FERC cleared the way yesterday for Southern LNG Inc. to take itsliquefied natural gas terminal facility on Elba Island in Georgiaout of the mothballs.

The only potential hurdle in Southern LNG’s way was a request byDalton Utilities for FERC to investigate the impact of reactivatingthe Elba Island terminal on affiliate Southern Natural Gas and itscustomers. The Commission rejected the request, saying that DaltonUtilities had presented “nothing beyond speculation” to warrant aSection 5 investigation. Furthermore, it said the request was”premature” considering that the terminal wouldn’t begin commercialoperation until 2002 or later.

The certificate was good news not only for Southern LNG, whoseElba Island facility has been mothballed since 1980, but forAtlantic LNG of Trinidad and Tobago, which owns the liquefactionplant in Trinidad that will supply LNG to Southern. Based on thecertificate, Atlantic LNG will continue to expand its Trinidad LNGfacility, while an overseas consortium — known as the NCMADevelopers — plans to develop offshore gas reserves to beliquefied by Atlantic LNG and shipped to the Southern LNG terminalfacility.

Southern LNG has executed a binding contract with its affiliate,Sonat Energy Services Co., (SES) for 100% of the capacity of theElba Island terminal. The contract, which has a term of 22 years,will enable SES to store up to 4 Bcf of natural gas in LNG form,and receive up to 330,000 Mcf/d of gas in vaporized form.

Last November, the Department of Energy (DOE) granted SESpermission to import up to 82 Bcf/year for 22 years from theAtlantic LNG project in Trinidad. SES expects the biggest rise inLNG demand to be in the southeastern section of the United States.Further, it said the interconnection of Southern LNG’s facilitieswith Southern Natural’s pipeline and other pipelines wouldpotentially open up markets for imported gas in other parts of thenation.

Southern LNG said initial rates for the project would be basedon recommissioning costs of $25 million and an annualcost-of-service of about $23 million.

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