With the ink barely dry on the FERC order approving part of thephase-two expansion of its storage caverns in Mississippi, PetalGas Storage L.L.C. last week kicked off an open season to determinewhether there’s a demand for another expansion.

The FERC-approved Phase II expansion, which is fully subscribed,will increase the working gas capacity of Petal’s two Mississippistorage facilities to 10 Bcf by the scheduled in-service date ofJune 2001. If the current open season, which ends April 14, issuccessful, Petal will seek Commission approval later this year toadd another 5 Bcf of working gas capacity by leaching a thirdcavern, said Vice President David Hayden. That capacity wouldbecome available by June 2003.

In the meantime, Petal has an amended application pending atFERC to build about 5.5 miles of 36-inch looping from its storagefield to a point of interconnection with Tennessee Gas Pipeline’s500 Line in Mississippi and to add 20,000 horsepower of compression[CP00-59-001]. Also, Tennessee is planning to seek an expansion ofits 500 Line serving Petal in either May or June.

The two projects would boost Petal’s existing deliverability,which currently is 320 MMcf/d, to about 1 Bcf/d by mid-2001 and to1.5 Bcf/d by mid-2003, according to Hayden. Its injection ratewould be about one half of those levels, he added.

The additional working gas capacity and deliverability will beneeded to satisfy the projected growth in gas demand by powergenerators in the Southeast over the next five to six years, Haydentold NGI. “The power [generation] development is creating a bigsurge in demand for high-deliverability storage.”

Southern Company, parent of several utilities in the Southeast,has expressed some concern because the amended application beforeFERC doesn’t include Petal’s original commitment to build 60 milesof interstate pipeline – in addition to the looping andcompression.

Southern said its agreement with Petal for 7 Bcf of firm storagecapacity and 700,000 MMBtu/d of firm storage withdrawal rights wasbased on the pipe facilities being built to deliver gas tointerconnections with Southern Natural Gas, Destin Pipeline andTranscontinental Gas Pipeline.

But Petal has proposed to bifurcate its original projectproposal, with it handling the looping and compression andTennessee agreeing to expand its deliverability from Petal storage,Southern Company said. “This latter application [of Tennessee’s]has not been filed yet and the details of the arrangement underwhich such capacity will be made available to Petal, and throughPetal to Southern Company, are uncertain,” it told the Commission.

“…..[U]ntil the related Tennessee application is filed,Southern Company will not be able to satisfy itself that thecombined Petal and Tennessee applications, if approved, willfulfill the commercial terms agreed upon by Petal and SouthernCompany as contained in the precedent agreement…..Clearly, on astand-alone basis [Petal’s amended application] does not do thatsince it fails to provide Southern Company with 700,000 MMBtu perday of firm storage withdrawal capability delivered into Southern,Destin and Transco.”

Amoco Production and Amoco Energy Trading strongly protested therevised Petal project, saying that it represented a “significantchange” that was the result of “non-arm’s-length negotiationsbetween Petal and Tennessee,” which are affiliates now. El PasoEnergy, which owns Tennessee, purchased Petal’s parent, Crystal GasStorage Inc., in January.

Petal’s amended proposal “advantages Tennessee and disadvantagesnon-affiliated pipelines and producers, marketers and shippers onthese non-affiliated pipelines,” Amoco charged. Still, the futurelooks pretty good for Petal. In addition to its new owner, thestorage company has some influential friends on Capitol Hill thatare looking out for it at FERC. They include the Mississippidelegation — Senate Majority Leader Trent Lott and Reps. CharlesPickering and Gene Taylor.

Susan Parker

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