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FERC Gives Preliminary Nod to FGT Expansion

FERC Gives Preliminary Nod to FGT Expansion

FERC last week awarded a preliminary determination on non-environmental issues to Florida Gas Transmission (FGT) for its latest project to expand its existing 1.4 Bcf/d of transportation capacity by nearly one-third.

The Commission ruled that the benefits of FGT's proposed Phase V expansion, which would provide an additional 428,015 MMBtu/d of capacity to an unfolding power generation market in Florida, outweighed any potential adverse effects that may result from the new construction.

At the same time, FERC said Koch Gateway Pipeline Co.'s proposal to sell an undivided interest in its Mobile Bay Lateral assets to FGT as part of the pipeline's Phase V expansion was in the "public convenience and necessity." The lateral would provide FGT shippers with upstream access to 300,000 MMBtu/d of additional capacity, as well as entrance to all existing receipt and delivery points on the line. FGT proposes to build a 30-inch line to connect the lateral to its system.

The Commission noted the Phase V expansion met two key "threshold" requirements for new projects: 1) FGT had demonstrated project need, negotiating long-term firm contracts for 71.5% of the proposed capacity on an annual average basis; and 2) its proposal to roll in the project costs would reduce the rates for FTS-2 shippers and not change the rates for FTS-1 shippers.

Rather than buying Koch's undivided interest in the Mobile Bay Lateral, some shippers argued in favor of FGT either leasing capacity from the lateral or acquiring unused capacity on Transcontinental Gas Pipeline's system. But FGT countered that the former option would probably be more expensive and the latter would require the construction of a significant amount of looping facilities. FERC agreed with FGT's decision to buy Koch's interest in the lateral, saying it "would be environmentally preferable and less expensive than the construction of a new pipeline."

The Phase V expansion would add about 167 miles of 16-inch to 30-inch mainline looping and laterals to the pipeline's existing system of 4,900 miles, which extends from South Texas to Miami, FL. It also would add compression totaling 132,615 horsepower and other associated facilities in Mississippi, Alabama and Florida. The project has a targeted in-service date of Oct. 1, 2001.

This comes on top of the pipeline's Phase IV expansion, which will add 196 MMcf/d to the FGT system when it's completed. The company expects to have this new capacity in service by May 1, 2001.

These two expansion projects would further cement FGT's monopoly position in the gas transportation market in the Sunshine State. But the pipeline could be in for some competition from Duke Energy and Williams by mid-2002. The two companies plan to buy the Gulfstream Natural Gas System project from The Coastal Corp. to serve the growing gas appetite of power generators in Florida (see NGI, Nov. 20). The Federal Trade Commission ordered Coastal to divest its Gulfstream project in light of its pending merger with El Paso Energy, which owns 50% of FGT.

Reflecting the strong demand for the project, FGT has executed 20-year firm transportation service agreements with seven shippers for 305,819 MMBtu/d of the expansion capacity on an annual average basis. The shippers include Southern Company, Florida Power & Light, Peoples Gas, Jacksonville Electric, the City of Tallahassee, Tampa Electric and U.S. Agri-Chemicals.

Two companies --- Enron North America Corp. and Dynegy Marketing and Trade --- had backed out of the Phase V expansion following a Florida Supreme Court ruling last April that effectively blocks the construction of a series of merchant power facilities that were planned for the Florida market (see NGI, April 24). FGT, however, made up some of the lost ground when it later signed a long-term contract to provide 180 MMcf/d of firm capacity to Tampa Electric's repowered Bayside generation facility in Hillsborough County in southwestern Florida.

The decision of the state's high court, which is up for rehearing, held that Florida regulators exceeded their authority by approving construction of a power plant whose output would be used to primarily serve out-of-state markets.

Susan Parker

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