FERC will tackle new issues in the natural gas space this year as surging natural gas production rearranges the pipeline network and pushes forth a field of LNG export proposals, Commissioner Cheryl LaFleur said April 23.
"The issue we considered in the [Cheniere Energy Inc.] case of how the DOE approval and the FERC approval fit together was the first time we looked at that," LaFleur said at the Natural Gas Roundtable in Washington, D.C. "So whether it's precedential or not ... it won't be the last time. But the facts of other cases may be different, and we'll try to keep an open mind and look at each case on its own merits."
In the Cheniere order, which approved an application to build liquefaction facilities at the Sabine Pass LNG Terminal in Louisiana, FERC reinforced the position that it will keep its review focused on the facilities themselves, and it will rely on the U.S. Department of Energy's determinations on broad market issues involving the export of the commodity.
During her presentation, LaFleur observed that there are four similar applications in the prefiling process before the commission, and FERC is aware of three others that are before the DOE and headed to the commission.
"One issue that I've been thinking a lot about, as all the people rush to put their money into export facilities, is how long the technological advantage that the U.S. appears to hold in unconventional gas extraction will last," LaFleur said. "There are shale plays in other parts of the world, but the supporting infrastructure is not there yet to take advantage of them. Estimates vary as to how long our advantage of being the only one doing this will last. It's certainly not indefinite, and my experience is that these technological cycles seem to be shorter and shorter as we move forward all the time."
LaFleur also touched on FERC's April 16 decision to vacate the authorization for Jordan Cove Energy Project LP to build an LNG import terminal in Coos Bay, Ore., even as the developer proceeds with its plans to build liquefaction facilities. "That decision really prevented what would have been a unique circumstance of a company pre-building an export facility without an export certificate," the commissioner said.
In addition to reviewing LNG export facilities in the coming year, the FERC docket will be full of other project applications and rules influenced by the rising supply of shale gas. FERC will see applications for shorter laterals connecting shale gas reserves to markets, LaFleur said, mostly in the Northeast but also in the Southeast. Capacity values have dropped on long-haul pipelines, she said, and FERC has seen proposals to restructure pipeline rates closer to the market area. Downstream customers have objected to paying rates for transportation along the whole length of a pipeline, and pipeline operators are concerned they might not collect enough revenue to cover their operation and maintenance costs.
"So far we are addressing these on a case-by-case basis, but we're looking at the trend and looking, as we always try to do, [to see] if there is something we need to do more generically," LaFleur said.
(Originally published April 25, 2012, in SNL Daily Gas Report.)
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