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KeySpan Says Rhode Island LNG Project Meets Federal Safety Standards

KeySpan LNG LP, in comments filed at FERC last week, said it took "strong exception" to staff's finding that the proposed conversion of the company's existing liquefied natural gas (LNG) storage terminal in Providence, RI, to an import terminal did not meet federal safety standards. Commission staff reached this conclusion in a final environmental impact statement (FEIS) on the project that was issued last month.

KeySpan LNG "takes even stronger exception to any suggestion that [the company] is reluctant to comply with the new construction standards or any other safety requirements... The proposed new construction will meet all federal safety standards for new construction and the existing components will (and do) meet all federal safety standards for existing facilities," the company, an affiliate of Brooklyn, NY-based KeySpan Corp., told FERC.

It called on the Federal Energy Regulatory Commission to reject staff's assertion that the company's existing LNG storage tank must comply with federal standards governing new construction.

"There is a serious question whether the Commission has the legal power to impose, retroactively, new construction standards on an existing LNG storage tank that is not being expanded or relocated," KeySpan LNG said. "If the Commission could and were to adopt a policy that existing LNG facilities must comply with new construction standards, it would render upgrades of all of the existing facilities impractical or infeasible. This would drastically limit the industry's ability to meet the projected demand for LNG."

The Commission's FEIS "repeatedly acknowledges the existing [LNG storage terminal] is safe, and [the company] is not proposing to modify the existing LNG storage tank, which has been in service for more than 30 years and currently complies with all applicable safety regulations," KeySpan LNG said. "There is simply no basis for concluding that the [KeySpan LNG] facility will go from being safe today to being unsafe tomorrow because of the upgrade proposed in this proceeding."

Federal regulations require application of the new construction standards to KeySpan LNG's storage tank "only if there is a change in the tank, whether by way of modifying its capacity or location, and [KeySpan] does not propose to change the tank in any way," the company said.

Moreover, "requiring that the existing tank be modified to meet new construction standards would necessitate demolishing the existing tank and replacing it with a new tank or substantially rebuilding the existing tank and impoundment system. That would require [KeySpan] to abandon service to existing customers for up to three heating seasons -- which [it] does not have legal or contractual authority to do."

The KeySpan LNG project calls for the conversion of the company's existing 600,000 barrel LNG storage facility in Providence to an import terminal. The terminal would supply up to 375 MMcf/d of imported LNG to the New England region via the interstate pipeline of Algonquin Gas Transmission's existing G system. The facility also would continue to deliver up to 150 MMcf/d of vaporized LNG to the New England Gas Co. distribution system. KeySpan LNG signed an agreement in October 2003 with BG LNG Services to undertake the $50 million conversion project.

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