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FERC Splits the Baby on Dominion Cove LNG Terminal

In an attempt to mollify the courts, Dominion Cove Point LP and Washington Gas Light (WGL), FERC last Tuesday split the baby in a much-anticipated order, giving Dominion Cove Point the go-ahead to resume expansion of its liquefied natural gas (LNG) import terminal on Maryland's eastern shore, while at the same time barring the flow of the additional expansion-related LNG volumes to WGL to shield its distribution system from further system leaks.

Because "we find that public interest considerations support allowing the completion and limited use of the expansion facilities, we are authorizing their completion and use, but are conditioning that authorization to ensure that no additional volumes of regasified LNG will flow through WGL's system as a result of the terminal expansion," the order said [CP05-130]. Toward that goal, the Federal Energy Regulatory Commission (FERC) reissued certificates to complete the project.

"We anticipate that at some point in the future, we may be able to remove this restriction. However, in the meantime, the condition we impose will prevent the unsafe leakage on WGL's system from occurring as a result of the terminal expansion."

Dominion Cove Point, a subsidiary of Richmond, VA-based Dominion Resources, was forced to stop construction when the U.S. Court of Appeals for the District of Columbia Circuit in July vacated a FERC order approving the expansion of the LNG terminal and associated pipeline, ruling that the evidence did not support the agency's conclusion that Washington, DC-based WGL could fix widespread leaks on its distribution system before the terminal expansion went into operation (see NGI, July 21).

WGL argued that the coupling leaks on its utility system were caused by unblended LNG from Cove Point. FERC, however, concluded that the leaks occurred because WGL applied hot tar to system couplings when they were installed. The DC appellate court agreed with the Commission as to the cause of the leaks, but it nonetheless vacated the agency's order because it said FERC incorrectly ruled that WGL would be able to fix all of its system leaks before the LNG terminal expansion went into service.

In 2006 WGL petitioned the court for review of the FERC order approving the construction of the Cove Point LNG project, which would increase the sendout capacity of the terminal to 1.8 Bcf/d from 1 Bcf/d, and would boost storage capacity to 14.6 Bcf from 7.8 Bcf. The utility challenged the order on the grounds that an influx of LNG would aggravate leaks on its distribution system.

WGL reported more than 1,600 coupling leaks in 2004 when unblended regasified LNG was introduced into its system in Prince George's County in Maryland, an area primarily supplied with regasified LNG from Dominion Cove Point. The utility, which serves parts of Virginia, Maryland and Washington, blamed the leaks on the chemical composition of the LNG from Cove Point and sought to block the terminal expansion (see NGI, July 11, 2005).

The Dominion Cove Point terminal expansion is approximately 93% complete and should be finished within 120 days, according to the agency order. And an expansion of the existing Cove Point Pipeline being carried out by affiliate Dominion Transmission Inc. is 65% complete. "We find that any stoppage of construction work at this point in time would have substantial adverse impacts beyond financial implications to Cove Point LNG and Dominion," it said.

At a technical conference in August, WGL suggested a possible solution to the ongoing dispute with Dominion Cove Point -- that its distribution system be isolated from the bulk of Cove Point's LNG expansion volumes (see NGI, Aug.18). Among other things, WGL proposed that more volumes be shifted from Columbia Gas Transmission's 26-inch diameter line to its 30-inch diameter line, allowing the regasified LNG to bypass several of the affected areas on WGL's distribution line. Columbia is WGL's largest supplier of natural gas.

"We...find that the flow of additional volumes of LNG associated with the expansion into WGL's system from Columbia Gas can be prevented by restricting deliveries of natural gas into Columbia Gas' pipeline at its interconnection with the Cove Point Pipeline at the Loudoun, VA, delivery point (Columbia-Loudoun) to 530,000 Dth/d," the order said. Because the Dranesville, VA, and Rockville, MD, gate stations are downstream of Columbia-Loudoun, restricting deliveries at Columbia-Loudoun would subsequently limit deliveries at Dranesville and Rockville, it noted.

"By imposing this restriction, we will ensure that no additional LNG can be delivered into WGL's system as a result of the expansion project," FERC said.

With respect to Cove Point Pipeline's interconnections at Centerville, VA, and White Plains, MD, "we find that these receipt points are capable of effective isolation from WGL so that LNG volumes as a result of the expansion will not impact WGL's system," the order said. And because WGL plans to complete repairs to its system behind the Leesburg, VA, and Jefferson, MD, delivery points off Dominion Transmission, "we find that any LNG volumes received off Dominion as a result of the expansion will have no adverse impact on WGL's system."

The delivery points on Transcontinental Gas Pipe Line's (Transco) system that serve WGL have already been isolated from all LNG-sourced supplies by the installation of certain valves such that "WGL can now exclude Cove Point gas that is transported through the Transco pipeline from each of its four Transco gate stations," the order said.

"While WGL may, in fact, receive specific molecules of gas which emanate from [the] terminal expansion facility, it will be protected from receiving any greater volume of regasified LNG than it could have received had the expansion not been authorized." FERC noted that the largest volume of regasified gas delivered to the Columbia-Loudoun point was about 290,000 Dth/d in the winter of 2006-2007. However, the average flows for the last three years at the point have been 30,000 Dth/d for both summer and winter.

"Given present world LNG market conditions, shipments of LNG to the Cove Point terminal are likely to remain diminished. In the event that prior to WGL's making additional repairs to its system, the U.S. market does make a sustained call on the world LNG supply such that deliveries of LNG-sourced supplies at Columbia-Loudoun increase greatly and are sustained, WGL may experience some leaks on that portion of its system served by Columbia Gas. However, that situation would occur even in the absence of this expansion, and thus cannot be said to be attributable to the expansion," the Commission said.

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