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Initial Environmental Nod Given to Companion Southern, FGT Pipe Projects

FERC has issued a preliminary environmental approval of two related pipeline projects -- Southern Natural Gas' Cypress Pipeline -- which will handle increased deliveries of regasified liquefied natural gas (LNG) supplies from a proposed expansion of Southern's Elba Island LNG terminal in Georgia -- and Florida Gas Transmission's (FGT) expansion project to be built downstream of an interconnect with Cypress Pipeline so regasified LNG can reach Florida.

"We have determined that construction and operation of the Cypress Pipeline and FGT expansion projects would result in limited adverse environmental impacts based on information provided by Southern and FGT and further developed from data requests [and] field investigations," FERC staff said in the draft environmental impact statement (DEIS) on the two companion projects [CP05-388, CP06-1].

The Cypress Pipeline project would open a direct corridor for deliveries of regasified LNG from the Elba Island terminal in Georgia to the flourishing northern Florida market. The FGT expansion would make it possible for FGT to accept 160 MMcf/d of gas from the Cypress Pipeline for delivery to Progress Energy Florida Inc.'s gas-fueled Hines Energy Complex in Polk County, FL.

The Cypress Pipeline, which has been on the drawing board since 2000, would add 500 MMcf/d of firm transportation capacity on Southern's existing system in Georgia and Florida by constructing 177 miles of 24-inch and 30-inch diameter pipeline, 31,050 horsepower (hp) of compression and associated facilities from El Paso's Elba Island LNG terminal to Jacksonville, FL. The project was given a preliminary determination on non-environmental issues by FERC in late November (see NGI, Nov. 28, 2005).

The $320.8 million expansion would be built in three phases and would tie in with FGT's system in the northern part of the Sunshine State. Southern is fully owned by El Paso, while FGT is 50% owned by El Paso.

Phase I would consist of the construction of 1) 166 miles of 24-inch diameter pipeline, extending from an interconnect with Southern's existing Wrens-Savannah lines in Effingham County, GA to an interconnect with FGT in Clay County, FL; 2) interconnection and measurement facilities with Atlanta Gas Light Co. in Glynn County, GA; Southern's South Georgia facilities in Nassau County, FL; JEA (formerly Jacksonville Electric Authority) in Duval County, FL; and FGT in Clay County; and 3) various associated facilities, including replacement facilities, at Southern's Marietta delivery point to Atlanta Gas Light in Cobb County, GA. Phase I is targeted for in-service on May 1, 2007.

Phase II, which is projected to go into operation in May 2009, would consist of a new 10,350 hp compressor station in Glynn County. Phase III would include nearly 10 miles of 30-inch diameter pipeline loop on Southern's Wrens-Savannah lines in Chatham and Effingham Counties, and two new 10,350 hp compressor stations in Liberty County, GA and Nassau County. Southern said it expects Phase III facilities to go into service May 2010.

Southern has entered into precedent agreements for firm transportation service for the full capacity of the project with BG LNG Services LLC (20-year term), Progress Energy Florida. (20-year term), and the City of Austell, GA (15-year term), according to the El Paso pipeline.

The Federal Energy Regulatory Commission granted Southern's request to roll the costs of its proposed Cypress Pipeline into its existing rate base in a future Section 4 rate proceeding -- "absent material changes in the relevant facts and circumstances" surrounding the project.

As for the companion FGT project, the Phase VII expansion calls for FGT to build 33 miles of 36-inch diameter pipeline looping in several segments along an existing right-of-way and install 9,800 hp of compression, to accept regasfied LNG deliveries from the Cypress Pipeline project. The pipeline's project application seeking FERC approval is currently pending at the agency. The project is expected to go into service at the same time that Southern's Cypress Pipeline becomes operational -- May 2007.

The increased gas supplies in Florida will fuel Progress Energy's 461 MW Hines 4 combined-cycle generation facilities in Bartow, FL. Progress Energy, which has distribution utilities in Florida and the Carolinas, has entered into a 20-year, $3.3 billion agreement with Southern Natural and FGT, as transportation providers, and with BG LNG Services to supply the LNG. BG Group, parent of BG LNG Services, holds the rights to the existing capacity at the Elba Island terminal.

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