing facilities have been modernized over the years to satisfy DOT safety standards. "In short, the project would meet all the applicable current safety standards, and it is clearly erroneous to conclude otherwise."

KeySpan and BG LNG claim that FERC also "abused its discretion by refusing to issue a certificate identifying the specific conditions [that KeySpan LNG] would be required to meet to satisfy its concerns." The agency, in effect, deprived KeySpan of an opportunity to adapt its project to meet the Commission's requirements, they said.

KeySpan planned to convert the existing onsite LNG peak-shaving facility into an import terminal without undertaking substantial changes to the existing LNG storage tanks. The $50 million LNG conversion was designed to provide a peak sendout of 525 MMcf/d of gas with storage capacity for 600,000 metric tons of LNG. KeySpan signed a partnership agreement in October 2003 with BG Group on the project.

KeySpan and BG LNG also asked FERC to reconsider its decision to deny Algonquin Gas Transmission LLC a certificate to build a small pipeline to transport gas from the proposed terminal to Algonquin's existing interstate pipeline system. FERC is required to respond to the rehearing request within 30 days.

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