The Federal Energy Regulatory Commission has awarded Petal GasStorage LLC a certificate to increase the gas total storagecapacity of its two caverns in Mississippi by 5.4 Bcf and workinggas capacity by 4.8 Bcf.

Petal Gas now can move forward with its plans to expand thetotal storage capacity and working gas capacity of the two cavernsto 15.8 Bcf and 10 Bcf, respectively, to meet the growing demandfor storage service by electric generation facilities in theSoutheast [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 approved the expansion of Petal Gas’ storagecapacity after determining that the project met the thresholdrequirements of its policy statement for certificating newconstruction, specifically that the benefits of the projectoutweighed potential adverse effects to existing storage customersand landowners.

For one, the order said Petal Gas has demonstrated the project’sneed. It has executed firm storage and precedent agreements for 9.5Bcf of working gas capacity, which represents 95% of the combinedexisting and expanded working storage capacity. The biggestcapacity holder is Southern Company Services Inc., which hasexecuted a 20-year precedent agreement for 7 Bcf of firm storagecapacity.

The storage project “responds to the need for competitivelypriced storage services in the region by providing Petal’scustomers greater storage options and enhancing their ability tomanage gas supplies.”

Also, FERC said existing customers wouldn’t be forced tosubsidize the storage expansion, given that Petal Gas has requested— and received — authority to charge market-based rates forexisting and expanded storage services. Such rates “require that itassume the economic risk associated with the costs of its existingand proposed facilities…..” There would be no degradation ofservice to existing customers as well, the order said.

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.”

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