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FERC OKs Northern Natural Storage Expansion in Iowa

March 17, 2008
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FERC last Wednesday issued a certificate to Northern Natural Gas to increase the total storage capacity at its Redfield storage field in Dallas County, IA, by 8.551 Bcf.

Northern Natural proposes to expand Redfield's storage capacity to130.55 Bcf from 122.1 Bcf, as well as increase the withdrawal rate by 140 MMcf/d to 600 MMcf/d. It said it has executed precedent agreements for a total of 8 Bcf of firm deferred delivery storage service, with the balance earmarked for potential base gas requirements [CP07-108].

The Federal Energy Regulatory Commission (FERC) has approved market-based rates for storage services that will be provided by the expansion, even though Northern Natural was unable to show it lacked market power. In November 2006, FERC issued a declaratory order that found Northern Natural had met the requirements for market-based rate authority under new regulations issued pursuant to the Energy Policy Act of 2005 (see NGI, Nov. 20, 2006).

As amended by EPAct, the Natural Gas Act now allows FERC to award storage projects possessing market power the authority to charges market-based rates "if the Commission determines that market-based rates are in the public interest and necessary to encourage the construction of storage capacity in the area needing storage services, and that customers are adequately protected."

In Wednesday's order, the Commission ruled the "proposed project will not impact existing customers and will have only nominal environmental and landowner impacts. No adverse impact on other pipelines or their customers have been claimed or shown...Since Northern has demonstrated that the proposal will result in benefits without adverse impacts, the proposal is required by the public convenience and necessity."

Commissioner Suedeen Kelly dissented in part, saying that Northern Natural failed to prove that market-based rates are in the public interest, and that the project will provide adequate customer protections.

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