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FERC Spells Out Approval Policy for Project Delays

In an order issued last week for Chestnut Ridge Storage LLC, FERC provided guidance on when it will (and won't) grant requests to extend deadlines for completing projects.

The Federal Energy Regulatory Commission (FERC) rejected Omaha, NE-based Chestnut Ridge's request for rehearing of a November 2011 order denying the company's request for a three-year extension to complete its Junction Natural Gas Storage Project near Uniontown, PA. The order also vacated the August 2009 certificate authorizing the storage project (see NGI, Sept. 7, 2009).

In seeking the project extension Chestnut Ridge told FERC that "prospective gas storage service customers are currently unwilling to enter into new long-term arrangements for storage services at rates developers such as Chestnut Ridge would need to support construction of new capacity." The company made "no representations that any improvements in gas storage markets or the availability of project financing for its particular project is imminent," FERC said.

The Commission's order clarified its policy with respect to deadline extensions. "We do not, as Chestnut Ridge suggests, automatically grant additional time solely because a company expresses a preference, or even need, to place a hold on its project until more agreeable market conditions materialize. We do, in general, grant extensions of time when a project sponsor demonstrates that good faith efforts to meet a deadline have been thwarted by unforeseeable circumstances, e.g. difficulties in obtaining deliveries of needed materials or the discovery of cultural remains on an approved right-of-way.

"In this case, however, it appears Chestnut Ridge has reached the conclusion, which we have no reason to dispute, that its project is not financially viable under current conditions. It has consequently refrained from moving forward with activities that must be completed, or be well underway, prior to initiating construction, e.g. acquiring necessary property rights, submitting a construction implementation plan, ordering materials and obtaining state and federal permits and authorizations. These decisions on the part of the company provide grounds for the Commission to refrain from 'automatically' granting Chestnut Ridge an extension of time without further consideration," the order said [CP08-36-02].

The Chestnut Ridge order was issued only one day after the Commission rejected North Baja Pipeline LLC's request for a two-year extension of its certificate authority to construct and place into service proposed Phase II facilities to transport regasified liquefied natural gas from Sempra Energy's Energia Costa Azul terminal in Baja, Mexico, to California and Arizona (see NGI, Oct. 8, 2007).

The Phase II facilities, which were approved in October 2007, were intended to accommodate an expansion of the Energia Costa terminal that was to be placed in service in January 2010. However, the terminal expansion was never undertaken by Sempra. Nevertheless, North Baja insisted that infrastructure changes in northwestern Mexico justify the expansion project moving forward.

FERC, in denying North Baja's plea, said the company's request for the project extension was based on mere speculation that market opportunities would present themselves in Mexico. "North Baja now merely speculates that, as the Mexican government pursues the improvement of the natural gas infrastructure in northwestern Mexico, the facilities may provide opportunities for North Baja to construct and utilize the Phase II facilities. This speculation is not enough to justify the requested extension of time," the agency order said [CP06-61, 01-23].

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