FERC has given Williams the green light to reactivate and expand liquefied natural gas (LNG) import services at its Cove Point LNG terminal in Lusby, MD, saying it would provide “substantial benefits” in light of the growing role of LNG in the domestic market and the rising demand for gas on the East Coast.

In its application, Williams proposed reactivation of its existing LNG facilities, import services by April 1, 2002, and construction of a fifth LNG storage tank to boost its capacity to 7.8 Bcf. The 850,000-barrel LNG tank would have a targeted in-service date of Sept. 1, 2003. Williams has estimated the reactivation/expansion project would cost $103 million.

The project would make the Cove Point facility, which Williams purchased from affiliates of Columbia Energy Group in June 1999 for $150 million, one of the two largest import facilities in the United States, with a send-out capacity of 1 Bcf/d [CP01-156]. Cove Point is one of only four existing LNG import terminals in the nation. CMS Energy’s LNG terminal in Lake Charles, LA has similar send-out capabilities.

“The project will bring new gas supplies into the heart of the [East Coast] market area by providing new gas sources for the shippers on Dominion, Columbia and Transco pipeline systems,” the FERC order said. It further noted the project was critical, given the “vital role” of LNG in meeting the expanding gas demand of all consuming sectors. “The growing importance of LNG is evidenced by a 33% rise in import activity from the first nine months of 1999 to the first nine months of 2000, and the number of recently filed applications to re-certificate or increase the capacity of LNG import facilities.”

Cove Point customers have entered into 20-year binding precedent agreements for the entire 750 MMcf/d of send-out capacity that was offered in an open season for the recommissioning. The capacity will be divided equally between BP Energy Co., Shell NA LNG Inc., and El Paso Merchant Energy L.P.

Constructed in the mid-1970s at a cost of $400 million, the Cove Point facility has operated as a LNG peak-shaving facility, liquefying and storing pipeline gas, for use by customers in the Mid-Atlantic and Southeast, since 1995. It currently has LNG storage capacity of 5 Bcf and a liquefaction capacity of 15 MMcf/d. The import terminal has a send-out capacity of 1 Bcf/d. The facility also includes an 87-mile, 36-inch diameter gas pipeline that connects with pipelines owned by Columbia Gas, Dominion Transmission and Washington Gas Light.

A key issue in the FERC order was a proposal by Cove Point to increase the heat content for delivered gas to 1,100 Btu from 1,065 Btu, a move that was widely opposed by Washington Gas, a utility in Washington D.C., for safety reasons.

The Commission ultimately rejected Cove Point’s proposal. “…[W]e find that Cove Point has not demonstrated that its proposal to increase the gas specifications to 1,100 Btu is in the public interest,” the order noted, citing “safety and cost” concerns. However, it left open the door for Cove Point to file an amended proposal that would address some of the issues. “Cove Point should have sufficient time to address this unresolved issue, since the scheduled in-service date of its import facilities is not until April 1, 2002.”

The Federal Energy Regulatory Commission on Thursday also issued a certificate for East Tennessee Natural Gas’ proposed 27-mile pipeline lateral and related compression facilities. The Murray Lateral, an extension of Line 3500 in Tennessee and Georgia, will deliver 170 MMcf/d of gas to Dalton Utilities, the City of Cartersville, GA, and a 1,240 MW gas-fired power plant being developed by Duke Energy Murray LLC in Murray County, GA [CP01-80].

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