FERC last Thursday ordered Florida Gas Transmission (FGT) to revise its tariff within the next 30 days to specify standards for the energy content of the domestic gas stream and imported liquefied natural gas (LNG), clearing the way for the introduction of regasified LNG into its pipeline system.

The order responded to a complaint filed in April in which AES Ocean Express LLC accused FGT of placing “unreasonable and onerous” conditions on the company in its pursuit of an interconnection with FGT’s system. Ocean Express said FGT was frustrating its plans to construct a proposed Bahamas-to-Florida pipeline to deliver regasified LNG to the southern Florida market (see NGI, April 12).

The order is noteworthy because it is one of the few times that the so-called LNG interchangeability standards have come before the full Commission. “Unfortunately, as a matter of timing, we’re presented here with a case where we have a pipeline [FGT] that has a need to have interchangeability standards in place and doesn’t,” said FERC staff member Ed Murrell.

He noted that the Natural Gas Council currently is working on a consensus interchangeability standard for the natural gas industry, “but they are not there yet,” and the issue may not be resolved for “several more months.” The council formed an industrywide coalition earlier this year to develop guidelines and specifications for the quality of domestic gas entering pipelines, as well as the ability of LNG to be interchangeable with conventional U.S. gas supplies. It repeatedly has asked FERC to be patient as it seeks to balance the needs of the industry, and so far the agency has. But its patience appears to be wearing thin.

In the meantime, “Ocean Express is trying to move forward with its [LNG] project…Unless we are able to resolve some of these issues now we have a little bit of an impasse between developing LNG on the one hand, and some kind of standardization for these interchangeability standards on the other hand,” Murrell told the Commission.

“The process that we envision here would put some standards in place in [FGT’s] tariff now, but we recognize in the future, once generic standards have been arrived at by the industry, there may be a need to make some further changes” in FGT’s tariff, he said.

“I think this will certainly…spur the industry’s discussions into a lot higher gear, and I hope it does” because these LNG projects need regulatory certainty, said FERC Chairman Pat Wood. He noted that he called the case up for discussion during last Thursday’s regular Commission meeting “to let the world know that this is now a docket…where some significant decisions will be made.”

The Commission’s order is intended to “ensure the greatest degree of certainty and transparency for Ocean Express, other LNG developers and Florida Gas’ shippers, and to ensure [equitable] treatment among several pipeline projects competing to deliver regasified LNG directly into Florida Gas’ market area,” a FERC staffer said.

The interchangeability issue has risen to the forefront as more Btu-enriched regasified LNG is expected to be introduced into the U.S. gas stream from imports, prompting pipelines such as FGT to fret about the impact of the Btu-rich gas on the integrity of their systems, and local distribution companies (LDCs) to worry about the safety of regasified LNG for their end-use customers. The key concern is the extent that LNG-sourced gas can replace conventional gas without unduly interfering with the operation of delivery systems and customers’ equipment and appliances.

In addition to directing FGT to revise its tariff, the FERC order set two operational issues for settlement judge procedures and, if that fails, for hearings. The issues are whether FGT should have the ability to control flows at the interconnection in order to maintain rates of flow up to 6% per hour, and whether Ocean Express should be required to install heaters at the interconnection point to avoid liquid hydrocarbon fallout.

In its complaint, Ocean Express said it has tried for almost two years to finalize an agreement to interconnect with FGT in Broward County, FL, but the pipeline continually demanded more restrictive requirements that were not justified under its tariff. Ocean Express, which is affiliated with Arlington, VA-based AES Corp., called on the Commission to break the “impasse” by ordering FGT to grant the interconnect for its project. FERC didn’t go that far, but it ordered the pipeline to establish energy content standards in its tariff, which the agency will review.

The Ocean Express project, which received a FERC certificate in January, calls for the construction of the 54-mile U.S. leg of a $440 million pipeline that would transport 842 MMcf/d of regasified LNG to southern Florida from a proposed LNG import terminal in the Bahamas.

According to the complaint, FGT conditioned the interconnection agreement on: 1) Ocean Express delivering gas at a minimum temperature of 80 degrees Fahrenheit; 2) Ocean Express accepting unspecified “quality” standards in addition to a comprehensive set of agreed-upon, detailed gas quality specifications related to gas composition and heating value; 3) FGT retaining absolute authority to adopt, alter and enforce any interchangeability standards for LNG-sourced gas; 4) FGT retaining the discretion to “shut in” deliveries from Ocean Express for minor deviations from quality specifications; and a number of other requirements.

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