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AES Asks FERC for 4-Year Extension of Bahamas Pipe Completion

As politicians in the Bahamas continue to mull over the fate of several long-proposed liquefied natural gas (LNG) projects, AES Corp. was forced to ask FERC this week to push back a deadline for a gas pipeline project from the Bahamas to Florida by four years to January 2011 (see Daily GPI, Sept. 20, 2001 and Jan. 23, 2004).

"An extension of the in-service date is necessary because Ocean Express has been unable to commence construction of the pipeline due to unanticipated delays in securing final approval from the Commonwealth of The Bahamas for the construction of related facilities," AES told the Federal Energy Regulatory Commission (FERC). "The delay is largely due to the time required for The Bahamas to develop regulations to govern the [LNG] terminal that will be built in the Bahamas and the associated nonjurisdictional pipeline facilities that will interconnect with the Ocean Express pipeline." AES said it expects the Bahamian government to "soon complete work on these regulations" and to approve the terminal and associated pipeline.

The project has faced stiff opposition from environmental groups (see Daily GPI, Nov. 28). Interest in preserving tourism as the Bahamas' main industry also has been a major sticking point hindering agreements between the government and LNG companies.

Suez Energy already put its proposed LNG terminal in the Bahamas on hold to pursue a separate LNG project offshore Florida that would utilize its previously approved offshore pipeline in U.S. waters (see Daily GPI, Feb. 10).

After Bahamian government officials leaked news of an agreement with AES last summer, the company said it anticipated rapid approval. However, development of new regulations governing LNG projects in the country prevented final authorization.

AES' proposed $800 million project would include two 160,000 cubic-meter LNG storage tanks and an 842 MMcf/d regasification facility on a 90-acre man made island, located about 65 miles east of Miami. The project also would include the 76-mile Ocean Express pipeline, which would transport regasified LNG to Ft. Lauderdale in southern Florida, where it would interconnect with Florida Gas Transmission (FGT). Approximately 55 miles of the pipeline would be located in U.S. waters.

FERC's order on the U.S. portion of AES' proposed pipeline required completion of the facilities by Jan. 29, 2007. However, because the U.S. and Bahamian facilities are interdependent, the company said it cannot move forward with construction at this time.

"Ocean Express understands that the Bahamian government is now undertaking a final review of the regulations to govern LNG facilities and that this process will soon be complete... When unexpected delays have been encountered in the construction of projects, the Commission has routinely granted motions to extend the specified in-service date," the company told FERC, noting a recent extension for Sempra Energy's Port Arthur LNG project.

"Importantly, the fundamental predicates upon which the Commission based it approval of the project have not changed," AES said. "Gas demand in the southeastern Florida area continues to increase, with a significant part of the increase attributable to the use of gas to fuel electric power plants. Denial of an extension...would cause Ocean Express to lose millions already invested and deprive gas and electric customers in the southeastern Florida area of much needed access to additional supplies of competitively priced gas."

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