Southern LNG Inc. has launched a scathing denial of theallegations that it conducted an open season in secret in order toaward to an affiliate all the teminalling capacity in its liquefiednatural gas (LNG) facilities on Elba Island in Georgia. The companyis seeking to reactivate the facilities, which have been dormantsince the early 1980s.

Enron Americas LNG Co. last month accused Southern LNG of notpublicizing the open season, which took place in early June, sothat it could award the terminal’s entire 4 Bcf of capacity to itsmarketing affiliate, Sonat Energy Services (SES). Enron asked FERCto place an immediate hold on Southern LNG’s applications toreactivate and upgrade its mothballed LNG storage and send-outfacilities on Elba Island, and to conduct an investigation into thecompany’s open-season procedures.

Enron Americas charged that the open season for the Elba Islandcapacity , which ran from June 1 to June 15, was cloaked entirelyin secrecy. It said it didn’t learn of Southern LNG’s open seasonuntil June 7th, which gave it only eight days to put together abid.

But Southern LNG countered that the “open season was theculmination of a year-long reactivation effort, which was known toEnron.” It said “Enron failed to respond to a direct solicitationof three senior executives at the commencement of that year-longreactivation effort – and that it was ultimately unable to submit abinding request for firm service.” In short, Enron Americas was “avictim of its own inaction.”

More importantly, Southern LNG said “it did not givepreferential treatment to its marketing affiliate or otherwiseengage in improper behavior.” The company contends that itaccurately calculated the net present value (NPV) of all the bidsthat were submitted, with the winning bid coming from affiliateSES.

Enron Americas LNG contends that its bid for the entire capacityof the Elba Island LNG facility – at maximum rates for a term of 15years – beat out SES’ bid in the open season. It said its bidpossessed a higher NPV because it had an earlier in-service date -Jan. 1, 2002 as opposed to SES’ Oct. 1, 2003 – and wasn’t subjectto the 7- to 10-year rate moratorium that was offered to SES.Moreover, Enron Americas said it’s prepared to match the deal thatSouthern LNG struck with SES – a 22-year term with a 7- to 10-yearrate cap – and still “stand by” the earlier in-service date.

On the plus side, Southern LNG argued that SES’ 22-year bid was”backed by an international consortium in Trinidad. The NCMADevelopers, led by British Gas, have a real project in Trinidad -one that will entail the expansion of an existing liquefactionfacility and the utilization of an existing marine tanker.”

In contrast, Enron’s 15-year bid “was illusory – nothing morethan a placeholder,” Southern LNG told FERC. In fact, “if this hadbeen the only bid submitted, [Southern LNG] could not have goneforward with recommissioning of the Elba Island Terminal and,instead, would have reluctantly sought to abandon this uniquefacility…”

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