Southern LNG, Inc., 092007 FERC, CP06-470-000

Docket Nº:CP06-470-000, CP06-471-000, CP06-471-001, CP06-472-000, CP06-472-001, CP06-473-000, CP06-473-001, CP06-474-000, CP06-474-001
Party Name:Southern LNG, Inc. Elba Express Company, LLC Southern Natural Gas Company Rejected Pro Forma Tariff Sheets, Southern LNG Inc. Pro Forma Original Volume No. 1
Judge Panel:Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff. Kimberly D. Bose, Secretary.
Case Date:September 20, 2007
Court:Federal Energy Regulatory Commission
 
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120 FERC ¶ 61, 258

Southern LNG, Inc.

Elba Express Company, LLC

Southern Natural Gas Company

Nos. CP06-470-000, CP06-471-000, CP06-471-001, CP06-472-000, CP06-472-001, CP06-473-000, CP06-473-001, CP06-474-000, CP06-474-001

United States of America, Federal Energy Regulatory Commission

September 20, 2007

Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.

ORDER ISSUING CERTIFICATES, AUTHORIZING ABANDONMENTS, GRANTING AUTHORIZATION, AND DENYING REHEARING

1. On April 4, 2007, the Commission issued a preliminary determination addressing the non-environmental issues raised by the applications filed on September 29, 2006 by Southern Natural Gas Company (Southern) and Elba Express Company, LLC (Elba Express) under section 7 of the Natural Gas Act (NGA), requesting, among other things, certificate authority to construct and operate a new interstate natural gas pipeline in Georgia and South Carolina to transport new volumes of vaporized liquefied natural gas (LNG) from Southern LNG, Inc’s (Southern LNG) Elba Island, Georgia, LNG terminal to interconnections with Transcontinental Gas Pipe Line Corporation (Transco).1In the April 4 Order, the Commission issued its conditional approval of the Elba Express and Southern proposals pending completion of its environmental review. The April 4 Order did not address any of the issues associated with Southern LNG’s contemporaneous application pursuant to NGA section 3 to expand its Elba Island LNG terminal and its request to abandon certain dock facilities pursuant to NGA section 7. On May 4, 2007, Shell NA LNG LLC (Shell) filed a timely request for rehearing of the April 4 Order.

2. The Commission has completed its analysis of Southern LNG’s, Southern’s, and Elba Express’ proposals. As discussed below, we will grant the requested authorizations subject to certain conditions. Further, we will also deny Shell’s request for rehearing.

I. Background and Proposals

A. Southern LNG

3. Southern LNG is a Delaware corporation whose parent is Southern, also a Delaware corporation. Southern LNG operates an LNG import terminal on Elba Island in Chatham County, Georgia, five miles downstream from the city of Savannah, Georgia, on the Savannah River.2Southern LNG commenced operations at the Elba Island terminal in 1978 and, by 1980, when market demand slowed, had received 55 LNG shipments. From 1980 to 1982 Southern LNG provided peak shaving service with the remaining inventory of LNG. Between 1982 and 2000, Southern LNG operated the terminal on a standby mode. In a series of orders from 1999 to 2001, the Commission authorized the re-commissioning and expansion of the Elba Island Facility (Elba I).3In 2002 and 2003, the Commission authorized a further expansion of the Elba Island terminal (Elba II).4This expansion was placed into service on February 1, 2006. As currently configured, the Elba Island terminal has an LNG storage capacity of 7.3 Bcf, a firm sendout rate of 806 MMcf per day, and a maximum sendout rate of 1, 215 MMcf per day.

4. In its application in Docket No. CP06-470-000, Southern LNG proposes, in its Elba III Expansion, to expand the storage capacity of its Elba Island LNG import terminal by 8.44 Bcf and its vaporization capacity by 900 MMcf per day in two phases. Specifically, in Phase A, Southern LNG proposes to: (i) construct a new 200, 000 cubic meter tank (1.25 million barrels) having a storage capacity of 4.22 Bcf of LNG with a boil-off recondenser and three boil-off gas compressors; (ii) install submerged combustion vaporizers with a firm send-out capacity of 405 MMcf per day; and (iii) modify the existing unloading docks to accommodate larger LNG ships and to facilitate simultaneous unloading of two LNG ships.

5. In Phase B, Southern LNG proposes to: (i) construct an additional 200, 000 cubic meter tank (1.25 million barrels) with a storage capacity of 4.22 Bcf; and (ii) install submerged combustion vaporizers with a firm send-out capacity of 495 MMcf per day. In addition, Southern LNG proposes, separate and apart from the proposed expansion, to abandon certain unutilized facilities at its riverside dock. Southern LNG anticipates placing the Phase A facilities into service on June 1, 2010, and the Phase B facilities into service on December 31, 2012. Southern LNG estimates that the combined cost of both phases of the expansion will be $416, 641, 364.

6. Southern LNG has entered into precedent agreements with Shell and BG LNG Services, LLV (BG) for the entire firm capacity of Phase A and Phase B, respectively. Southern LNG proposes to provide service for the Elba III Expansion under its proposed new Rate Schedule LNG-3. Both Shell and BG have agreed to pay a negotiated rate for service from Southern LNG.

B. Southern

7. Southern is a natural gas company engaged in the operation of an interstate natural gas system in the southeast United States. Southern’s pipeline system includes the 13.25-mile Twin 30s pipelines, which extend from Southern LNG’s Elba Island LNG terminal to an interconnection with the rest of Southern’s pipeline system near Port Wentworth, Georgia.5In its application in Docket No. CP06-474-000, Southern seeks approval to transfer to Elba Express, at net book value, an undivided ownership interest up to a volume equal to 1, 175 MMcf per day in the Twin 30s pipelines. Southern will retain sufficient capacity in the Twin 30s pipelines to meet its contractual obligations and asserts that Carolina Gas’ ownership interest in the Twin 30s pipelines will be unaffected by the instant proposal.

8. Southern also seeks to acquire an undivided ownership interest in Elba Express’ proposed pipeline between Port Wentworth and Rincon, Georgia, up to a volume equal to 500 MMcf per day, if Southern elects to proceed with Phase III of its previously authorized Cypress Expansion Project.6Southern explains that it was authorized in Phase III of its Cypress Expansion Project7to construct a 9.85-mile, 30-inch diameter pipeline loop on its pipeline system downstream of Port Wentworth along the route of the proposed Elba Express pipeline. Southern states that acquiring an interest in the Elba Express pipeline would reduce construction costs and environmental impacts by eliminating the construction of two pipelines in the same right-of-way. Southern will pay Elba Express the net book value of its proportional share of capacity in the pipeline at the time of closing.

C. Elba Express

9. Elba Express, a subsidiary of Southern, is a Delaware Limited Liability Company formed to provide open-access transportation service for others under the Commission’s jurisdiction. In addition to acquiring an undivided ownership interest in Southern’s Twin 30s pipelines, Elba Express proposes in Phase A to construct and operate a new 42-inch and 36-inch diameter pipeline extending approximately 189 miles, from Port Wentworth through Effingham, Screven, Jenkins, Burke, Jefferson, Glascock, Warren, McDuffie, Wilkes, and Elbert Counties, Georgia, to interconnections with Transco in Hart County, Georgia, and Anderson County, South Carolina. The 42-inch diameter segment would extend approximately 115 miles from Port Wentworth to a proposed interconnection with Southern at Wrens, Georgia, and the 36-inch diameter segment would continue north for approximately 74 miles from Wrens to interconnections with Transco.

10. The acquired capacity on the Twin 30s pipeline and the Phase A facilities will allow Elba Express to provide up to 945 MMcf per day of transportation capacity from the Elba Island LNG terminal to the Transco interconnections. In addition, Elba Express has designed the pipeline to accommodate the transfer of an undivided ownership interest equal to a volume of 500 MMcf per day to Southern on the approximately 10-mile segment of the 42-inch diameter pipeline from Port Wentworth to an interconnection with Southern’s Cypress Expansion at Rincon, Georgia.

11. In Phase B, Elba Express proposes to construct a 10, 000 horsepower compressor station on the 42-inch diameter segment in Jenkins County, Georgia, to provide an additional 230 MMcf per day of transportation capacity for a total of 1, 175 MMcf per day to the Transco interconnections. Elba Express’ proposed in-service dates for Phases A and B are coincident to those of Southern LNG’s expansion. Elba Express estimates that the combined costs of both phases will be $509, 225, 070.

12. Elba Express has entered into precedent agreements for long-term firm transportation service for the entire Phase A and Phase B capacity, with Shell and BG, respectively. Elba Express proposes to provide open-access transportation service under Part 284 of the Commission’s regulations and has provided a pro forma tariff for review. Shell and BG have elected to pay negotiated rates for service on Elba Express. Finally, Elba Express also requests a Part 157 blanket certificate authorizing it to construct, operate, and/or abandon certain eligible facilities and services.

D. April 4, 2007 Preliminary Determination

13. In the April 4 Order we made a preliminary determination, subject to completion of our environmental review and the fulfillment of all conditions specified in that order, that the benefits of Elba Express’ and Southern’s proposed projects will outweigh any potential adverse effects, are consistent with our policy statement8on new facilities, and are required and permitted by the public convenience and necessity.

14. Among the conditions to the April 4 Order was a requirement in Ordering Paragraph (G), that Southern make a filing, within 20 days of the issuance of the order, providing a detailed justification of the proposed acquisition of an undivided...

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