FERC on Tuesday granted a waiver that would allow SG Resources Mississippi LLC to build a high-performance underground natural gas storage facility in Mississippi without first executing agreements for firm storage service.

SG Resources sought the waiver after an anchor customer for its Southern Pines Energy Center, Aquila Merchant Services Inc., backed out of the project, citing substantial financial and credit difficulties. Aquila discontinued its marketing business and was unable to commit to 3 Bcf (or any other quantity) of service, which FERC required when it awarded SG Resources a certificate for the project in October 2002.

SG Resources told the Commission it was continuing to pursue development of the Southern Pines project and fully intended to construct it, but that it hasn’t been able to negotiate any agreements for services. The company said the condition that it execute a service agreement for 3 Bcf had made it difficult to negotiate acceptable firm storage agreements and to more forward with project construction.

When SG Resources submitted proof of a 3 Bcf precedent agreement with Aquila to support its storage project, “such evidence was not required under existing policy…and the Commission could have issued a certificate for the Southern Pines project without the condition for which a waiver has now been requested,” the FERC order said [CP02-229].

The Commission noted it has taken similar action in the past. In mid-2002, it approved Copiah County Storage Co.’s application to construct a 3.3 Bcf salt cavern storage facility in Copiah County, MS, without a condition requiring contract execution. In addition, the requirement that SG Resources and Aquila execute a service agreement for 3 Bcf “is now impossible to meet because Aquila Merchant Services is no longer operational,” the order said.

“For good cause shown, we grant the requested waiver. [But SG Resources] may not commence construction until it has satisfied all other applicable certificate conditions and Commission regulations.”

When completed, the Southern Pines Energy Center in Greene County, MS, would offer approximately 12 Bcf of working gas storage capacity in two salt caverns, with 1.2 Bcf/d of maximum delivery and injection capabilities of up to 0.6 Bcf/d. FERC has authorized Southern Pines, an at-risk storage project, to charge market-based rates for services.

The company said it has executed interconnect agreements with four interstate pipelines, including Gulfstream Natural Gas System, Transcontinental Gas Pipe Line, Florida Gas Transmission and Destin Pipeline.

SG Resources is a subsidiary of Houston-based SGR Holdings LLC, which develops, owns and operates high-deliverability salt cavern storage facilities.

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