Enstor Gulf Storage LLC, an affiliate of Houston-based Enstor Operating Co. LLC, has requested FERC authorization to operate what may be the first virtual storage facility.

"Enstor Gulf Coast seeks certification to provide storage and storage-related services as a jurisdictional natural gas company without resorting to the construction of a new facility," the company said in its FERC application [CP07-94, CP07-96]. Enstor Gulf's proposal would provide customers with "yet another competitive provider from which to obtain interstate storage services, without having to wait for multi-year construction and environmental processes to run their course before receiving service."

The proposed virtual facility, if approved, would "more efficiently utilize the existing natural gas infrastructure and encourage the development of new storage capacity," as well as mitigate natural gas price fluctuations, Ensor Gulf noted. And it "will likely induce other independent storage providers to follow suit -- either by proposing their own pooling mechanisms or by constructing new facilities," the company said.

Specifically, Enstor Gulf proposes to operate a "Gulf Coast Storage Pool" that would offer an "enhanced" range of storage and storage-related services to serve markets in the Midwest, Atlantic Seaboard, New England and Southwest regions. Rather than building an actual facility, it said it would acquire storage capacity from affiliated and non-affiliated providers to offer in the interstate market.

The Gulf Coast storage pool will use 10 Bcf of capacity to be acquired from the Katy Storage and Hub facility, a stand-alone storage facility owned and operated by affiliate Enstor Katy Storage and Transportation LP in southeastern Texas, 10 Bcf of Gulf Coast firm capacity from Natural Gas Pipeline Company of America (NGPL), and 10 Bcf of working gas storage capacity acquired from third parties in the Gulf Coast market area. Enstor said it already has entered into agreements for storage capacity with Katy Storage and NGPL.

Enstor Gulf asked the Federal Energy Regulatory Commission to authorize the company to "operate under these contractual arrangements as an integrate natural gas storage facility." This would enable the Enstor Gulf Coast storage pool to function as a "virtual storage facility."

Enstor Gulf said the planned storage capacity will be geographically contained within FERC-authorized interstate natural gas pipeline pools, or subpools. The pool ultimately will operate with up to 30 Bcf of working gas capacity and 1.2 Bcf/d of associated injection and deliverability capability, a level of injection and deliverability capacity that is currently not offered by any other gas storage provider, or even physically available on the Gulf Coast, the company said.

When the Gulf Coast storage pool is operational, Enstor Gulf said customers will be able to choose among several interstate subpools within which to deliver and receive storage gas. The interstate pipelines operating in the storage pool areas include NGPL, Transcontinental Gas Pipe Line, Trunkline Gas, Tennessee Gas Pipeline and Gulf South Pipeline.

However, Enstor Gulf noted that it is not proposing to offer stand-alone transportation as part of its certificated services. Customers will be responsible for arranging their own third-party transportation services, the company said. In addition, a customer injecting gas into a certain subpool under a particular storage contract will be limited to withdrawing gas from the same subpool.

Enstor Gulf believes its proposal is consistent with certificate proposals that FERC has accepted in recent years, in which storage operators have acquired off-system capacity under a waiver of the shipper-must-have-title rule. "However, [those] proposals generally involved the applicant offering jurisdictional storage services through one or more certificated storage facilities which the applicant either operated or controlled. Here, by contrast, Enstor Gulf Coast is proposing to offer jurisdictional storage services through a series of contractual arrangements with both affiliated and nonaffiliated storage facilities," the company said.

Enstor Gulf asked the Commission for a waiver of the shipper-must-have-title rule, which would enable it to provide storage services for others using off-system capacity acquired on any of the five interstate pipelines operating within the proposed Gulf Coast storage pool. "Enstor Gulf Coast will use this off-system transportation capacity only to move gas in and out of storage, physically as well as contractually, and will utilize this transportation capacity only within a designated subpool," it said.

The company also asked that it be allowed to charge market-based rates for its proposed interstate storage services. And it called on FERC to grant the authorizations and waivers for the "virtual" storage project by June 1 of this year.

Enstor Operating currently owns and operates 50 Bcf of storage capacity in North America at the Alberta Hub Storage facility near Edmonton, AB; the Grama Ridge Storage facility in Lea County, NM; and the Katy Storage facility in Katy, TX. It also has two sites under development -- Houston Hub Storage facility near Houston; and Waha Storage in western Texas.

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