The Federal Energy Regulatory Commission last week awarded PetalGas Storage L.L.C. a certificate to increase the total gas storagecapacity of its two caverns in Mississippi by 5.4 Bcf and workinggas capacity by 4.8 Bcf.

Petal Gas now can proceed with plans to expand the total storagecapacity and working gas capacity of the two caverns to 15.8 Bcfand 10 Bcf, respectively, to meet the growing demand for storageservice by electric generation facilities in the Southeast[CP99-615].

Petal Gas has proposed a second phase of the expansion, whichwould include looping an existing storage header, installingadditional compression at the storage facility and constructing abi-directional pipeline to interconnect with Destin Pipeline,Transcontinental Gas Pipe Line and Southern Natural Gas. Theapplication still is pending before FERC.

The Commission said Petal Gas has demonstrated the project’sneed with precedent agreements for 9.5 Bcf of working gas capacity,which represents 95% of the combined existing and expanded workingstorage capacity. The biggest capacity holder is Southern CompanyServices Inc., which has executed a 20-year precedent agreement for7 Bcf of firm storage capacity.

Also, FERC said existing customers won’t be forced to subsidizethe storage expansion, given that Petal Gas has requested — andreceived — authority to charge market-based rates for existingand expanded storage services.

In requesting market-based rates, Petal Gas said it still lackedmarket power in the Gulf Coast production area even though itsparent, Crystal Gas Storage Inc., was purchased by El Paso Energyin January. FERC agreed, finding that “although Petal’s marketshare has increased proportionately as a result of its affiliationwith El Paso, its aggregate share of the relevant market [was]still relatively small.”

Susan Parker

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