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Sawgrass Bows to Shale Flood, Shelves Louisiana Storage Project

In a tacit acknowledgement that the prolific Marcellus Shale has significantly lessoned the need for natural gas storage in the Gulf region, Sawgrass Storage LLC has asked FERC to vacate a previously issued certificate to convert a depleted natural gas reservoir in northern Louisiana to an interstate gas storage facility.

"Because of a change in circumstances, Sawgrass no longer intends to pursue the Sawgrass Storage Project," the company said in a Dec. 20 letter to the Federal Energy Regulatory Commission (FERC). "Sawgrass has not commenced construction of the natural gas storage facility, the header pipeline or ancillary facilities."

FERC approved the project, which was to serve gas and power markets in Oklahoma, Texas, Arkansas and Louisiana, in March 2012 (see Daily GPI, March 16, 2012).

Sawgrass Storage, which is affiliated with Samson Investment Co. and Nicor Inc., had proposed to site the storage facility in the depleted South Downsville Field, which is about 20 miles northwest of Monroe, LA, near the town of Downsville. The project would have converted the Vaughn Sandstone Formation, proving up to 44.5 Bcf of storage capacity, including 30 Bcf of working gas capacity. The project was designed to have a maximum injection and withdrawal capacity of 300 MMcf/d and would have interconnected with the Midcontinent Express Pipeline near Farmerville, LA (see Daily GPI, Nov. 28, 2011).

At the time of FERC's approval, Sawgrass had received 14 expressions of interest for storage capacity, but it had not signed any precedent agreements.

Sawgrass's decision comes just two weeks after Tres Palacios Gas Storage LLC asked FERC for authorization to abandon up to 22.9 Bcf of working capacity at its three-cavern facility in Texas because "...demand for and the prices being paid for natural gas storage services in the Gulf Coast region have declined substantially, particularly over the past year" (see Daily GPI, Dec. 10).

It its FERC filing, Tres Palacios cited "...historically low natural gas prices, substantial reductions in natural gas price volatility and in winter/summer gas price spreads, and the increasing availability of gas from shale plays and other prolific gas supply sources in many regions of the U.S., including Texas."

And Peregrine Midstream Partners CEO John Hopper recently told NGI that demand for storage has been down and speculated that a sustained cold winter would squeeze supplies a bit, bring back some price volatility and cause customers to rethink the value they place on storage (see Daily GPI, Dec. 2).

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