FERC cleared the way last week for Southern LNG Inc. to take itsliquefied natural gas terminal facility on Elba Island in Georgiaout of mothballs.

The only potential hurdle in Southern LNG’s way was a request byDalton Utilities for FERC to investigate the impact of reactivatingthe Elba Island terminal on affiliate Southern Natural Gas or itscustomers. The Commission denied the Georgia utility’s request,saying it had presented “nothing beyond speculation” to warrant aSection 5 investigation. Furthermore, it said the request was”premature” considering that the terminal wasn’t expected to begincommercial operation until 2002 or later.

The certificate was a welcome relief to Southern LNG, whose ElbaIsland facility has been mothballed since 1980. An upgrade andother work on the terminal is expected to get under way in early2001.

Southern LNG has executed a binding contract with its affiliate,El Paso Merchant Energy, for 100% of the capacity of the ElbaIsland terminal near Savannah, GA. The contract, which has a termof 22 years, would enable El Paso Merchant to store up to 4 Bcf ofnatural gas in LNG form. A company spokesman said El Paso Merchantstill is negotiating contracts to import LNG supplies from theRepublic of Trinidad and Tobago.

The Elba Island terminal is one of four marine LNG terminals inthe U.S., and is capable of achieving a peak sendout rate of 540MMcf/d of natural gas and a baseload sendout rate of 330 MMcf/d,according to Southern Natural Gas, which is Southern LNG’s parentand now is owned by El Paso Energy.

The terminal is located at the eastern end of Southern Natural’sservice territory. This makes it a “strategically valuable source”of gas supply for the pipeline, which plans to initiate “numerouspipeline expansion projects” in its existing market and in newmarkets over the next several years, Southern Natural said.

The company expects the biggest demand for the Elba Island gasto be in the southeastern section of the United States, wherenumerous new power plants are either under construction or beingproposed. Further, it said the interconnection of Southern LNG’sfacilities with Southern Natural’s pipeline and other pipelineswould potentially open up markets for imported gas in other partsof the nation.

Southern LNG said initial rates for the project would be basedon recommissioning costs of $25 million and an annualcost-of-service of about $23 million.

Susan Parker

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