Major importers of liquefied natural gas (LNG), New England local distribution companies (LDCs) and pipelines are taking issue with Algonquin Gas Transmission LLC's proposed gas quality and interchangeability standards for regasified LNG that would be delivered from the Northeast Gateway deepwater LNG facility being built off the coast of Massachusetts.

The central bone of contention is Algonquin's proposed nitrogen limit of 2.5%. Importers, such as BP Energy and Statoil Natural Gas LLC, argue that the nitrogen limit is much too low, and would restrict LNG cargoes coming into the United States from many parts of the world [RP07-504]. But New England LDCs contend that the 2.5% nitrogen cap is too high and would negatively impact LNG peak-shaving liquefaction facilities in the region.

"Although most of [Algonquin's] June 29 filing generally is consistent with the Commission's recent policy statement on gas quality and interchangeability, and with the Natural Gas Council Plus (NGS+) white paper on interchangeability, Algonquin's proposed maximum nitrogen limit of 2.5% is unjust and unreasonable, and is not supported by the pipeline's evidence," said Statoil.

"A 2.5% nitrogen limit will unnecessarily restrict new supplies of global LNG from reaching the Mid-Atlantic and Northeast markets over a critical period of time during which domestic production and supplies are declining and demand is increasing." Statoil said it is concerned because some of the regasified LNG from the expanded Dominion Cove Point terminal, from where it ships, will be delivered into Algonquin's system at Lambertville, NJ.

"Algonquin admits that it can accept into its system natural gas with a 4% nitrogen content with not adverse consequences to pipeline operations," Statoil said, adding that this "highlights the fact that Algonquin's proposal is narrowly tailored to suit the needs of only a very few facilities (peak-shaving facilities)."

While a 2.5% nitrogen limit "would allow Algonquin to receive regasified LNG from most LNG sources, it would eliminate many sources that otherwise could come in," BP Energy said. "A better choice is the 4% total inert upper limit included in Algonquin's proposal and the NGC+ interim guidelines, without a separate nitrogen ceiling," the company told FERC.

Several parties have claimed that LNG peak-shaving facilities couldn't handle nitrogen above 2.5% or even 2%, but none has presented any type of technical, scientific or engineering analysis to back up their claims, BP Energy noted.

The New England LDCs filed a limited protest to Algonquin's 2.5% nitrogen cap and absence of ethane, propane and butane specifications in its tariff. They argue that some of the region's LDCs, such as Connecticut Natural Gas Corp. and Consolidated Edison, would have to spend millions to retrofit their LNG peak-shaving facilities to accept gas with a nitrogen limit above 2.5%. They asked FERC to approve a nitrogen limit of 2% instead.

Dominion Transmission, an affiliate of Dominion Cove Point LNG in Maryland, advocates a nitrogen level above 2.5%. "Algonquin justifies this proposed nitrogen limit [of 2.5%] as striking the 'right balance' between protecting end-users and encouraging the development of new LNG supplies," the pipeline said.

But "notwithstanding the 'Goldilocks Theory' that any standard that is attacked as both too high and too low must be just right, Algonquin has not given sufficient weight to the adverse impact its proposal would have on needed new supply and has deferred too much to the concerns of a few LNG peak-shaving facilities," Dominion Transmission said. It noted that it has a 4% nitrogen limit for regasified LNG delivered from the Cove Point facility.

In March of this year, Algonquin received a certificate to construct a 16-mile pipeline that would connect the company's New England-area natural gas pipeline system to Excelerate Energy's proposed Northeast Gateway deepwater LNG port (see NGI, Mar. 19).

Algonquin's proposed 24-inch diameter lateral would connect its existing HubLine pipe in Massachusetts Bay to the proposed LNG facility, which would be located 13 miles off the coast. The pipeline would have the capacity to deliver up to 800,000 Dth/d of incremental supply to the Northeast market, and is targeted for operation in the 2007-2008 winter season, said Algonquin spokesman John Sheridan.

FERC's approval of the Algonquin lateral came about a month after the U.S. Maritime Administration issued a deepwater port license to Excelerate Energy to build its proposed Northeast Gateway LNG delivery system in Massachusetts Bay, which the company says will be the first of its kind built in the Northeast.

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