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FERC: No Deadline to Site Sabine Pass LNG Project

March 26, 2012
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A FERC official last week declined to say when the agency would act on the proposed Sabine Pass Liquefaction LLC liquefied natural gas (LNG) export facilities. If approved by the Federal Energy Regulatory Commission (FERC), Sabine Pass would be the first LNG export terminal in the United States.

The Commission will issue a decision "as soon as the order's ready," said Jeff Wright, director of FERC's Office of Energy Projects, during the Natural Gas Roundtable in Washington, DC. "There's no deadline for FERC to issue...a siting [decision]...There's statutory [deadline requirements] that deal with rate cases...but nothing that deals with siting."

Cheniere Energy, parent of Sabine Pass Liquefaction, had asked FERC to issue a siting order at its meeting on March 15, but the agency did not respond. The company said it was important that it receive FERC approval by then so that it could proceed under the terms of its lump sum turnkey engineering, procurement and construction agreement with Bechtel Oil, Gas and Chemical by March 31.

"The Commission just doesn't seem to move with much alacrity these days," said energy analyst Christine Tezak with Robert W. Baird & Co., referring to FERC's failure to respond to the request of Sabine Pass Nevertheless, "we think it [Sabine Pass] might still get done this month," she noted. "The White House doesn't seem particularly worried about what the FERC is up to, which makes us wonder -- is it disinterest or a 2-2 deadlock slowing things down." A spokeswoman for FERC declined to respond to Tezak's comments.

The liquefaction project would be capable of processing an average of 2.2 Bcf/d of pipeline-quality natural gas from the Creole Trail Pipeline, which interconnects with the Sabine Pass terminal. The Department of Energy has already approved plans for Sabine Pass Liquefaction to export 2.2 Bcf/d to countries that have a free trade agreement (FTA) with the United States and also to non-FTA countries (see NGI, May 23, 2011, Sept. 13, 2010).

As for the LNG export market, Wright said he believes that the industry sees the growth in exports taking place in non-FTA countries. That's because the majority of FTA countries are small markets. The big target markets will be in Europe and the Far East, he said. With the economy somewhat flat and demand "not taking off right now...people who operate storage facilities are probably saying, 'We're choking on it [natural gas] right now,'" Wright said.

Mexico may have more shale gas than the United States, said Wright. But the fact that Mexico has a "national energy agency...enshrined in the constitution, doesn't give it a whole lot of freedom to develop" the resources. In talking to his colleagues in Mexico, Wright said he has found it to be a "little bit of a sad situation there," with Mexico "sitting on a lot but not being able to develop it."

The buildout of the pipeline infrastructure to connect shale resources to market centers is shifting to the Marcellus from the Southeast. "You've seen a big buildout in the Southeast [for] shale deposits...I'm not going to say it's over down there," but the center of the pipeline construction activity is switching. You're not going to see a lot of long lines. But you're seeing a lot of [smaller] lines that are connecting those [shale] fields to the market areas."

Wright further noted that the natural gas and electricity industries are going to have to get more serious about understanding each others operations. He said that there has been "a lot of superficial talk" about the need for gas and power to get together over the years, but the talk needs to be more serious. "Electric's going to be probably your big[gest] customer, and electric needs to realize they're very dependent on gas, [as well as understand] the dynamics and physics of [the] gas pipeline industry."

Pipelines already are seeking changes in their tariffs to accommodate power generators. FERC earlier this month approved a new tariff for Texas Gas Transmission that sets out an enhanced nominations service with an additional 11 nomination cycles each gas day and interruptible bump times as short as one hour to serve the on-again, off-again power generation load (see NGI, March 19).

Texas Gas filed with FERC for the new service last fall saying some power plant customers had requested the ability to start up gas deliveries quickly to meet changing demand throughout the gas day. The customers said the changeable intra-day service was necessary to meet load adjustments due to sudden weather changes and the availability of renewable power sources dependent on weather. The new service "will better fit the profile of gas fired generation," and is aimed at "improving the integration between the natural gas and power industries, according to the pipeline.

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