While she joined the majority at FERC last week in voting out a certificate order to build facilities to liquefy and export natural gas, Commissioner Cheryl LaFleur Monday cautioned industry about rushing to invest in liquefied natural gas (LNG) export facilities, questioning how long the U.S. will maintain its technology edge in the development of shale gas that is driving the trend towards exports.
“One issue that I’ve been thinking a lot about…as all the people rush to put their money into export facilities [is] how long the technological advantage that the U.S. appears to hold in unconventional gas extraction will last,” she said during a meeting of the Natural Gas Roundtable in Washington, DC on Monday.
“There are shale plays in other parts of the world, but the supporting infrastructure isn’t there yet to take advantage of that…Estimates vary as to how long our advantage of being the only ones doing this will last,” she noted.
“My experience is that these technological cycles seem to be shorter…as we move forward all the time,” she told executives and regulators.
Last Monday the Federal Energy Regulatory Commission (FERC) approved a proposal by Cheniere Energy’s Sabine Pass Liquefaction and Sabine Pass LNG to build and operate liquefaction and associated facilities to enable the companies to liquefy and export up to 2.2 Bcf, or 16 million metric tons per years. The project would be sited at Sabine Pass’ existing LNG terminal in Cameron Parish, LA (see Daily GPI, April 17).
While the Sabine Pass order was the “big news,” the Commission also vacated authorization for Jordan Cove Energy Project LP to construct import facilities in Coos County, OR. FERC’s ruling “[was] based on the applicant’s express lack of intention to build an import facility, and instead to build an export facility,” LaFleur said.
“That decision really prevented what would have been an unique circumstance of a company prebuilding an export facility without an export certificate,” she noted.
“In a blink of an eye, we’ve gone from [LNG imports to exports],” she said. “When I joined the Commission [in 2010] I was asking questions about importing LNG. Now eight of the active LNG terminals in the country are only at 5% capacity.”
In other news, LaFleur said she supported legislative reform of Section 5 under the Natural Gas Act (NGA) to make the refund effective date for gas pipeline shippers consistent with the refund effective date for power customers under the Federal Power Act (FPA).
Under the NGA, refunds only become available on the date the Commission decides a complaint brought by a gas pipeline shipper, assuming FERC rules in a shipper’s favor, rather than from the date a complaint is filed, as is the case with refunds owed to electric customers (see Daily GPI, April 20). In 1988 Congress fixed the FPA to provide for retroactive refunds for electric customers.
“Without retroactive refund authority on the gas side, I believe that pipelines facing Section 5 cases may have incentive to delay them,” LaFleur said.
On the rate side, “the location of the gas and all the shale plays are having…considerable impact on our pipeline ratemaking. Pipelines are being utilized differently as a result of the new resources. Capacity values have dropped on many of the long-haul pipelines as strong production growth in the Marcellus and other shale basins displace flows from further away.”
A few years ago, FERC began seeing a “wave of filings” to abandon services on offshore pipelines, she noted. Now the agency is starting to see proposals to restructure rates closer to the market area part of a pipeline. Downstream customers are objecting to paying for rates for service on the whole length of the pipeline.
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