Originally published April 21, 2006
On April 11, 2006, Federal Energy Regulatory Commission ("FERC" or the "Commission") Administrative Law Judge Herbert Grossman ("ALJ") issued an initial decision in the AES v. FGT proceeding. The proceeding, the first fully litigated case before FERC involving gas composition issues related to imports of liquefied natural gas ("LNG"), determined the appropriate natural gas quality and interchangeability standards for re-gasified LNG introduced into the Florida Gas Transmission Company ("FGT") pipeline system. The ALJ adopted standards that seek to encourage natural gas supply, while at the same time protect the pipeline’s physical integrity and assets connected to the system.
The proceeding was initiated by a complaint filed with FERC by AES Corporation ("AES") over allegedly unreasonable gas quality standards contained in FGT’s proposed interconnection agreement. AES asserted that the standards that FGT recommended were overly restrictive and would stifle the development of LNG markets. FGT’s proposed standards were largely supported by an analysis contained in White Papers prepared by the Natural Gas Council. After evaluating a considerable amount of technical evidence, Judge Grossman generally found that FGT’s standards were just and reasonable.
In reaching his decision, the ALJ weighed the competing interests of various stakeholders. Recognizing the importance of importing LNG supply to the Florida natural gas market, he established standards that considered the system’s historical gas flows as well as consumer demand in attempting to set a reasonable benchmark for the future. Specifically, the ALJ adopted the following standards:
- Wobbe range of 1340 to 1396;
- Heating values of 1025 (1022 for the Western Division) to 1110 Btu/scf; and
- Gas composition levels established for methane, ethane, propane, butanes+, pentanes+, hydrogen sulfide, CO2, and O2.
The ALJ was urged by several participants to delay implementation of the standards due to the possibility that the introduction of regasified LNG on the FGT system could cause leakage of compression joints on distribution facilities. The Florida local distribution companies ("LDCs") submitted the Washington Gas Light ("WGL") commissioned ENVIRON report to demonstrate that FGT’s system could experience coupling leaks similar to those found on the WGL system. Judge Grossman firmly rejected calls for a delay in implementation, holding that the ENVIRON report was biased and that other factors likely caused the leaks on the WGL system.
The ALJ’s ruling in AES v. FGT also impacts the Cypress Pipeline expansion proceeding. In that case, Southern Natural Gas Company has proposed a pipeline expansion to provide interstate transportation service and deliver natural gas from the Elba Island LNG terminal to various electric generation facilities, industrial customers, and LDCs in northern Florida. The Commission had determined in that proceeding that objections raised by LDCs and end users regarding gas quality and interchangeability issues would be resolved in the AES v. FGT proceeding.
The ALJ’s initial decision is subject to review and modification by the full Commission after parties submit briefs in opposition or support of the ALJ’s ruling. There is no timetable governing the Commission’s issuance of a final decision.
For more information relating to this alert, please contact:
Dena Wiggins, Kirstin Gibbs or David Wochner
© 2006 Sutherland Asbill & Brennan LLP. All Rights Reserved.
This article is for informational purposes and is not intended to constitute legal advice.
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