Dominion Cove Point LNG, LP, 061606 FERC, CP05-130-000

Docket Nº:CP05-130-000, CP05-130-001, CP05-130-002, CP05-132-000, CP05-132-001, CP05-131-000, CP05-131-001
Party Name:Dominion Cove Point LNG, LP Dominion Transmission, Inc.
Judge Panel:Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead Brownell, and Suedeen G. Kelly. Magalie R. Salas, Secretary.
Case Date:June 16, 2006
Court:Federal Energy Regulatory Commission
 
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Dominion Cove Point LNG, LP

Dominion Transmission, Inc.

Nos. CP05-130-000, CP05-130-001, CP05-130-002, CP05-132-000, CP05-132-001, CP05-131-000, CP05-131-001

United States of America, Federal Energy Regulatory Commission

June 16, 2006

Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead Brownell, and Suedeen G. Kelly.

ORDER ISSUING CERTIFICATES AND GRANTING SECTION 3 AUTHORITY

1. This order approves the applications filed by Dominion Cove Point LNG, LP (Cove Point LNG) and Dominion Transmission, Inc. (Dominion) in the captioned dockets to construct and operate facilities which comprise the Cove Point Expansion Project. This project includes the expansion of Cove Point LNG’s existing import terminal and pipeline and Dominion’s construction of new downstream pipeline and storage facilities.

2. On April 15, 2005, Cove Point LNG filed, in Docket No. CP05-130-000, an application under section 3 of the Natural Gas Act (NGA) requesting authority to expand its facilities at its liquefied natural gas (LNG) import terminal at Cove Point, Maryland. Concurrently, in Docket No. CP05-132-000, Cove Point LNG filed an application under NGA section 7(c) and Part 157 of the Commission’s regulations for authorization to expand its Cove Point Pipeline facilities by constructing and operating approximately 47.8 miles of 36-inch diameter loop pipeline in Calvert, Prince George’s and Charles Counties, Maryland.

3. In addition, on April 15, 2005, Dominion filed, in Docket No. CP05-131-000, an application under NGA section 7(c) and Part 157 of the Commission’s regulations, requesting a certificate of public convenience and necessity authorizing construction activities in Pennsylvania, New York, Virginia, and West Virginia to increase Dominion’s pipeline and storage capacity.1

4. In this order, the Commission is approving Cove Point LNG’s and Dominion’s proposals, subject to the conditions set forth herein.

Background and Proposal

Background

5. Cove Point LNG owns and operates the Cove Point LNG Terminal in Lusby, Calvert County, Maryland and the Cove Point Pipeline facilities that extend approximately 88 miles from the LNG terminal to interconnections with Transcontinental Gas Pipe Line Corporation (Transco) in Fairfax County, Virginia and with Columbia Gas Transmission Corporation (Columbia) and Dominion in Loudon County, Virginia. Cove Point LNG was initially authorized in 1972 to construct and operate the Cove Point LNG Terminal and the Cove Point Pipeline as part of a project to import LNG from Algeria and transport natural gas to United States markets.2] Shipments of LNG to the Cove Point LNG Terminal began in March 1978, were interrupted in April 1980, and ceased in December 1980. With the exception of a small amount of interruptible transportation service provided through the Cove Point Pipeline, the Cove Point facilities were not used from December 1980 to 1984.

6. In 1994, the Commission authorized Cove Point LNG to reactivate the mothballed onshore facilities and to construct a liquefaction unit for the purpose of storing domestic natural gas during the summer for use at peak times during the winter.3] Cove Point LNG provides 10-day, 5-day and 3-day firm peaking services under Rate Schedules FPS-1, FPS-2, and FPS-3, respectively, and provides firm and interruptible transportation services under Rate Schedule FTS and ITS.

7. In 2001, the Commission authorized Cove Point LNG to construct new facilities and to reactivate and operate existing facilities to recommence LNG imports at the terminal.4] LNG terminalling services are provided to shippers importing LNG pursuant to Rate Schedules LTD-1 and LTD-2. Cove Point LNG received its initial cargo of imported LNG in August 2003, and since that time imports through the terminal have provided approximately 325 million dekatherms (MMDth) of needed gas supplies to major Eastern United States markets, making the Cove Point LNG Terminal the most active LNG receiving terminal in the country. The two berths at the pier were also recommissioned in August 2003; the south berth will be in active use prior to completion of the Cove Point LNG Terminal Expansion.

8. In November 2003, Cove Point LNG was authorized by the Commission to construct and operate two new compressor stations on the Cove Point Pipeline to provide additional west-to-east firm transportation capacity.5] In November 2004, the Commission authorized Cove Point LNG to place into service the fifth LNG storage tank, with a capacity of 2.8 billion cubic feet (Bcf) that was approved in the 2001 Reactivation Orders.6] Thus, the Cove Point LNG Terminal presently has storage capacity of 7.8 Bcf and 1 MMDth/d of peak send-out capacity.

Proposal

9. Cove Point LNG’s and Dominion’s proposals together comprise the Cove Point Expansion Project. The applicants state that the Cove Point Expansion Project is designed to: (a) expand the existing Cove Point LNG Terminal to increase the volumes of LNG that can be imported, stored, regasified, and delivered; (b) expand the capacity of the Cove Point Pipeline; and (c) construct new downstream pipeline and storage facilities that will provide shippers enhanced access to firm natural gas storage capabilities and to additional natural gas markets throughout the northeastern United States. The applicants contend that by this proposal, new gas supplies will be delivered to where they are needed in the Mid-Atlantic and northeastern United States. In addition, the applicants state that the proposed facilities in Maryland would bring additional winter supplies to the Mid-Atlantic region, and the proposed facilities in Pennsylvania, Virginia, West Virginia, and New York would allow additional supplies to be stored in the summer and moved to the Northeast for use during periods of peak need in the winter.

Docket No. CP05-130-000 - The Cove Point LNG Terminal Expansion

10. In Docket No. CP05-130-000, Cove Point LNG proposes to expand its LNG terminal by installing two additional insulated LNG storage tanks, each capable of storing 160, 000 cubic meters of LNG. Cove Point LNG states that this will increase the send-out capability by 800, 000 Dth/d and increase storage capacity by approximately 6.8 Bcf. The Cove Point LNG Terminal, after this expansion, will have storage capacity of 14.6 Bcf and peak send-out capability of 1.8 MMDth/d. Other additions and modifications to support send-out of vaporized LNG include all necessary process equipment such as pumps, compressors and piping to handle LNG and the associated boil-off. Additional vapor management capacity will be installed in order to accommodate the boil-off gas associated with the new facilities and to improve the efficiency of the unloading operation. In addition, power generation will be installed to provide electricity for motor-driven equipment, lighting, controls and other ancillary facilities.

Proposed Facilities

11. Specifically, Cove Point LNG seeks authorization to construct and operate the following new facilities:7

Two 160, 000 cubic meter LNG storage tanks;

Four vertical shell and tube vaporizers;

Two waste heat shell and tube vaporizers;

Four second-stage send-out pumps;

Three low pressure LNG tank withdrawal pumps;

One boil-off gas (BOG) recondenser;

Two 21.7 megawatt gas turbine generators;

Five non-cryogenic rotary screw BOG compressors;

Seven water/ethylene glycol heaters;

Five hot water/ethylene glycol circulation pumps;

Four warm water/ethylene glycol circulation pumps;

One vent heater;

Two waste heat recovery units;

Two instrument air compressors;

Three emergency generators; and

Other related facilities and buildings.

12. Cove Point LNG states that the new facilities will be operated on an integrated basis with the existing LNG terminal facilities. According to Cove Point LNG, the expansion facility design will provide substantial operational benefits and improved reliability and flexibility of service for both expansion and existing customers.

Proposed Hackberry Rate Treatment

13. Cove Point LNG proposes to provide the expansion services to Statoil Natural Gas LLC (Statoil) on a “proprietary” basis, with deregulated rates and services in reliance on the Commission’s policy announced in Hackberry LNG, Inc. (Hackberry), 8] while continuing to provide service using the existing terminal capacity on a regulated basis, with regulated services and cost-of-service rates for both its existing section 3 import customers and its existing section 7 peaking customers. Cove Point LNG contends that applying Hackberry rate treatment for the proposed terminal expansion capacity will not require subsidization by its existing customers, degrade service or unduly discriminate in service terms and conditions against existing customers. Cove Point LNG is not seeking a determination of rolled-in rate treatment and understands that it will have the burden of proof in a future rate case to demonstrate that the proposed allocation of costs and rates between existing and expansion customers is just and reasonable. Cove Point LNG states that it and Statoil, the expansion shipper, are assuming the economic risk and costs associated with the Cove Point LNG Terminal Expansion, due to Cove Point LNG’s proposal of incremental rates under Hackberry rate treatment.

14. Cove Point LNG contends that its proposed LNG terminal expansion clearly furthers the principle goal of the Hackberry policy, which is to encourage the construction and operation of additional LNG import terminals in order to increase LNG imports into the United States. Cove Point LNG adds that this objective can be met at a lower cost and with less environmental impact by the expansion of existing terminals, rather than...

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