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FERC Gives Preliminary Go-Ahead for Southern's Cypress Pipe Project

Southern Natural Gas, a pipeline subsidiary of El Paso Corp., last Tuesday received a favorable preliminary determination (PD) on non-environmental issues from FERC for its Cypress Pipeline project, which would open up a direct corridor for deliveries of regasified natural gas from the Elba Island liquefied natural gas (LNG) terminal in Georgia to the flourishing northern Florida market.

"We preliminarily find, pending completion of our environmental review, that approval of Southern's proposed Cypress Pipeline is required by the public convenience and necessity," the PD order said [CP05-388]. A PD ruling is the first step in the agency's certificate process, to be followed by draft and final environmental reviews and ultimately a certificate.

The Cypress Pipeline has been on the drawing board since 2000. It would add 500 MMcf/d of firm transportation capacity on Southern's existing system in Georgia and Florida by constructing 177 miles of 24-inch and 30-inch diameter pipeline, 31,050 horsepower (hp) of compression and associated facilities from El Paso's Elba Island LNG terminal to Jacksonville, FL.

The $320.8 million expansion, which would be built in three phases, would tie in with Florida Gas Transmission's (FGT) system in the northern part of the Sunshine State. FGT is 50% owned by El Paso.

Phase I would consist of the construction of 1) 166 miles of 24-inch diameter pipeline, extending from an interconnect with Southern's existing Wrens-Savannah lines in Effingham County, GA, to an interconnect with FGT in Clay County, FL; 2) interconnection and measurement facilities with Atlanta Gas Light Co. in Glynn County, GA; Southern's South Georgia facilities in Nassau County, FL; JEA (formerly Jacksonville Electric Authority) in Duval County, FL; and FGT in Clay County; and 3) various associated facilities, including replacement facilities, at Southern's Marietta delivery point to Atlanta Gas Light in Cobb County, GA. Phase I is targeted for in-service on May 1, 2007.

Phase II, which is projected to go into operation in May 2009, would consist of a new 10,350 hp compressor station in Glynn County. Phase III would include nearly 10 miles of 30-inch diameter pipeline loop on Southern's Wrens-Savannah pipelines in Chatham and Effingham Counties, and two new 10,350 hp compressor stations in Liberty County, GA, and Nassau County. Southern expects Phase III facilities to go into service in May 2010.

Southern has entered into precedent agreements for firm transportation service for the full capacity of the project with BG LNG Services LLC (20-year term), Progress Energy Florida Inc. (20-year term), and the City of Austell, GA (15-year term), according to the El Paso pipeline.

The Federal Energy Regulatory Commission granted Southern's request to roll the costs of its proposed Cypress Pipeline into its existing rate base in a future Section 4 rate proceeding -- "absent material changes in the relevant facts and circumstances" surrounding the project.

The Commission said it would condition its certificate authorization for Southern's expansion on the pipeline delivering gas to the Cypress-FGT interconnect that complies with the FGT gas quality standards that are established in a pending case at the agency [RP04-249-001]. "Those parties that object to the gas quality and interchangeability aspects of Southern's proposed expansion [Peoples Gas, Florida Power & Light and Florida Gas Utility] are also participating in the AES vs. FGT proceeding" at FERC, the order noted. An initial decision in that case is schedule for April 11, 2006.

"The outcome of that proceeding will dictate not only the gas standards that AES must meet, but also the gas standards that Southern will have to meet to make deliveries to FGT," the order said.

The pending gas quality/interchangeability case stems from an April 2004 complaint in which AES Ocean Express LLC accused FGT of placing "unreasonable and onerous" conditions on the company in its pursuit of an interconnect with FGT's system. By imposing what it called restrictive gas quality requirements, Ocean Express claimed that FGT was frustrating its plans to construct a proposed Bahamas-to-Florida pipeline to deliver regasified LNG to the southern Florida market. FERC at the time ordered FGT to revise its tariff to specify standards for the energy content of the domestic gas stream and imported LNG that could enter its system. It also set certain gas quality/interchangeability issues for hearing before an administrative law judge.

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