FERC Thursday approved D’Lo Gas Storage LLC’s proposal to build a 24 Bcf salt dome natural gas storage facility in South Central Mississippi, dismissing claims that the the addition of more storage capacity would harm incumbent operators in the region.
D’Lo Gas Storage, which is 100% owned by D’Lo Holdings LLC, proposes to build three salt dome storage caverns, each with a capacity of 8 Bcf, in Simpson and Rankin counties, MS. They are to be sited along pipeline routes that serve Florida, the Southeast, Mid-Atlantic and Northeast, including New York. The project would provide access to diverse supply sources from the Gulf of Mexico, South Texas, South Louisiana, East Texas Cotton Valley, shale gas plays (Barnett, Haynesville, Eagle Ford and Woodford) and regasified liquefied natural gas, D’Lo said.
In addition to the three caverns, the Lafayette, LA-based independent storage developer plans to install a compressor station with four 8,000 hp and one 4,735 hp gas-driven compressors, totaling 36,735 hp; five meter and regulator stations and 5.4 miles of interconnect with three interstate pipelines — Kinder Morgan Midcontinent Express Pipeline (MEP), Southern Natural Gas and Gulf South Pipeline — and one intrastate pipeline, Southcross Mississippi Pipeline LP.
The project is designed to provide 1,200 MMcf/d of maximum withdrawal and 590 MMcf/d of maximum injection capability, with a capability of six cycle per year, according to the order issued by the Federal Energy Regulatory Commission (FERC) [CP12-39]. In addition, it would have a receipt and delivery capacity of 500 MMcf/d at interconnections with Gulf South and MEP; a receipt and delivery capacity of 250 MMcf/d at the interconnection with Southern Natural; and a receipt and delivery capacity of 50 MMcf/d at the interconnections with Southcross and Gulf South.
D’Lo said it held a nonbinding open season from March 22 through May 7 for firm storage capacity in the first of its proposed storage caverns with a planned in-service date of 2015. The company said it received formal bids for 10.15 Bcf of firm capacity, exceeding the anticipated 8 Bcf of the first cavern.
The Commission approved D’Lo’s request for authority to charge market-based rates for its proposed open-access firm and interruptible gas storage and hub services, as well as its request for a waiver of FERC’s “shipper-must-have-title” requirements and certain other tariff requirements.
Leaf River Energy Center LLC, which owns and operates a gas storage facility in Smith, Jasper and Clarke counties, MS, raised concerns about FERC allowing a new storage entrant into the regional market, noting that it had “substantial amounts of unsubscribed capacity available” and that a new storage operator would further depress the market.
Leaf River said it “has found it difficult over the past year to secure new customer commitments to purchase firm storage services in any substantial quantity for any price…In view of this situation, Leaf River [asked] the Commission [to] find that D’Lo Gas has failed to establish that the benefits associated with its project will outweigh the adverse impacts that adding additional storage capacity to the market would allegedly impose on incumbent natural gas storage operators, like Leaf River,” the order said.
However, the order said “the Commission recognized in [its] certificate policy statement [for new projects] that while it does have an obligation to ensure fair competition, [it] does not need to protect incumbent pipelines [or storage operators] from the potential loss of market share. There is no suggestion that D’Lo Gas would be competing on anything other than a fair basis.
“The impacts that Leaf River identifies, i.e., devaluation of existing storage capacity and any resultant potential financial stress for existing storage providers, are not adverse impacts to be weighed under the certificate policy statement, but rather risks expected in the competitive market they have entered,” the order said.
“One of the factors underlying the Commission’s granting market-based rate authority to Leaf River was ease of entry into the relevant market. It is disingenuous for Leaf River to propose that we now erect barriers to other new competitors seeking to enter the market.
“The Commission is satisfied that approval of D’Lo Gas’ proposal should have no adverse impact…on existing pipelines or storage providers, or their captive customers. The proposed D’Lo Gas Storage facility will be located in a competitive market and will enhance storage options available to pipelines and their customers and, thus, will increase competitive alternatives.”
The storage facility “would be capable of providing natural gas at high rates of deliverability and on short notice, thereby providing reliability to a region prone to hurricane and other supply disruptions. Also, the project would be well suited to support high variable loads such as natural gas-fired electricity generators.”
FERC also dismissed Leaf River’s objection to D’Lo Gas filing its application prior to holding an open season and obtaining precedent agreements. “While…it is general Commission policy that an open season should be conducted prior to the filing of an application, failure by an applicant to do so is not a bar to the Commission’s acting on the applications…We find D’Lo Gas has sufficiently complied with the Commission’s open season requirements.”
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