FERC's recent decisions on gas quality standards for Florida Gas Transmission (FGT) in a precedent-setting case ( RP04-249) affecting LNG have drawn criticism from both ends and the pipeline itself: from suppliers who claim it will severely limit LNG imports, to power generators who claim the Commission should have provided cost mitigation for end users whose equipment must be changed to handle a different gas quality.

And the pipeline protested the application of the new standards not just to LNG received in its market area, but also to the commingled gas stream coming into the market area through FGT's western division (see Daily GPI, April 20). Some of that gas will come from a new pipeline connection delivering regasified LNG from the receiving terminal at Elba Island, GA.

Since it is the first decision by the Federal Energy Regulatory Commission under its Interchangeability Policy Statement (see Daily GPI, June 16, 2006) it could have an impact on standards for LNG imports in other locations. The issue is particularly critical for Florida where some offshore imports will feed directly into its market area system. The case initially involved LNG imports scheduled to come from a proposed underwater pipeline, AES Ocean Express, from the Bahamas. Three years later that pipeline has yet to make it out of the Bahamas, but there are other proposals for LNG receiving terminals offshore Florida, which would take pipeline gas from ships that regasify the LNG and deliver it to FGT's system onshore.

Generator end users and Florida Power requested a rehearing, claiming the Commission incorrectly crafted a Natural Gas Act section 4 response in a section 5 case by accepting a pipeline-promulgated remedial proposal for a Wobbe Index range of +/- 2% from a midpoint value of 1,368 and capped at 1,396, rather than crafting one itself.

Furthermore, FERC failed to fairly address and resolve substantial disagreements in the record over what Wobbe Index range could safely be implemented in FGT's market area without disrupting the safe and reliable operation of existing Dry Low NOx (DLN) combustion turbines on the FGT system. "FERC based its ruling upon a highly selective and unbalanced review of the evidence, driven by the agency's paramount policy goal of using its legal authority to maximize the economic attractiveness of U.S. markets to prospective LNG importers," the power generators said.

The Commission used the manufacturer's specs for the turbine engines' capabilities rather than actual operating capacities. FERC should do some testing to determine whether the turbines actually can be configured to accept the new gas standard. The generators also said the Commission erred in setting the sulfur standard, advising the new sulfur level could corrode equipment and increase the sulfur content in the gas so that it violates air quality standards.

The generator end users, who use about 80% of the natural gas delivered to Florida, also argued with FERC's conclusion that it did not have the jurisdiction to order cost mitigation for costs incurred by customers to modify their equipment to accommodate the new gas standard, citing several previous cases.

And while the Commission accepted FGT's proposed interchangeability standards, it delivered a backhand to the pipeline by extending those standards to the mainline point where the commingled gas stream flows from FGT's western division mainline into the market area. The administrative law judge's decision would have applied the interchangeability standards to LNG receipt points on FGT's western system, as well as receipt points in its market area. The Commission, however, changed that to have the standards apply to the commingled gas stream. This "totally lacks any rational explanation," and is "arbitrary and capricious," FGT said, wondering how it could control the commingled gas if it could not control gas fed into the system.

FGT also noted there had been no record evidence that there was any problem with the mainstream gas.

And finally, the major producers said the restrictive standards placed on regasified LNG "will prevent the importation of LNG from over two-thirds of the world's LNG plants into the Florida market." The producers making up the LNG Suppliers Coalition asked the Commission to set the Wobbe Index standard at +/- 4% of FGT's historical average (capped at 1400), and establish certain other limitations. Further, the suppliers don't want the standard applied to supplies from FGT's western division, nor should it serve as a precedent for imports on other pipelines.

The LNG suppliers pointed out that FERC failed to follow the principles of its own Interchangeability Policy Statement, which had encouraged the use of principles developed by an industry coalition.

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