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Market Wins If We 'Survive,' Storage Operator Tells FERC

What's good for Tres Palacios Gas Storage LLC (TPGS) is good for the market, the company told FERC in a motion filed last Tuesday in its ongoing bid to abandon a portion of its Gulf Coast capacity that has become uneconomic.

Late last year TPGS filed at the Federal Energy Regulatory Commission to abandon up to 22.9 Bcf of working capacity at its three-cavern facility in Texas to relieve itself of lease payments for the capacity, which the storage operator said is not wanted by the market (see Daily GPI, Dec. 10, 2013).

The lessors of that capacity (Underground Services Markham LLC and Riverway Storage Holdings LLC) objected strenuously, saying TPGS is trying to avoid paying them for the capacity, duck market risk and not effectuate a real abandonment at all but merely one on paper (see Daily GPI, Jan. 8). They said such an abandonment, if allowed by FERC, would establish a dangerous precedent whereby other operators of uneconomic storage would bring their contract difficulties to the Commission.

Reducing TPGS' costs by allowing the abandonment would be in the public interest and good for the Gulf Coast storage market, the storage operator told FERC.

"TPGS has demonstrated that its proposed abandonment is permitted by the public convenience and necessity because it will not have adverse effects on existing customers, competing pipelines or their customers, landowners or local communities, while meeting TPGS' need to reduce its fixed costs in order to enhance its financial viability and promote its long-term success," TPGS said [CP14-27].

The storage operator maintains that the abandonment would benefit itself and "the market in which it competes by reducing TPGS' operating costs which, ultimately, will enable it to survive in the currently depressed market for natural gas storage services."

While the abandonment might allow TPGS to stay in the Gulf Coast storage game, the company has not been able to find market players willing to sign up for its capacity of late. "...[I]ts public offering of capacity conducted in November 2013 drew no expressions of interest and...there have been no takers in response to continued postings of available capacity on its Internet website."

Separately, earlier this month Underground Services, which is a unit of Texas Brine, sued in Harris County District Court in Texas to keep TPGS from reducing its working gas capacity. In a filing in response, TPGS asserted that FERC "has the exclusive jurisdiction to determine the certificated working gas capacity of storage caverns..."

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