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Maryland OPC Seeks Further FERC Review of WGL Leak Case

The Maryland Office of People's Counsel (OPC) is seeking review of a FERC order upholding the agency's prior approval of an expansion of Dominion Cove Point LNG LP's terminal in Calvert County, MD, and pipeline system. FERC cleared the project despite claims by Washington Gas Light Co. (WGL) that LNG-sourced natural gas from the terminal caused widespread leaks on its distribution system in Prince George's County, MD, in 2005.

The OPC in seeking an appeal of FERC's January order on rehearing did not dispute the "inadequacy of WGL's efforts to date to demonstrate [a] significant causal" link between the leaks on WGL's distribution system and the regasified gas from the Dominion Cove Point terminal. However, it said the order fell short of addressing the corrective actions that WGL needed to take before it could accept expanded high-Btu LNG supplies from the terminal, as well as freeing WGL's ratepayers from any responsibility for the costs of damages stemming from the actions of WGL management and others.

The January order "requires clarification in order to establish a rational and reasonable approach to the necessary corrective actions needed for WGL to prepare its system to permit operation of the [expanded] Cove Point LNG facility," the OPC told FERC [CP05-130, CP05-132, CP05-131]. Upon the completion of the proposed Cove Point expansion, Washington, DC-based WGL anticipates an almost twofold increase in the flow of regasified gas to serve its customers in Maryland, Virginia and the District of Columbia.

"The evidence available...demonstrates a failure of WGL to fully prepare for the impact of increased LNG gas supply or even effectively complete repairs to portions of its system already exposed to LNG," the OPC noted. It suggested that FERC consider levying a penalty on WGL for not complying with repairs.

The Federal Energy Regulatory Commission also "should grant rehearing to correct the...failure to protect ratepayers from the significant costs of any system failures resulting from actions by WGL management and others," the Maryland agency said.

"Although the record before the FERC may be sufficient to allay...that LNG is not inherently a destructive force for distribution systems through the United States, the record fails to demonstrate that in the particular situation faced by WGL that the company's distribution system can be safely operated so closely connected with a major LNG [terminal]," the OPC noted.

"WGL's customers cannot be adequately confident that the system will operate safely now with the current level of LNG flows. Later, when the company's entire system is exposed to expanded LNG flows from Cove Point, customers may be faced with an even greater threat to safety." The OPC called for FERC to consider the need for and manner in which WGL can properly address the impact of gas leaks on its system.

"The Commission's disregard of even a minor impact [on WGL's system] from LNG is imprudent and is not consistent with the Commission's mandate to [ensure] safe operation of gas facilities and pipelines," the OPC said. "The failure to recognize that LNG even as a limited factor could significantly impact the quality of the gas supply on WGL's system is a significant defect" in the FERC decisions in this case.

In 2005, WGL identified approximately 1,400 gas leaks on its distribution system in a 100 square-mile area in Prince George's County (see Daily GPI, May 18, 2005). The utility blamed the leaks, which at the time it estimated would cost $140 million to repair, on the LNG-sourced natural gas flowing from the Cove Point terminal.

In the January rehearing order, FERC concluded that WGL's system would not have had an increase in leaks as a result of flows of regasified LNG if the sealing ability of couplings on the distributor's system had not already been compromised by other significant factors, namely hot tar, age, temperature and pressure.

The Cove Point expansion, which is scheduled for completion in the fall of 2008, would increase the sendout capacity of the terminal to 1.8 Bcf/d from 1 Bcf/d, and would boost storage capacity to 14.6 Bcf from 7.8 Bcf. The project calls for the construction of two 160,000 cubic meter LNG storage tanks. Affiliate Dominion Transmission Inc. also plans to construct 161 miles of mostly 36-inch and 24-inch diameter pipeline in Maryland and Pennsylvania, and associated above-ground facilities in Virginia, Pennsylvania, New York and West Virginia.

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