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KeySpan, AGA Decry NGSA's Gas Quality, Interchangeability Proposal

June 13, 2005
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The Natural Gas Supply Association's (NGSA) proposal asking FERC to adopt national hydrocarbon dew point (HDP) and interchangeability specifications for natural gas "is nothing more than an attempt to solve complicated issues with quick-fix solutions" that benefit gas producers at the expense of others in the market, KeySpan Corp. charged last week.

In comments posted last Thursday, which appeared to reflect the sentiment of local distribution companies (LDCs), KeySpan called on the Federal Energy Regulatory Commission to reject NGSA's plea to establish a minimum safe harbor national cricondentherm hydrocarbon dew point (CHDP) level of 15 degrees Fahrenheit, saying that such a standard would not meet the needs of large segments of the natural gas industry.

As the American Gas Association (AGA) pointed out at a May technical conference, "establishing such a limit on a nationwide basis would be akin to a six-foot tall man assuming that he could ford a river that had an average depth of five feet," the Brooklyn, NY-based utility said. "The simple fact of the matter is that a CHDP 'safe harbor' of 15 degrees would produce an unacceptable level of liquid fallout in numerous areas of the country, including the areas served by KeySpan's distribution affiliates."

In addition to a safe harbor CHDP, the NGSA called on FERC to require pipeline adoption of specifications -- including a 1400 Wobbe Index (maximum), 4% inert gas maximum and 1.5% butanes plus limit -- to allow Btu-rich liquefied natural gas (LNG) to be interchangeable with conventional U.S. gas supplies, as well as to require pipelines to implement tariff language reflecting these standards.

"NGSA's proposed regulations governing interchangeability are similarly defective," KeySpan told FERC [PL04-3]. Interim guidelines that were spelled out in the interchangeability white paper "do not support adoption of the criteria set forth in NGSA's petition, particularly a Wobbe Index number of not greater than 1400," the company said. The Natural Gas Council submitted gas quality and interchangeability technical white papers to FERC in February. The agency asked the industry to comment on the documents.

In addition, NGSA's proposed regulations governing interchangeability "would impose the burdens and costs associated with accommodating gas supplies that are not interchangeable on pipelines, LDCs and consumers," the utility said.

The AGA, which represents LDCs, took exception with NGSA's proposal as well. "AGA appreciates NGSA's desire for certainty in the face of four years of regulatory litigation over natural gas quality issues and in advance of the construction of needed LNG import terminals," but its approach is all wrong, the distribution group said.

"NGSA's proposal...ignores the process endorsed by the two technical white papers and instead would require that interstate pipelines state in their tariffs: 1) a delivery CHDP that in no event can be below 15 degrees F, even if the technically endorsed process results in a CHDP below 15 degrees F; and 2) a Wobbe number of 1400 without any of the other parameters, such as a limit on higher heating value at 1110...This position results in a solution to gas quality and interchangeability issues that maximize supply profits at the expense of the end-use customers -- from both a safety and cost perspective," AGA said.

"Several of AGA's members report that a CHDP of 15 degrees F is too high for their systems. These members range across the country from New York City to Michigan, supplying millions of natural gas customers. As an example, KeySpan of New York reports that the CHDP of their historical gas is closer to zero degrees than to 15 degrees. Likewise, MichCon reports historical CHDPs averaging well below zero degrees F...Memphis Light Gas and Water reports CHDPs close to 10 degrees F on one pipeline supplier."

Southern California Gas and affiliate San Diego Gas & Electric Co. were among the LDCs that supported NGSA's petition. They joined NGSA in asking the Commission to issue proposed regulations to develop national standards for CHDP and interchangeability in pipeline tariffs.

Rising hydrocarbon content in domestic gas entering pipelines has become a pressing issue over the last couple of years as gas prices rose while price for natural gas liquids did not keep up, prompting producers to keep liquids in their gas streams. Industry members, particularly pipelines, urged FERC to approve tighter restrictions on domestic gas quality. Pipelines contend that hydrocarbon-rich gas leads to liquids fallout, which can cause operational problems on their systems.

The interchangeability issue has risen to the forefront as greater amounts of LNG make their way into the U.S. gas stream, prompting pipelines to worry about the impact of the Btu-rich gas on the integrity of their systems. LDCs fret about the safety of regasified LNG. The key concern is the extent to which LNG-sourced gas can replace conventional gas without unduly interfering with the operation of the pipeline network.

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