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Open Season Fills Elba Island LNG

Open Season Fills Elba Island LNG

The results are in from Southern LNG Inc.'s open season for a revitalization of the mothballed Elba Island LNG terminal, and the winner of all 4 Bcf of capacity is Sonat Energy Services, a Southern LNG affiliate and an affiliate of Southern Natural Gas pipeline. The winning bid was for a 22-year term at full cost-of-service rates.

"I have a hard time believing someone won't protest this," said one LNG veteran, who wished to remain anonymous. "If Elba Island was a pipeline, there would be riots at FERC over the way this open season was carried out."

Southern LNG launched the open season June 1 to test market demand and to "explore the economic feasibility of recommissioning the [terminal]." The Elba Island LNG facility has been dormant since 1982. The open season ended June 15 and the results were posted to the bulletin board last week. A Sonat spokesman said the company will issue a release soon, but would not be more specific.

The company posted the open season announcement to its Web-site bulletin board, but did not issue a press release. "They posted the announcement only a few hours before the open season started," the source said. "Does that sound like a company that wants a lot of companies competing in an open season? Of course not. It was designed to keep the offer as quiet as possible.

"Look at it another way. Sonat also recently held an open season for their Palmetto Pipeline (See Daily GPI, April 13). There were press releases all over the place about that. Why didn't they do the same thing for Elba Island?"

The maximum rate for firm service will be "established to recover an annual cost-of-service of approximately $23 million," the open season notice said.

Despite the way in which the open season was promoted, sources said there were still many bidders vying for capacity at Elba Island. "It all could fire up in a hurry," one source said. "The specifications were very strict, and they eliminated 99% of the LNG industry. If somebody steps up and says something, they have a pretty strong case. Many of the specifications had nothing to do with bidding for capacity at Elba Island."

If nothing else, the source said Sonat's practices have set a bad precedent. "I know Columbia is thinking about holding an open season for its Cove Point LNG facility. If Sonat can get away with running an open season the way they did, why won't Columbia? It's to their advantage."

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