The full version of these articles will appear in The Foster Report No. 3168, published on October 6, 2017
FERC Clears Delfin LNG to Proceed with Repurposing Facilities
October 3, 2017
On September 28, FERC issued a certificate and conditional authorizations that will enable Delfin LNG LLC (CP15-490) to construct, operate, and maintain onshore metering, compression, and piping facilities located in Cameron Parish, Louisiana, in order to exclusively transport domestic natural gas to its planned liquefied natural gas (LNG) deepwater port export facility.
Delfin’s project is to be located in federal waters within the Outer Continental Shelf (OCS) approximately 40 miles offshore Louisiana. Delfin LNG also requested and was granted a blanket certificate to construct routine onshore facilities under Part 157, Subpart F, of the regulations. Delfin filed the section 7(c) certificate application on 5/8/15, as amended on 11/19/15, pursuant to the Natural Gas Act (NGA).
In the September 28 authorization order, the Commission also addressed protests lodged by one firm shipper and several interruptible customers regarding the implications of a corresponding application of High Island Offshore System, LLC (HIOS) (CP16-20) seeking authority to abandon from NGA jurisdictional interstate pipeline service certain offshore facilities in the Gulf of Mexico — including HIOS’s 66-mile, 42-inch diameter mainline, an offshore platform, and pig launcher.
FERC Grants Medallion Pipeline’s Petition for Declaratory Order
October 3, 2017
The Commission approved Medallion Pipeline Co., LLC’s petition for a declaratory order (OR17-18) on September 29, which will allow Medallion to nearly double the current capacity of its Wolfcamp connector system and boost capacity on its Howard lateral.
In the order, FERC approved Medallion’s open season procedure, capacity allocation, tariff rate structure, and certain provisions of the open season transportation service agreements (TSA) and tariffs regarding annual rate adjustments. In addition, contract extension rights, a “ramp up” election and destination points, and reduced rate offers for shippers extending contracts were also approved by the Commission.
Medallion filed its petition on July 21 and asked FERC to act on it by October 1, in order to provide its committed shippers assurances that its expansion projects will proceed on the basis of the terms and conditions set forth in the TSAs and begin commercial operations in the third quarter of 2017.
The Medallion pipeline system was constructed to support increased crude oil exploration, development, and production activities in the Midland Basin in West Texas. Initially the pipeline consisted of the Wolfcamp connector pipeline system which spanned 112 miles and had a capacity of 65,000 bpd.
Since it commenced initial operations of the Wolfcamp Connector, Medallion explained that it has entered into a series of expansion projects which followed open season procedures that FERC had approved in an earlier declaratory order which solicited long-term transportation commitments to support the commercial development of its expansion projects.
Following discussions with shippers, producers, and marketers, the pipeline determined that the expansions were necessary based on the belief that the Midland basin will continue to produce increasing volumes of crude oil.
The Wolfcamp expansion would consist of a 47-mile partial loop of the existing Wolfcamp mainline, which is a 12-inch diameter line. The Wolfcamp expansion will increase the capacity of the mainline by 95,000 bpd to 200,000 bpd to the Colorado City Hub.
FERC Approves Tennessee Gas Pipeline’s ACR Project
October 2, 2017
The Commission issued a certificate order on September 29, to Tennessee Gas Pipeline Co., LLC (CP15-88) for a capacity restoration project and approved the abandonment by sale to Tennessee’s affiliate Utica Marcellus Texas Pipeline LLC (UMTP) of certain pipeline facilities.
The Commission imposed certain environmental conditions on the project, noting that FERC staff only needed to prepare an environmental assessment (EA) of the project and not an environmental impact statement (EIS) as argued by protestors.
Project. On 2/13/15, Tennessee filed a certificate application for the Abandonment and Capacity Restoration (ACR) Project, which is a plan for Tennessee to relinquish its multiple looped parallel pipelines that comprise approximately 964 miles of mainline pipeline facilities between Natchitoches Parish, Louisiana, and Columbiana County, Ohio by sale to its affiliate UMTP. UMTP intends to use this pipeline, in part, for conversion to natural gas liquids service. Currently, four pipes deliver natural gas along the route, but under Tennessee’s proposal one pipe would be converted, resulting in three gas pipes and one liquids pipe.
In order to replace the capacity that would otherwise be lost by the sale, Tennessee proposed to construct and operate approximately 7.6 miles of new pipeline looping in Kentucky and a total of 124,771 hp of compression at four compressor stations in Ohio and two stations in Kentucky. The estimated cost for the abandonment and replacement is $412 million.
 160 FERC ¶ 61,144.
 For more information about the project, see, Tennessee’s Abandonment and Capacity Replacement Project, Proposed to FERC, Triggers Significant Interest Including Protests and Requests for More Details/Scrutiny, FR No. 3044, pp. 17-24.
Industry Reacting to DOE NOPR on Generation Compensation Sent to FERC
October 2, 2017
The energy sector is reacting to the notice of proposed rulemaking (NOPR) submitted to FERC by the Department of Energy (DOE) with the goal of providing adequate compensation for generation facilities in organized markets that have on-site fuel supplies. The reactions are what might be expected based on fuel preferences, with coal and nuclear power groups praising the DOE proposal, with many other groups blasting the notion of FERC supporting specific generation resources.
The oil and natural gas sector, competitive generators, environmental groups, and others are taking issue with the market intervention sought by DOE and the Trump administration. The debate is likely to be extensive given the rare nature of DOE’s proposal (RM17-3, RM18-1), the fast action sought by DOE and questions about whether FERC will tackle a NOPR with three commissioners.
The directive from DOE comes under Section 403 of the DOE Organization Act, proposing a rule for FERC to use under its authority in Sections 205 and 206 of the Federal Power Act.
A spokeswoman for FERC said the Commission has received the NOPR and is reviewing it, without further comment.
As an independent agency, FERC has some latitude in how it handles the NOPR, sources said, indicating that it could publish the document and take a lot longer than DOE requested to consider the issues. If the Commission can decline to issue a final rule is among the questions being considered since FERC has rarely used its authority under the DOE Organization Act.
LaFleur, Lawmakers Address Gas Export Potential, DOE Plans
October 3, 2017
A panel of lawmakers from the U.S. House of Representatives, FERC Commissioner Cheryl LaFleur, and others commented on the natural gas production gains the gas industry has made and resulting LNG export potential of the U.S. at the North American Gas Forum in Washington D.C.
LNG project developers and Robert Smith of the Department of Energy also addressed LNG market developments and the DOE approval process for liquefaction facilities and export projects.
Smith, assistant secretary for oil and natural gas at DOE, declined to address DOE’s notice of proposed rulemaking (NOPR) submitted to FERC designed to improve power grid resiliency by improving compensation for coal and nuclear generation units in organized wholesale power markets.
LaFleur sought to assure the conference attendees that FERC staff can work through the backlog of cases stemming from the period when FERC lacked a quorum, including pipeline certificate applications, while also addressing the DOE NOPR.
In an October 2 notice (RM18-1), FERC set an aggressive schedule for parties to submit comments on the NOPR, with initial comments due October 23, and reply comments due November 7. In the NOPR that DOE sent to FERC under Section 403 of the DOE Organization Act, DOE directed the Commission to consider and complete final action within 60 days from the date of publication of the document in the Federal Register.
These articles will appear as published in The Foster Report No. 3168, being issued on October 6, 2017
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