FERC on Thursday approved Magnum Gas Storage LLC’s proposal to build a high-deliverability, multi-cycle salt cavern natural gas storage facility in western Utah and a major pipeline header system. But it shot down a request by an affiliate to construct, operate and separately own the leaching facilities and ordered Magnum Gas to revise its application to include these jurisdictional facilities.

The certificate order gives Magnum Gas the green light to build a storage facility with 54 Bcf of total capacity, of which 42 Bcf would be working gas. The project, to be built in Millard, Juab and Utah counties, UT, would have four salt caverns, each with a working gas capacity of approximately 10.5 Bcf and about 3 Bcf of base gas, for a total cavern volume of 13.5 Bcf.

The proposed facilities would be capable of injecting up to 0.3 Bcf/d of natural gas and withdrawing up to 0.5 Bcf/d and have the ability to cycle inventory from nine to 12 times a year, according to Salt Lake City-based Magnum Gas, a Haddington Ventures LLC portfolio company. Magnum Gas said it currently is negotiating precedent agreements with a number of respondents that participated in a mid-2009 open season.

The company proposes to construct a 61.6-mile, 36-inch diameter natural gas pipeline header extending from the storage site to points of interconnection with interstate gas pipelines owned by Kern River Gas Transmission Co. and Questar Pipeline Co. at the end of the header near Goshen, UT. The header pipe would be capable of bidirectional flow and would have a transportation capacity of up to 1.2 Bcf/d of natural gas, the Federal Energy Regulatory Commission order said [CP10-22].

In its application Magnum Gas cited a 2009 study commissioned by the INGAA Foundation that projected that 41-76 Bcf additional gas storage services will be needed in the West through 2030.

Magnum Gas said it plans to phase construction of the project as follows: the header pipeline is to be completed by May 2014; cavern one is to be finished by July 2014; cavern two is targeted for completion by August 2014; cavern three is expected to be finished by June 2021; and cavern four is targeted for service by December 2027.

The Commission denied affiliate Magnum Solutions LLC’s request for a limited-jurisdiction certificate authorizing it to construct, own and operate cavern leaching facilities to support cavern creation and maintenance and to lease an undivided interest in the facilities to Magnum Gas. Specifically, Magnum sought to construct and operate water supply wells, a centralized pumping facility and evaporation ponds for the injection of fresh water through Magnum’s wells to create the caverns and for the transfer and management of brine for the caverns as leaching progresses.

“We find that issuance of a limited-jurisdiction certificate to Magnum Solutions is inconsistent with the provisions of the NGA [Natural Gas Act],” which requires that “the issuance of a certificate for the construction and operation of the jurisdictional facilities, including the leaching facilities, [go] to Magnum, not Magnum Solutions,” the FERC order said.

“Our issuance of a certificate of public convenience and necessity to Magnum [Gas] in this proceeding will include authorization to construct and operate the entire proposed storage project, including the cavern leaching and brine management facilities. Prior to accepting its certificate, Magnum should revise and refile its applicable corporate exhibits…to reflect that all of the project’s jurisdictional facilities will be constructed and operated by Magnum.”

The two Magnum companies told FERC that they proposed “separate ownership of the leaching facilities by Magnum Solutions [to] facilitate financing of the project, allow Magnum Solutions to perform cavern creation service for third parties in the future, and facilitate the possible separation of ownership of Magnum and Magnum Solutions at some point, if such separation would create more value.”

The Commission approved Magnum’s request to charge market-based rates for storage and hub services. “Based on the analysis in the record, the Commission finds there are sufficient underground storage and local production alternatives in the Rockies/Plains and Southwest/Southern California markets to prevent Magnum from increasing prices for a significant period. Magnum’s market power study demonstrates that numerous alternatives to Magnum’s proposed services exist in the relevant markets that will prevent the exercise of market power.

“In view of [these] considerations, we will grant Magnum’s request to charge market-based rates for its proposed storage services,” the order said.

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