Washington Gas Light Co. (WGL) drew the ire of Dominion Resources last week by announcing that a recently conducted study blames vaporized LNG from Dominion's Cove Point import terminal in Maryland for widespread leaks on the WGL distribution system in Prince Georges County, MD.

WGL said repairing the 1,400 leaks will cost about $144 million and additional measures must be taken to adjust the chemical composition of the revaporized LNG entering the distribution system.

However, Dominion charged that WGL misinterpreted the findings of the study. Dominion said the study showed that WGL's aging infrastructure was mainly to blame for the leaks, not LNG from its terminal in Lusby, MD.

The gas leaks began to increase in 2003 around the time WGL began distributing regasified LNG from the terminal. The leaks also were concentrated in a 100-square mile area that receives most of its gas directly from Cove Point, WGL said.

WGL held a press conference last Thursday to announce the result of the study and ended it by saying that it still supports increasing LNG imports at Cove Point despite the study's findings.

The investigation into the cause of the leaks was conducted by Groton, MA-based ENVIRON International Corp., Polymer Solutions Inc., and Akron Rubber Development Laboratory. The consultants isolated three leading contributors to the leaks: winter ground temperatures, aging seals in pipe couplings, and gas composition.

"Based on the work we have conducted to date, we believe that a combination of factors contributed to the observed spikes in leaks," the consultants said in the executive summary of their study. "Three factors have been identified as contributors:

The report stated that in both the 2003 and 2004 winter heating seasons, the increased incidence of leaks occurred in Prince George's County, MD. "Based on composition measurements and system gas flow models, the affected region of the [WGL] system was known to be supplied primarily with revaporized LNG from the Cove Point terminal. Other parts of the [WGL] network, which did not receive significant amounts of LNG experienced typical seasonal leak rates."

WGL commenced distribution of regasified LNG from Cove Point in August 2003. Meanwhile, the high incidence of leaks was first noted in early December 2003 but the number of reported leaks returned to normal levels in March 2004. A similar pattern was noted during the last heating season.

Based on the findings, WGL announced that the main cause of the leaks, or "key contributing factor," was the chemical composition of the gas that supplied the affected areas of Prince George's County. According to WGL, the regasified LNG "precipitated the deterioration of the rubber seals" in mechanical couplings that join sections of its distribution mains to its service lines. The couplings are located outside of homes in underground pipelines.

CEO James H. DeGraffenreidt Jr. noted that study found that the low level of heavy hydrocarbons in regasified LNG from Cove Point contributed to the widespread failure of the rubber seals. The process of changing natural gas into a liquid requires the removal of the heavier hydrocarbons from the gas to prevent the formation of solids. The low level of hydrocarbon's hexane and pentane "caused the seals to shrink and lose their ability to adhere tightly" to the couplings, he said.

"The heavy hydrocarbon impact on seals did come as a surprise to us" because Washington Gas Light, like most other local distribution companies, was more focused on the potential impact of the higher BTU content of LNG on end user appliances, said DeGraffenreidt.

Although the study also said that the age of the seals and winter ground temperatures were factors in the leaks, it noted that those two factors affected other areas of the WGL system where no increased leaks occurred, WGL pointed out during its teleconference on the study results.

Shortly following the announcement by WGL, however, Dominion Resources released a statement demanding that Washington Gas Light officials "immediately cease and desist from mischaracterizing" the contents of the study.

The gas leaks on WGL's system were "caused by old, deteriorated gas couplings -- an apparent failure on WGL's part to maintain its system adequately -- not by the introduction of natural gas from Dominion's Cove Point [terminal]," Dominion said.

In a letter to WGL, Dominion told the company that its statements were an "inaccurate description of the contents of the report and the likely causes of your system failures."

Dominion spokesman Dan Donovan said, "If you carefully read the report, it says that the aging infrastructure, particularly the 40- to 50-year-old seals, is the real cause of the problem. That's what's really bothering us in this whole thing."

"There's absolutely nothing wrong with the natural gas from Cove Point," said Donovan. "That gas meets the stringent standards set by FERC and agreed to by Washington Gas and any other companies that receive [LNG]. Washington Gas specifies the quality level and the chemical composition of the natural gas before purchasing it."

Donovan said the regasified LNG from Cove Point is "interchangeable with the gas streams around the Northeast, in the Mid Atlantic, and has had no impact on other natural gas systems." He also said that the low hexane content cited in the report is common in domestic gas streams at other locations. (In fact, the report referred to the similar experience of Long Island Lighting Co. when it switched to receiving Canadian gas from Iroquois Gas Transmission instead of domestic Gulf production via Transcontinental Gas Pipeline.)

However, if Washington Gas is correct regarding regasified LNG, the findings could have national implications because of the expected sharp increase in imported LNG nationwide. The seals that were affected apparently are widely used. Other seals and equipment also might suffer similar problems.

Washington Gas said the findings of the report show that the resulting drying effects of regasified LNG on its rubber seals can be reversed by adding hexane and pentane to the gas stream or possibly by mixing the regasified LNG with domestic supply. It plans to determine whether such remedies might be employed on its system to prevent new leaks from occurring. It did not say how much such a plan would cost or what the long-term implications would be.

"We are assessing several manageable approaches to supplement our existing rehabilitation program and prevent similar conditions from emerging elsewhere," said DeGraffenreidt.

Adrian Chapman, Washington Gas' vice president of energy acquisition and regulatory affairs, said the company believes it can reverse seal deterioration by conditioning the Cove Point gas entering the system.

On Friday, Washington Gas reaffirmed its position regarding the characterization of the content of the investigative study. "We stand by the technical study," said DeGraffenreidt. However, he also said the company is committed to working "with Dominion, the LNG shippers and the interstate pipeline operators to facilitate the continued and growing use of Cove Point gas.

"Indeed, the gas that we receive through the Cove Point terminal is an important source of supply today -- and will remain a key factor in our supply diversity strategy in the future as we work to keep pace with the regional preference for natural gas at a reasonable cost."

In April, the distribution company announced plans to repair all the leaks in the affected area within six months of identification. To date, it has completed two-thirds of the repairs and expects to complete them by December 2007. It is still unclear how the repairs will impact customer rates.

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