FERC’s upcoming meeting Thursday is expected to be a blockbuster one, as the agency takes action on issues involving gas quality and the interchangeability of liquefied natural gas (LNG) and traditional gas, a joint pipeline-producer petition for broader blanket certificate authority, the agency’s proposed storage rule and a host of new LNG projects and expansions.
If not struck from the agenda, the Federal Energy Regulatory Commission is scheduled to address natural gas quality issues and the interchangeability of LNG supplies with traditional gas, as well as respond to a petition by the Natural Gas Supply Association (NGSA) for a rulemaking on gas quality and interchangeability issues [PL04-3, RM06-17].
Some observers believe FERC will issue a policy statement in this area, rather than a rulemaking. Interstate gas pipelines favor a policy statement that would allow them to tackle gas quality and interchangeability issues on a pipeline-by-pipeline basis. But the producer group, NGSA, wants FERC to issue a rule adopting national hydrocarbon dew point (HDP) and interchangeability specifications for gas being delivered throughout the national pipeline system, as well as for nondiscriminatory application of the specifications in the tariffs of all interstate gas pipelines.
The Commission also is expected to issue a final rule reforming the agency’s pricing policies to promote the construction of more natural gas storage sites in the United States. The notice of proposed rulemaking, which was issued last December, proposed two methods for prospective developers of gas storage to seek market-based rate authority.
Using one method, storage developers could seek authorization for market-based rates under a new flexible approach that would factor in potential substitutes to storage in the relevant market when deciding whether market power exists. Those potential substitutes would include available pipeline capacity, supplies from local gas production, LNG and released transportation capacity, which are available to the same customers to be served by the new storage operations [RM05-23, AD04-11].
As for the second method, FERC proposed to implement rules under the new Natural Gas Act Section 4(f) that would permit market-based rates for new storage capacity that is placed into service after the enactment of the Energy Policy Act of 2005. This section of the bill authorized market-based rates for new storage projects even if they have market power — if the Commission determines the project is necessary for the public interest and customers are adequately protected from manipulation.
Moreover, the Commission is scheduled to take up a petition by NGSA and a pipeline group that asks FERC to make a series of permanent regulatory and policy changes to spur the construction of interstate gas pipeline expansions, new storage capacity and facilities related to LNG projects. Specifically, the Interstate Natural Gas Association of America and the NGSA called on FERC to allow blanket authorizations for the construction of certain mainline pipeline expansions, underground storage improvements and takeaway facilities for LNG projects [RM06-7].
The two groups also urged FERC to begin an inquiry and rulemaking to permanently raise the dollar limits for blanket construction facilities beyond the inflation levels recognized by the agency in its existing regulations. With respect to larger, nonblanket projects, they asked the Commission to issue a policy statement or rule “clearly [stating] that it will not be construed as undue discrimination under the Natural Gas Act to provide favorable rate treatment for the shippers who make a project financially feasible.”
The joint INGAA-NGSA request came shortly after FERC last year waived regulations on a temporary basis to raise the cost limitations for projects that gas pipelines can construct without prior specific authorization from FERC under Part 157 blanket certificates.
Thursday’s blockbuster FERC meeting also will bring decisions on five LNG import projects and related pipelines, including Sempra’s $700 million Port Arthur LNG project in Jefferson County, TX, BP’s $500 million Crown Landing terminal in Logan Township, NJ, Cheniere Energy’s $900 million Creole Trail LNG terminal in Cameron Parish, LA, and expansions of Cheniere’s proposed Sabine Pass LNG terminal in Louisiana and Dominion Cove Point’s LNG terminal in Calvert County, MD. The Commission granted environmental approvals to all five projects within the last two months (see Daily GPI, May 1 and May 8).
Cheniere’s Sabine Pass expansion would increase the sendout capacity of the proposed import terminal to 4 Bcf/d from 2.6 Bcf/d, would add 480,000 cubic meters of storage space and would allow up to 400 ships per year to bring LNG to the terminal. The Creole Trail LNG project would include 3.3 Bcf/d of sendout capacity and an associated 118-mile, 3.3 Bcf/d pipeline to be constructed by affiliate Cheniere Creole Trail Pipeline.
Crown Landing LLC’s proposed 1.2 Bcf/d terminal would be built along the Delaware River, but the project will be in limbo until the U.S. Supreme Court makes a decision on whether Delaware has the right to block construction of the terminal (see Daily GPI, Nov. 30, 2005). BP’s $500 million Crown Landing terminal project calls for the construction of 9.2 Bcf of storage and vaporization facilities, with a baseload sendout rate of 1.2 Bcf/d and peak rate of 1.4 Bcf/d.
The Cove Point expansion, which is scheduled for 2008, would increase the sendout capacity to 1.8 Bcf/d from 1 Bcf/d, and would boost storage capacity to 14.6 Bcf from 7.8 Bcf. The project calls for the construction of two 160,000 cubic meter single-containment LNG storage tanks. Affiliate Dominion Transmission Inc. also proposes to construct 161 miles of mostly 36-inch and 24-inch diameter pipeline in Maryland and Pennsylvania, and associated aboveground facilities in Virginia, Pennsylvania, New York and West Virginia.
Sempra’s Port Arthur LNG terminal and pipeline project would be located in Port Arthur about 85 miles east of Houston. It would be built in two phases and completed in 2009. Phase I would permit the terminal to send out 1.5 Bcf/d of regasified LNG on a firm basis by the winter heating season of 2008-2009. Construction of Phase II would increase the sendout capability by an additional 1.5 Bcf/d of gas on a firm basis as early as 2010. Affiliate Port Arthur Pipeline LP proposes to build and operate a 70-mile, 36-inch diameter pipeline leg, which would interconnect with Transcontinental Gas Pipe Line, and a three-mile pipeline leg to Natural Gas Pipeline Company of America in Jefferson County.
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