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FERC Approves Combined Elba Island-to-Florida Projects

FERC has approved two associated pipeline projects that will deliver natural gas from the Elba Island liquefied natural gas (LNG) import terminal near Savannah, GA, to the energy-hungry Florida market.

The combined projects include Southern Natural Gas' Cypress Pipeline, which will transport regasified LNG from a proposed expansion of Southern's Elba Island LNG terminal in Georgia to Jacksonville, FL, and Florida Gas Transmission's (FGT) VII expansion project that will interconnect with Cypress near Jacksonville to allow regasified LNG to reach Florida [CP05-388, CP06-1].

The Cypress Pipeline would offer a direct corridor for deliveries of regasified LNG from Elba Island to the northern Florida market. The pipe project will consist of 177 miles of 24- and 30-inch diameter pipe, 31,050 horsepower (hp) of compression and associated facilities, and will transport up to 500 MMcf/d of regasified LNG from the import facility to an interconnect with FGT.

The $321 million project will be constructed in three phases. The largest part -- 167 miles -- is targeted for operation on May 1, 2007, with Phase II and Phase III expected to go into service on May 1, 2009 and May 1, 2010, respectively. FERC last November conditionally approved Southern's project and its request to roll project costs into its existing rates, pending a favorable environmental review. The pipeline got the final go-ahead in this latest order.

Southern said it has entered into precedent agreements for firm transportation service for the full capacity of the Cypress Pipeline project with BG LNG Services LLC (20-year term), Progress Energy Florida Inc. (20-year term), and the City of Austell, GA (15-year term).

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 receive regasified LNG deliveries from the Cypress Pipeline project. FGT proposes to build its $105.5 million expansion in two phases, with the bulk of the facilities to be constructed in the initial phase and ready for in-service by May 2007. Phase II of the project is targeted for operation on May 1, 2009. BG LNG and Progress Energy have executed agreements for the entire 160,000 MMBtu/d of capacity to be created by the FGT expansion.

FERC denied FGT's request for a predetermination to roll the costs of the Phase VII expansion into its firm transportation rates in a future Section 4 rate proceeding.

"Comparing the period between May 1, 2007 and April 30, 2010, when the project is expected to operate with expenses exceeding revenues on an annual basis, to the period during which FGT must file its next general rate case -- no sooner than Oct. 1, 2007, if FGT is seeking to increase its base tariff rates; otherwise, no later than Oct. 1, 2009 -- we find it likely that in FGT's next rate case, test period data will reflect that the project has not achieved financial viability. Under these circumstances, rolling in the project's costs would result in existing FTS-2 customers subsidizing the project from the date the new base rates become effective until FGT files a new rate proceeding," the order said.

As such, "the Commission believes it is premature to make a predetermination on rolling in the proposed expansion's costs because FGT could file its next rate case before project revenues exceed costs on an annual basis," the order said.

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