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EnCana Storage Affiliate Asks FERC to Reconsider Denial of Unbundling Waiver

EnCana Corp. affiliate Starks Gas Storage LLC has called on FERC to reconsider an order denying a waiver of the Order 636 unbundling requirement in connection with the development of a 19 Bcf natural gas storage facility in southwestern Louisiana. It also asked the agency to use its certificate case to set new storage policy.

Instead of waiting for the conclusion of FERC's ongoing generic storage proceeding, the company urged the Federal Energy Regulatory Commission to act now, in Starks' certificate proceeding, to revise its storage policy in order to encourage the development of independent storage. FERC Commissioner Joseph Kelliher indicated last Thursday that the agency planned to take action in 30 days on this issue (see related story).

Last October, Starks Gas requested an unbundling waiver to "optimize uncontracted or underutilized [storage] capacity that would otherwise lay fallow at its facility." In an order last month, FERC awarded the storage project a preliminary determination, but denied the company's bid for a waiver on the grounds that the protections offered under Order 636 outweighed the alleged benefits of allowing Starks Gas to optimize the value of uncontracted storage capacity.

Starks Gas Storage is seeking the ability to "optimize' the unsold or underutilized storage capacity that third-party customer do not want or need. But the Commission's Order 636 unbundling requirement currently prevents a jurisdictional independent storage provider from owning any of the excess working gas that may be stored in its facility from time to time.

On rehearing, "the Commission should grant Starks' request for waiver of the unbundling requirements because Starks has shown first that, as an independent storage provider, it is fundamentally different from the vertically integrated and regionally dominant interstate transmission companies whose market power Order 636 sought to control, and second, that because of those differences, Starks is incapable of committing the sins which the Commission sought to address in its unbundling initiative," the storage company told FERC [CP05-8].

"Simply put, Order 636 was never intended to apply to an entity like Starks that has no market power, no exclusive franchise area, no cost-of-service or assured rate of return, no captive ratepayers, no ability to cross-subsidize its at-risk business with ratepayer contributions, and no affiliation with any transmission provider to which it interconnects."

By denying the waiver, FERC "has indefinitely and unnecessarily delayed the Starks' project until substantially all of its capacity can be contracted on a long-term basis to creditworthy customers," Starks Gas said.

Starks Gas Storage, which is located about 25 miles west of Lake Charles, LA, proposes to construct a two-cavern salt dome gas storage facility in two phases and a 35-mile, 30-inch diameter header pipeline system, which would connect to Transcontinental Gas Pipe Line, Tennessee Gas Pipeline and Texas Eastern Transmission. The facility would have a maximum withdrawal rate of about 800 MMcf/d.

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