First Revised Sheet No. 42

Transcription

1 Patricia S. Francis Associate General Counsel Legal June 7, 2010 Ms. Kimberly Bose Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D. C Re: Southern LNG Company, L.L.C. Docket No. RP10- Gas Interchangeability Filing Dear Ms. Bose: Pursuant to Section 4 of the Natural Gas Act and Part 154 of the regulations of the Federal Energy Regulatory Commission ( Commission ), Southern LNG Company, L.L.C., ( Southern LNG ) hereby submits for filing as part of its FERC Gas Tariff Original Volume No. 1 ( Tariff ), an original and five (5) copies of the following tariff sheet. First Revised Sheet No. 42 Southern LNG requests that the Commission accept this Tariff Filing and permit the proposed tariff sheet to become effective August 1, Nature, Basis and Reasons for the Proposed Tariff Changes This filing sets forth revisions to Southern LNG s Quality provision in the General Terms and Conditions to its Tariff to include interchangeability indices and align Southern LNG s Quality provision with industry standards for gas quality and interchangeability while promoting supply diversity. These proposed changes are also designed to meet the needs of the market served by Southern LNG while remaining consistent with the Commission s Policy Statement on Provisions Governing Natural Gas Quality and Interchangeability in Interstate Natural Gas Pipeline Company Tariffs ( Policy Statement ). 1 The proposed Tariff changes are based on discussions between Southern LNG and each of its customers at the Elba Island LNG terminal, who support the proposed changes set forth herein. In addition, Southern LNG has discussed its proposal on gas quality changes with other interested stakeholders in order to fully explain the proposal and to attempt to alleviate any concerns that such parties might have regarding such changes. Southern LNG believes its proposal adequately accommodates interchangeability concerns of these stakeholders while accommodating the receipt of additional available LNG supplies FERC 61,325 (2006). Southern Natural Gas 569 Brookwood Village, Suite 501 Birmingham, Alabama PO Box 2563 Birmingham, Alabama tel fax

2 Ms. Kimberly Bose, Secretary June 7, 2010 Page 2 The Quality provision in Section 3.1 of the General Terms and Conditions of Southern LNG s Tariff currently contains a minimum and maximum gross heating value ( GHV ) specification for LNG and does not include a Wobbe Number. As discussed in the NGC+ Interchangeability Whitepaper 2, the Wobbe Number is a more robust interchangeability index for LNG rather than application of the GHV alone. 3 Accordingly, Southern LNG proposes in this filing to revise the maximum GHV from 1,075 to 1,100 and to include a maximum Wobbe Number of 1,396. Southern LNG also proposes to revise the nitrogen, carbon dioxide, and oxygen maximum limits in Section 3.1 of the General Terms and Conditions of its Tariff. Southern LNG proposes to revise its limit of 3% for carbon dioxide and nitrogen in aggregate to 1% and 2% for carbon dioxide and nitrogen, respectively. Southern LNG proposes to lower its limit on oxygen from 1% to 0.2%. Southern LNG is an import terminal for liquefied natural gas which inherently contains de minimis amounts of nitrogen, carbon dioxide, and oxygen; therefore, the reduction in the current specifications when combined with the proposed Wobbe and GHV parameters will not adversely impact supply but will enhance supply and, at the same time, protect the interests of end-users on the interconnecting pipelines. A discussion of how Southern LNG arrived at each of its proposed specification follows: a. Wobbe Number The NGC+ Interchangeability Whitepaper states the following about the Wobbe Number as its preferred interchangeability parameter: The Wobbe Number was considered first because it was recognized as the most robust single parameter. In general, establishing a maximum Wobbe Number can address certain combustion phenomena such as yellow tipping, incomplete combustion and potential for increased emissions of NOx and CO. Establishing a minimum Wobbe Number can be used to address lifting, blowout and CO. Laboratory testing and combustion theory has shown that simply selecting a maximum Wobbe is not sufficient to address incomplete combustion over a range of compositions (especially for natural gas with heating values in excess of about 1,100 Btu/scf). However, this limitation can be overcome by selecting a more conservative maximum Wobbe Number coupled with an additional parameter such as heating value. 4 2 White Paper on Natural Gas Interchangeability and Non-Combustion End Use submitted to the Commission on February 28, 2005 in Docket No. PL by the NGC+ Interchangeability Work Group ("NGC+ Interchangeability Whitepaper") 3 NGC+ Interchangeability Whitepaper at NGC+ Interchangeability Whitepaper at

3 Ms. Kimberly Bose, Secretary June 7, 2010 Page 3 Figure 1 of the NGC+ Interchangeability Whitepaper 5 demonstrates how the use of a Wobbe Number along with a limit on heating value, such as the Btu limit that Southern LNG is proposing in this Tariff Filing adequately accommodates concerns regarding interchangeability and combustion issues. The Interim Guidelines 6 suggest that the average historical Wobbe Number plus or minus 4% with a maximum of 1,400 can be used to establish an acceptable operating Wobbe range. As shown in Appendix A attached hereto, Southern LNG's average historical Wobbe Number since reactivation in 2001 is approximately 1, Using this historical average as a mid-point and a plus or minus 4% variation with a maximum of 1,400 yields a suggested reasonable Wobbe range of 1,325 to 1,400. However, the Interim Guidelines also state that these suggested gas interchangeability indices represent a starting point for developing guidelines for natural gas interchangeability. 8 Southern LNG believes that such a wide Wobbe range is not required at Elba Island from a historical perspective or to provide a reasonable variability to allow for a wide range of global LNG sources to be acceptable for import into the Southern LNG terminal. Accordingly, Southern LNG proposes a Wobbe Number maximum of 1,396 which is actually only 1% over the historical average and is only 0.3% above the historical high Wobbe value of 1,392 9 for re-vaporized LNG actually seen at Southern LNG since the terminal was reactivated in It is not necessary to explicitly specify a minimum Wobbe number in Southern LNG s Tariff since a minimum Wobbe Number floor will naturally occur because of the inherent composition of LNG and because of Southern LNG Tariff limits for nonhydrocarbon constituents within a regasified LNG mixture. The lowest theoretical Wobbe Number for LNG occurs for a mixture of methane along with the maximum allowed level of non-hydrocarbon constituents. The low Wobbe Number is further restricted by the additional constraint in Southern LNG s Tariff which specifies a minimum Gross Heating Value of 1,000. Accounting for all of these constraints, produces theoretical minimum Wobbe of approximately 1,329 which occurs when a regasified LNG mixture is comprised of approximately 99% methane, 1% carbon dioxide, and 0.4% nitrogen. This theoretical low Wobbe Number is almost 4% under the historical Southern LNG average of 1,380. Southern LNG believes that its proposed maximum Wobbe Number of 1,396, which is only modestly above the actual historical high Wobbe level, coupled with the natural floor that is established by the non-hydrocarbon and maximum heating value limits in the Southern LNG Tariff, produces a reasonable operating 5 Id. at p Interim guidelines from the White Paper on Natural Gas interchangeability and Non-Combustion End Use submitted to the Commission on February 28, 2005 in Docket No. PL by the NGC+ Interchangeability Work Group ( Interim Guidelines ). 7 This is a flow-weighted average. See Appendix A Southern LNG Historical Daily Wobbe. 8 NGC+ Interchangeability Whitepaper at Only slightly less than the proposed upper limit for Wobbe. 10 See Appendix A Southern LNG Historical Daily Wobbe.

4 Ms. Kimberly Bose, Secretary June 7, 2010 Page 4 Wobbe range for Southern LNG and should have no material adverse affects on its system, or to its customers, or to other stakeholders downstream of the Elba Island facility. Furthermore, Southern LNG s proposed maximum Wobbe Number taken in conjunction with its other gas quality specifications is consistent with Commission precedent. 11 b. Maximum GHV Currently, Southern LNG s Tariff provides for a minimum GHV of 1,000 and a maximum GHV of 1,075. Southern LNG proposes a heating value range of 1,000 Btu/scf to 1,100 Btu/scf. Southern LNG is not proposing to change the existing Btu floor. As shown in Appendix B, the small increase of 25 Btu in maximum heating value is consistent with Southern LNG's historical data 12 and should adequately accommodate concerns regarding interchangeability and combustion issues when combined with the proposed Wobbe Number as previously explained above. 13 c. Inerts Nitrogen and Carbon Dioxide Southern LNG s Tariff currently specifies a limit of 3% by volume for total carbon dioxide or nitrogen. Southern LNG proposes to revise this limit of 3% for carbon dioxide or nitrogen to 1% and 2% for carbon dioxide and nitrogen, respectively. Southern LNG is permitted to treat cargos of liquefied natural gas by injecting nitrogen using nitrogen injection equipment, but this equipment which is currently being installed as part of the Elba Island expansion project detailed in Docket No. CP06-470, is currently limited by design to inject nitrogen at a maximum level of approximately 1% with an LNG flow rate of 360,000 Mcf/d which would yield approximately 0.2% nitrogen at a maximum flow rate of Bcf/d. 14 Therefore, Southern LNG believes a 2% limit for nitrogen is an appropriate level which will accommodate the existing injection equipment, provide a reasonable opportunity for additional injection equipment in the future, 11 See, e.g., Florida Gas Transmission Company v. Federal Energy Regulatory Commission, Case No (D.C. Cir. 2010), AES Ocean Express LLC v. Fla. Gas Transmission Co., 119 FERC 61,075 (Apr. 20, 2007) (Initial Order), and AES Ocean Express LLC v. Fla. Gas Transmission Co., 121 FERC 61,267 (Dec. 20, 2007) (Order on Rehearing) which specify a maximum Wobbe Number of 1,396 for Florida Gas Transmission Company. 12 The maximum heating value for Southern LNG has reached 1,069. See Appendix B Southern LNG Historical Daily GHV. 13 NGC+ Interchangeability Whitepaper at p Elba Island Terminal Capacity.

5 Ms. Kimberly Bose, Secretary June 7, 2010 Page 5 and provide sufficient blending capability to allow a wider range of LNG into the terminal. Southern LNG proposes to reduce its carbon dioxide limit. Southern LNG understands that carbon dioxide may interfere with LDC processes such as liquefaction of gas at peak shaving facilities. Because Southern LNG s source of natural gas is LNG which contains virtually no carbon dioxide, this restriction will not impact domestic natural gas producers whose gas may contain larger amounts of carbon dioxide. The proposed carbon dioxide specification is consistent with Southern LNG's historical data and is designed to maximize supply while ensuring that end use markets are protected. The proposed carbon dioxide specification is also consistent with limitations in effect with certain downstream pipelines and will allow Southern LNG s shippers the maximum opportunity to deliver into downstream markets. These proposed values are more conservative than the 4% limit by volume on total nonhydrocarbon gas as suggested by the Interim Guidelines; however, they are consistent with historical data and are an accommodation to LDCs (particularly LDCs with LNG peak shaving storage facilities), electric generators, and the downstream pipelines and their markets which could be adversely affected by a combined 4% limit of nonhydrocarbon gases. Additionally, Southern LNG's proposed limits for carbon dioxide and nitrogen, individually, are more specific than the Interim Guidelines. Oxygen Southern LNG is proposing to lower its limit on oxygen from 1% in its current tariff to 0.2%. The Interim Guidelines did not provide a specification for oxygen; however the American Gas Association ( AGA ) recommends a 0.2% maximum in its Report No. 4A. 15 This report sets forth both the contractual limits that are typically required for corrosion constituents, including oxygen, as well as the typical values of these constituents occurring in natural gas. The oxygen limit is not an interchangeability issue, but customers have raised the oxygen limit in discussions as an issue for gas quality because oxygen promotes corrosion. In addition, LNG peak shaving storage facilities may be sensitive to quantities of nitrogen and oxygen that, when combined, exceed 2.75%. Such levels of nitrogen and oxygen inhibit the ability of LNG peak shavers to liquefy natural gas during the injection season, as stated in the NGC+ Interchangeability Whitepaper. Southern LNG s proposed oxygen 15 American Gas Association. Transmission Measurement Committee. AGA Report No. 4A, Natural Gas Contract Measurement and Quality Clauses. Washington, DC: American Gas Association, 2001

6 Ms. Kimberly Bose, Secretary June 7, 2010 Page 6 limit of 0.2% is conservative when compared with the requirements of downstream pipelines. 16 Furthermore, the historical data supports the 0.2% limit for oxygen, and Southern LNG believes it can continue to operate its facilities reliably under the proposed level of oxygen. In Appendix C, Southern LNG demonstrates that it has considered the requirements of interconnecting pipelines in establishing the proposed specifications contained in this Tariff Filing. 17 The table in Appendix C shows that Southern LNG s proposed specifications are conservative when compared to the applicable specifications of the downstream interconnecting pipelines with one exception for the GHV maximum specification. Southern LNG submits, however, that the additional proposed Wobbe limitation provides for sufficient safeguards to protect the downstream customers of the one interconnecting pipeline with a lower GHV maximum. Because every pipeline is different, pipelines have not historically matched up their gas quality specifications precisely with all of their interconnecting pipelines, nor should they be expected to do so in tariff filings to update their gas quality and interchangeability specifications. In Commission orders addressing this issue, the Commission has held that, although the pipelines should consider the specifications of interconnecting pipelines, the pipelines do not have to match up with the specifications of each other interconnecting pipeline. 18 As explained herein, Southern LNG is proposing a Btu limit paired with a Wobbe Number limit along with more conservative limits on inert gases to promote the development of and maximize the receipt of available supplies to Elba Island while adequately providing sufficient safeguards for end-users. 19 Appendix D shows how the limited changes in BTU when combined with the addition of the Wobbe Number will increase the opportunity for available LNG supply to be delivered to Elba Island significantly. Accordingly, the incremental modifications, which are consistent with the Interim Guidelines, will have a large impact on the availability of supply while having minimal impact on the parties that receive gas from Southern LNG. Commission Policy The Policy Statement sets forth five general principles for pipelines to observe in revising their gas quality and interchangeability provisions, and Southern LNG's Tariff Filing is consistent with each of those principles. First, the Tariff Filing sets forth the gas quality and 16 See Appendix C Southern LNG FERC Regulated Pipeline Interconnects. 17 Id. 18 See, e.g., Gulf South Pipeline Co., 120 FERC 61,076 (2007) at P 39 (rejecting a filing that was based solely on matching up with the specifications of interconnecting pipelines and stating that "[t]o the extent the Commission approved gas quality standards for downstream pipelines, those determinations were based on findings that the relevant standards were just and reasonable for those specific pipelines, and have no applicability to Gulf South's system"); Natural Gas Pipeline Company of America, 124 FERC 61,034, at P 85 (2008) (citing GulfSouth to support gas quality specifications different from interconnecting downstream pipelines). 19 See Appendix D Potential Supply Expansion.

7 Ms. Kimberly Bose, Secretary June 7, 2010 Page 7 interchangeability requirements in Southern LNG's Tariff. Second, the proposed requirements are flexible and maximize potential supply while minimizing the economic effects to downstream end-users. Third, the proposed requirements represent input from a collaborative process. Fourth, the proposed requirements are consistent with the Interim Guidelines from the NGC+ Interchangeability Whitepaper and the NGC+ Hydrocarbon Dropout Whitepaper. 20 Fifth, Southern LNG's Tariff Filing is supported by each of its firm customers. As described herein, Southern LNG believes that the Commission should be able to resolve any issues that ultimately are contested. Procedural Matters Pursuant to the applicable provisions of Section 154 of the Commission s Regulations, Southern submits the following materials in connection with the compliance filing: 1. An electronic copy of the revised tariff sheets. The undersigned states that the paper copy contains the same information as contained on the electronic copy, that the signer knows the contents of the paper copy and electronic copy, and that the contents as stated on the paper copy and on the electronic copy are true to the best knowledge and belief of the signer. 2. Both clean and marked paper copies of the tariff sheets with additions shown by underlining and deletions shown by strikethroughs pursuant to Section (a) of the Commission s Regulations. 3. As required by Section of the Commission s Regulations, copies of this filing are being made available at Southern s offices in Birmingham, Alabama, and electronically mailed or mailed to Southern LNG's customers and to interested state commissions. The names, titles, and mailing addresses of the persons to whom communications concerning this filing are to be addressed and to whom service is to be made are: 20 NGC+ Liquid Hydrocarbon Drop Out Task Group's February 28, 2005 White Paper on Liquid Hydrocarbon Drop Out in Natural Gas Infrastructure

8 Ms. Kimberly Bose, Secretary June 7, 2010 Page 8 Glenn A. Sheffield Director - Rates Southern LNG Company, L.L.C. P. O. Box 2563 Birmingham, Alabama Patricia S. Francis Associate General Counsel Southern LNG Company, L.L.C. P. O. Box 2563 Birmingham, Alabama Please acknowledge receipt of this letter and enclosures by stamping and returning the enclosed copy of this letter. Respectfully submitted, SOUTHERN LNG COMPANY, L.L.C. Enclosures /s/ Patricia S. Francis Patricia S. Francis Associate General Counsel Southern Natural Gas 569 Brookwood Village, Suite 501 Birmingham, Alabama PO Box 2563 Birmingham, Alabama tel fax

9 APPENDIX A Southern LNG Historical Daily Wobbe

10 Appendix A Southern LNG Historical Daily Wobbe 1400 Proposed Wobbe Max. = Wobbe Max. = Wobbe Avg. = 1380 Wobb be Wobbe Min. = /1/ /1/ /1/ /1/ /1/ /1/ /1/ /1/ /1/2009 Wobbe

11 APPENDIX B Southern LNG Historical Daily GHV

12 Appendix B Southern LNG Historical Daily GHV 1,110 Proposed GHV Max. = 1,100 1,100 1,090 Btu/cu. ft. 1,080 1,070 1,060 1,050 Current GHV Max. = 1,075 1,040 1,030 1,020 1,010 1,000 GHV Min. = 1, /1/ /1/ /1/ /1/ /1/ /1/ /1/ /1/ /1/2009 GHV

13 APPENDIX C Southern LNG FERC Regulated Pipeline Interconnects

14 Appendix C Southern LNG FERC Regulated Pipeline Interconnects Currently Effective Tariff Provisions Heating Value Inerts WOBBE (Btu/cu. ft.) Pipeline Name Maximum Carbon Nitrogen Combined Oxygen Maximum Dioxide CO2 + N2 Southern LNG proposal % 2% 3% 0.20% 1396 Southern Natural Gas Co. No info 3% 3% No info 1.00% No info Elba Express Company No info 2% 3% 4% 0.25% 1400 Carolina Gas Transmission Company 1075* No info No info No info No info No info * For all receipts except receipts from Transcontinental Gas Pipe Line Corp. which are subject to a maximum heating value of 1100 Btu/cu. ft. Downstream FERC Regulated Pipelines** Currently Effective Tariff Provisions Heating Value Inerts WOBBE (Btu/cu. ft.) Pipeline Name Maximum Carbon Nitrogen Combined Oxygen Maximum Dioxide CO2 + N2 Florida Gas Transmission Co. Market Area % No info 3% 0.25% 1396 Transcontinental Gas Pipe Line Corp % No info No info No info No info **Pipelines that can receive unblended LNG indirectly from Southern LNG into their systems.

15 APPENDIX D Potential Supply Expansion

16 Appendix D Potential Supply Expansion WI 1396 With 2% N 2 Allowable Atlantic Basin Supplies 1120 HHV Current Elba Limit HHV million tons per year Current Limited Supply Potential Supply Expansion Note: GHV values are approximated values based on historic LNG supplies. Small GHV variations are common on a cargo by cargo basis. Over time, large variations can appear due to changes in upstream supplies, liquefaction, and processing. Source: Shell North America LNG

17 PROPOSED TARIFF SHEETS

18 Southern LNG Inc. FERC Gas Tariff First Revised Sheet No. 42 Original Volume No. 1 Superseding Original Sheet No. 42 GENERAL TERMS AND CONDITIONS (Continued) 3. QUALITY 3.1 In order to permit delivery into downstream facilities, the LNG received by Southern LNG under any Service Agreement shall be merchantable and shall have in its gaseous state: (a) A Wobbe Index with an upper limit of 1,396 and/or a gross heating value (GHV) of not less than 1,000 Btu and not more than 1,100 Btu after considering the effects of any nitrogen that is able to be injected from the nitrogen injection facilities located at the Elba Island Terminal up to the nitrogen specification provided in (b)(iii) below; and (b) Constituent elements conforming to the following: (i) free of objectionable liquids and solids and be commercially free from dust, gums, gum-forming constituents, or other liquid or solid matter which might become separated from the gas in the course of vaporization or transportation through any downstream pipeline; (ii) not contain more than 200 grains of total sulphur or 10 grains of hydrogen sulphide, or 0.30 gallons of isopentane and heavier hydrocarbons, per Mcf; (iii) not contain by volume more than 1% of carbon dioxide, 2% nitrogen, or 0.2% oxygen; (iv) not contain any water; and (v) free of liquids at 800 psig and 50 F. 3.2 The gas delivered by Southern LNG will be merchantable gas. Issued by: Glenn A. Sheffield Issued on: June 7, 2010 Effective on: August 1, 2010

19 MARKED VERSION OF PROPOSED TARIFF SHEETS

20 Southern LNG Inc. First Revised Sheet No. 42 Original Volume No. 1 Original Sheet No. 42 Effective: December 1, 2001 Issued: October 24, 2001 Page 1 GENERAL TERMS AND CONDITIONS (Continued) 3. QUALITY 3.1 In order to permit delivery into downstream facilities, the LNG received by Southern LNG under any Service Agreement shall be merchantable and shall have in its gaseous state: (a) A Wobbe Index with an upper limit of 1,396 and/or a gross heating value (GHV) of not less than 1,000 Btu and not more than 1, Btu after considering the effects of any nitrogen that is able to be injected from the nitrogen injection facilities located at the Elba Island Terminal up to the nitrogen specification provided in (b)(iii) below; and (b) Constituent elements conforming to the following: (i) free of objectionable liquids and solids and be commercially free from dust, gums, gum-forming constituents, or other liquid or solid matter which might become separated from the gas in the course of vaporization or transportation through any downstream pipeline; (ii) not contain more than 200 grains of total sulphur or 10 grains of hydrogen sulphide, or 0.30 gallons of isopentane and heavier hydrocarbons, per Mcf; (iii) not contain by volume more than 3% by volume1% of carbon dioxide or, 2% nitrogen, or 1% of 0.2% oxygen; (iv) not contain any water; and (v) free of liquids at 800 psig and 50 F. 3.2 The gas delivered by Southern LNG will be merchantable gas.

21 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Southern LNG Company, L.L.C. ) Docket No. RP10- ) ) CERTIFICATE OF SERVICE I hereby certify that I have served the foregoing document upon all Southern LNG's customers and interested state commissions. Dated at Birmingham, Alabama this 7 th day of June, /s/ Patricia S. Francis Patricia S. Francis Associate General Counsel Southern LNG Company, L.L.C. P. O. Box 2563 Birmingham, Alabama patricia.francis@elpaso.com