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Wellinghoff: Globalization of Gas 'Inevitable'

While this is "out of my area of expertise, I think...it's inevitable that natural gas is going to be a world commodity, and that because of very substantial price differentials between the price in this country and the prices in Europe and Asia it will happen," FERC Chairman Jon Wellinghoff said during a roundtable briefing with reporters at the agency's headquarters in Washington, DC.

"But we have to look at how long it will take to build the infrastructure [in the U.S.] to do that...It's certainly clear that the infrastructure to export substantial amounts of natural gas is going to take more than five years to do," he said Thursday.

Wellinghoff said exports of liquefied natural gas (LNG) may exert "some upward pressure" on domestic gas prices. By the time that export infrastructure is constructed, he said "other [factors] may affect prices here more significantly than exports, such as additional natural gas for generation."

Power generators no longer see coal as the "low-cost alternative" to gas anymore, he said.

The Federal Energy Regulatory Commission (FERC) earlier this month approved a proposal by Cheniere Energy's Sabine Pass Liquefaction LLC and Sabine Pass LNG LP to site, construct and operate facilities to liquefy domestic natural gas for export to markets worldwide (see Daily GPI, April 17). This was the Commission's first authorization of a project to export LNG from production resources within the United States.

According to the Commission, four other projects to liquefy natural gas for export are in the pre-filing process. These include proposals filed by Jordan Cove Energy Project LP to build an export liquefaction facility in Oregon, Freeport LNG to build export capability in Brazoria County, TX (see Daily GPI, Dec. 27, 2011); Energy Transfer Equity LP's Trunkline LNG Co., Trunkline LNG Export and Trunkline Gas Co. units to build a natural gas liquefaction project in Lake Charles, LA (see Daily GPI, April 12); and Cheniere Energy to develop an LNG export liquefaction in Corpus Christi, TX, with the gas primarily to be supplied from the Eagle Ford Shale in South Texas (see Daily GPI, Dec. 19, 2011.

And "I keep hearing about lots of ones [export projects] that may be in the works," Wellinghoff said. The Commission will act on these projects "probably as quickly as we acted on Sabine Pass...It took us a while because we needed to look at environmental and safety issues."

On other issues, Wellinghoff said that until Congress gives FERC broad authority under the Natural Gas Act (NGA) to order retroactive refunds for gas pipeline shippers -- which would take effect on the date a Section 5 complaint is filed -- the Commission would be vigilant of individual interstate pipeline's returns on equity (ROE). It's "incumbent upon [us] to survey these pipelines to make sure [they are] not over-recovering" their ROE, he said.

Wellinghoff said the Commission would continue to look for patterns and practices that might signal ROE over-recovery.

Under the NGA, pipeline shippers become eligible for refunds when FERC issues a decision on a Section 5 complaint (prospective refunds), assuming it is favorable to shippers, rather than from the date a complaint is filed with FERC (retroactive refunds). In 1988 Congress amended the Federal Power Act to make power customers eligible for retroactive refunds. For years, gas customers have been asking Congress to do the same to the NGA.

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