Just days before Sunday’s fatal explosion at a gas-fired power plant under construction in Middletown, CT, the U.S. Chemical Safety Board (CSB) issued recommendations that national codes be changed to improve safety when gas pipes are being purged. Sunday’s explosion is thought to have occurred during a pipeline purge or “blow down” (see Daily GPI, Feb. 9).

The CSB’s “urgent recommendations” resulted from its ongoing federal investigation into the June 9 natural gas explosion at the ConAgra Slim Jim plant in Garner, NC, which caused four deaths and sent 67 people to the hospital. The CSB issued a safety bulletin on gas purging in October. Practices described in the bulletin include purging gases to a safe location away from ignition sources, evacuating nonessential workers during purging and using combustible gas monitors to detect hazardous gas accumulations. The CSB does not issue citations or fines but does make safety recommendations to plants, industry organizations, labor groups and regulatory agencies.

Meanwhile, a lawmaker from New Jersey, prompted by the explosion, is raising concerns about a new gas pipeline project that would pass through his state to serve predominantly gas users in New York. Sen. Frank R. Lautenberg (D-NJ) said a Texas Eastern Transmission project “should not be permitted so close to New Jersey’s chemical plants, Newark Liberty Airport and the area that terrorism experts call the most dangerous two miles in America” (see related story).

Sunday’s blast in Connecticut is not expected to affect power supplies, even though the plant under construction was nearly complete, ISO New England said. The ISO said its long-term plans did not anticipate that the plant would be available until 2011. “The ISO is currently assessing future implications should these resources not come online as planned,” it said. “The region has surplus capacity that can be available in mid-2011 if needed.” ISO New England said its region currently has about 32,000 MW of capacity available, with 7,500 MW of that located in Connecticut.

However, the blast, which killed five and injured more than a dozen, cast a pall over the outlook of developer Kleen Energy Systems LLC, according to Fitch Ratings. Fitch placed $730 million of Kleen Energy term loans on watch with negative implications based on the potential for heightened completion risks following the explosion. Construction of the facility had been proceeding within budget and on schedule, with the sponsor estimating a completion date of June 1, Fitch said.

“Fitch believes the accident may prevent Kleen from achieving the sponsor’s originally projected completion date, and the length of the delay cannot be estimated at this time,” the ratings agency said. “The force majeure provisions of the tolling and capacity purchase agreements provide for the suspension of liquidated damages and the extension of contract termination dates, though it is uncertain whether force majeure provisions will adequately mitigate Kleen’s potential exposure to construction delays.”

Kleen Energy is a special-purpose company created to develop, own and operate the project. It is using the proceeds of the term loans to finance construction under a fixed-price, turnkey contract with O&G Industries Inc. of Torrington, CT. After the project achieves commercial operations, Kleen Energy is to sell capacity under a 15-year agreement to Connecticut Light and Power (CL&P), which is to compensate Kleen with the equivalent of fixed capacity payments, according to Fitch. The facility’s energy output is to be purchased by Constellation Energy Commodities Group Inc. (CCG) under a seven-year tolling agreement. Constellation Energy Group Inc., the parent of CCG, has partially guaranteed CCG’s obligations under the tolling agreement, Fitch said.

Energy Investors Funds indirectly owns 80% of the economic interest in Kleen through its subsidiaries United States Power Fund II LP, USPF II Institutional Fund LP and United States Power Fund III LP. White Rock Holdings Associates LLC, a project development company owned by O&G Industries and individual investors, holds the balance of the ownership interests.

Standard & Poor’s Ratings Services (S&P) said the explosion does not affect the credit quality of Northeast Utilities’ CL&P as it would not be obligated to make any payments under the contract to Kleen Energy until the plant reaches commercial operation, S&P said.

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