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Regulation and Investment in the U.S. Robert J. Cupina, Deputy Director Office of Energy Projects Federal Energy Regulatory Commission. GIE Annual Conference Bratislava, Slovakia September 28, 2006. Basis of U.S. Regulation: Natural Gas Act. NATURAL GAS ACT. Section 3 Import/Export.

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regulation and investment in the u s

Regulation and Investment in the U.S.

Robert J. Cupina, Deputy Director

Office of Energy Projects

Federal Energy Regulatory Commission

GIE Annual Conference

Bratislava, Slovakia

September 28, 2006

basis of u s regulation natural gas act
Basis of U.S. Regulation:Natural Gas Act

NATURAL GAS ACT

Section 3 Import/Export

Section 7(c)

Interstate

• Pipelines

• Storage

• LNG Terminals

pipeline regulation

Source: Based on Platts PowerMap

Pipeline Regulation
  • Construction and Operation
  • Tariffs
    • Rates
    • Rate Schedules
    • Terms and Conditions of Service
storage regulation
Storage Regulation
  • Construction and Operation
  • Tariffs
    • Rates
    • Rate Schedules
    • Terms and Conditions of Service

Source: Based on Platts PowerMap.

lng regulation

EVERETT

COVE POINT

ELBA ISLAND

LAKE CHARLES

ENERGY BRIDGE

(Coast Guard Jurisdiction)

LNG Regulation
  • Construction and Operation
  • Ongoing Safety
  • No Tariff
  • Any Business Model Acceptable
evaluation of pipeline proposals
Evaluation of PipelineProposals
  • Certificate Policy Statement
    • Existing Shippers Do Not Subsidize New Facilities
    • Develop Record on Impacts (positive and negative) and Allow Commission to Make Decision
  • Environmental/Engineering Review
evaluation of storage proposals
Evaluation of StorageProposals
  • Storage Policy for Market-based Rates
    • Relevant product market for market power analysis includes many substitutes, or
    • MBRs allowed even if lack of market power has not been demonstrated in situations to encourage infrastructure
  • Environmental/Engineering Review
evaluation of lng terminals
Evaluation of LNG Terminals
  • Environmental/Engineering Review
  • Safety Review
  • No Tariff
    • Hackberry Decision (December 2002) no need for tariffs or third party access . Treats re-gas as production.
hackberry decision
Hackberry Decision

Liquid to Vapor Flow

B

LNG

Buyers

A

LNG

Suppliers

B

Open Access At Delivery of Vapor into Interstate Pipeline System

A

Open Access At Delivery of Liquid to Terminal

9

major pipeline projects certificated mmcf d january 2005 to september 2006
Major Pipeline Projects Certificated (MMcf/d)January 2005 to September 2006

Essex-Middlesex

(Tennessee)

(82)

1. TransColorado (300)

2. Rendezvous (300)

3. WIC (350)

4. Entrega (EnCana) (1,500)

5. Questar (102)

6. Northwest (450)

7. Questar Overthrust (550)

NE ConneXion

(Tennessee)

(136)

Transcontinental

(105)

ANR

(168)

Mill River

(800)

4

Transcontinental

(100)

7

Dominion

(700)

2

5

3

Northern Border

(Chicago III)

(130)

Logan Lateral

(Texas Eastern)

(900)

1

Columbia (172)

6

Cove Point Pipeline

(800)

Midwestern

(120)

Jewell Ridge Pipeline

(East Tennessee) (235)

CIG (105)

CenterPoint(113)

El Paso

(502)

Cypress Pipeline

(Southern Natural) (500)

Florida Gas

(160)

Petal (600)

Port Arthur (3,000)

Golden Pass (2,500)

Dominion South (200)

McMoRan (1,500)

San Patricio

(1,000)

Triple-T Extension

(Tennessee) (200)

12.6 BCF/D Total

903 Miles

Cheniere Creole Trail (3,300)

26.88 BCF/D Total

1,511 Miles

Cameron (1,500)

Vista Del Sol

(1,100)

Cheniere Corpus Christi

(2,600)

major pipeline projects pending mmcf d september 2006
Major Pipeline ProjectsPending (MMcf/d)September 2006

Maritimes Phase IV

(Maritimes)

(418)

Market Access

(Iroquois)

(100)

Millennium

(525)

Northern Lights

(Northern Natural)

(374)

Bradwood Landing

(NorthernStar)

(1,300)

Algonquin

(325)

Wamsutter Expansion

(Questar Overthrust) (750)

Empire Connector

(Empire Pipeline) (250)

Algonquin

(800)

Broadwater

Pipeline

(Broadwater)

(1,000)

2007 Expansion

(Vector Pipeline) (245)

TIME II

(Texas Eastern) (150)

Rockies Express REX West

(Rockies Express Pipeline)

(1,800)

Potomac Expansion

(Transcontinental)

(167)

Big Sandy Pipeline

(Equitrans)

(130)

Blanco to Meeker

(TransColorado) (250)

Gulf LNG Pipeline

(1,500)

Carthage to Perryville

(CenterPoint)

(1,237)

North Baja Expansion

(North Baja Pipeline) (2,700)

Compass Pass

(1,000)

East TX

Mississippi Expansion

(Gulf South)

(1,700)

Seafarer Pipeline

(El Paso) (800)

Point Comfort

(1,000)

18.72 BCF/D Total

1,976 Miles

Phase III Project

(Gulfstream)

(200)

major pipeline projects pre filing mmcf d september 2006
Major Pipeline ProjectsPre-Filing (MMcf/d)September 2006

Pacific Connector

(Williams Pacific)

(1,000)

GII Project

(Guardian Pipeline)

(537)

Brookhaven Lateral

(Iroquois)

(80)

Kanda & Mainline

(WIC) (225)

Sentinel Expansion

(Transcontinental)

(151)

Southern Expansion

(Questar Pipeline)

(170)

Rockies Express REX East

(Rockies Express Pipeline)

(1,800)

Continental Connector

(El Paso)

(1,000)

Southeast Expansion

(Gulf South)

(700)

Phoenix Lateral

(Transwestern) (500)

Southeast Supply Header

(CenterPoint)

(1,000)

Louisiana Pipeline

(Kinder Morgan)

(3,395)

Phase IV Project

(Gulfstream)

(155)

Sonora Pipeline

(1,000)

11.71 BCF/D Total

2,386 Miles

major pipeline projects on the horizon mmcf d august 2006

Alaska (4,000)

Panhandle Eastern (750)

KM Illinois Pipeline

(Kinder Morgan) (360)

Kinder Morgan (170)

Northwinds Pipeline

(NFG) (500)

Dracut Interconnect (Tennessee) (250)

Coronado (500)

Painter Lateral (Overthrust) (200)

EnCana Extension (Entrega) (1,000)

Questar Expansion (160)

Uinta Basin (WIC) (300)

Greasewood Lateral (Northwest)

(200)

Natural (232)

Henry Hub Expansion (Natural) (200)

North Texas Expansion (Trunkline) (510)

Carthage Pipeline(KM Interstate)(700)

A/G Line Expansion (Natural)(139)

Mid-Continent Express (Kinder Morgan) (1,500)

Mid-Continent Crossing (CenterPoint) (1,750)

Transcontinental (Mobile Bay) (700)

Boardwalk PL (1,000)

Shenzi Lateral (Enbridge) (100)

Major Pipeline Projects On The Horizon (MMcf/d)August 2006

15.22 BCF/D Total

6,976 Miles

pipeline infrastructure
PipelineInfrastructure
  • Least speculative gas infrastructure project
    • If approved, usually gets built
    • Cost-based rates required as an option, but usually rates are negotiated
  • Contracts or binding precedent agreements with shippers usually required by sponsor, not the Commission, prior to filing application.
  • Since 2000, the Commission has approved 57.1 Bcf per day of capacity; over 9,000 miles of pipeline; and 2.2 million horsepower of compression
    • Estimated cost of $16.9 billion.
pipeline infrastructure approvals 2000 2006
Pipeline InfrastructureApprovals 2000-2006

Short, high capacity pipelines to

deliver regasified LNG to grid

Typical long-line and replacement

pipeline projects

pipeline infrastructure future additions
Pipeline InfrastructureFuture Additions
  • The INGAA Foundation estimates that between 2006 and 2020, $50.9 billion will need to be invested in 26,000 miles of pipelines and 5.2 milllion HP in the U.S. and Canada
    • Replacement of facilities: $16.4 billion
      • 9,300 miles, 1.2 million HP
    • New facilities (16,900 miles): $34.5 billion
      • 16,900 miles, 4.0 million HP
        • Alaska and MacKenzie Delta
        • Other facilities
slide17

Storage Projects(Capacity in Bcf)

SemGas (5.5)

Bluewater

(29.2)

Dominion (18.0)

Dominion (9.4)

Columbia (16.4)

Unocal Windy Hill

(6.0)

Texas Gas (8.2)

Columbia (12.4)

Texas Gas (6.8)

Arizona Natural Gas

(3.5)

Natural (10.0)

County Line (6.0)

CenterPoint (15.0)

Freebird (6.1)

Bobcat (12.0)

Caledonia (11.7) Caledonia(1.7)

Natural (10.0)

EnCana (8.0)

Falcon MoBay (50.0)

Falcon Worsham-Steed (12.0)

Falcon Hill-Lake (10.4)

Certificated Since 1/1/05

Starks (19.2)

Currently Pending

Liberty (17.6)

Petal (5.0)

On The Horizon

storage infrastructure additions
StorageInfrastructure Additions
  • More speculative gas infrastructure project than pipelines
    • Not all gas users need storage service
  • New storage pricing policy to promote storage development
  • Since 2000, the Commission has approved 275 Bcf of storage capacity and daily deliverability from storage of 14.6 Bcf.
storage infrastructure future additions
Storage InfrastructureFuture Additions
  • The INGAA Foundation estimates that between 2006 and 2020, $5.5 billion will need to be invested in underground storage.
  • The NPC estimates that between 2005 and 2025, 492 Bcf of storage capacity needs to be added in the U.S. at an estimated cost of about $4.5 billion.
slide20

FERC

CONSTRUCTED

A. Everett, MA : 1.035 Bcfd (SUEZ/Tractebel - DOMAC)

B. Cove Point, MD : 1.0 Bcfd (Dominion - Cove Point LNG)

C. Elba Island, GA : 1.2 Bcfd (El Paso - Southern LNG)

D. Lake Charles, LA : 2.1 Bcfd (Southern Union - Trunkline LNG)

E. Gulf of Mexico: 0.5 Bcfd (Gulf Gateway Energy Bridge - Excelerate Energy)

APPROVED BY FERC

1. Hackberry, LA : 1.5 Bcfd (Cameron LNG - Sempra Energy)

2. Bahamas : 0.84 Bcfd (AES Ocean Express)*

3. Bahamas : 0.83 Bcfd (Calypso Tractebel)*

4. Freeport, TX : 1.5 Bcfd (Cheniere/Freeport LNG Dev.)

5. Sabine, LA : 2.6 Bcfd (Sabine Pass Cheniere LNG)

6. Corpus Christi, TX: 2.6 Bcfd (Cheniere LNG)

7. Corpus Christi, TX : 1.1 Bcfd (Vista Del Sol - ExxonMobil)

8. Fall River, MA : 0.8 Bcfd (Weaver\'s Cove Energy/Hess LNG)

9. Sabine, TX : 2.0 Bcfd (Golden Pass - ExxonMobil)

10. Corpus Christi, TX: 1.0 Bcfd (Ingleside Energy - Occidental Energy Ventures)

11. Logan Township, NJ : 1.2 Bcfd (Crown Landing LNG - BP)

12. Port Arthur, TX: 3.0 Bcfd (Sempra)

13. Cove Point, MD : 0.8 Bcfd (Dominion)

14. Cameron, LA: 3.3 Bcfd (Creole Trail LNG - Cheniere LNG)

15. Sabine, LA: 1.4 Bcfd (Sabine Pass Cheniere LNG - Expansion)

16. Freeport, TX: 2.5 Bcfd (Cheniere/Freeport LNG Dev. - Expansion)

APPROVED BY MARAD/COAST GUARD

17. Port Pelican: 1.6 Bcfd (Chevron Texaco)

18. Louisiana Offshore : 1.0 Bcfd (Gulf Landing - Shell)

CANADIAN APPROVED TERMINALS

19. St. John, NB : 1.0 Bcfd (Canaport - Irving Oil)

20. Point Tupper, NS 1.0 Bcf/d (Bear Head LNG - Anadarko)

21. Kitimat, BC: 0.61 Bcfd (Galveston LNG)

MEXICAN APPROVED TERMINALS

22. Altamira, Tamulipas : 0.7 Bcfd (Shell/Total/Mitsui)

23. Baja California, MX : 1.0 Bcfd (Energy Costa Azul - Sempra)

24. Baja California - Offshore : 1.4 Bcfd (Chevron Texaco)

PROPOSED TO FERC

25. Long Beach, CA : 0.7 Bcfd, (Mitsubishi/ConocoPhillips - Sound Energy Solutions)

26. Bahamas : 1.0 Bcfd, (Seafarer - El Paso/FPL )

27. LI Sound, NY: 1.0 Bcfd (Broadwater Energy - TransCanada/Shell)

28.Pascagoula, MS: 1.5 Bcfd (Gulf LNG Energy LLC)

29. Bradwood, OR: 1.0 Bcfd (Northern Star LNG - Northern Star Natural Gas LLC)

30.Pascagoula, MS: 1.3 Bcfd (Casotte Landing - ChevronTexaco)

31. Port Lavaca, TX: 1.0 Bcfd (Calhoun LNG - Gulf Coast LNG Partners)

32. Hackberry, LA : 1.15 Bcfd (Cameron LNG - Sempra Energy - Expansion)

33. Pleasant Point, ME : 2.0 Bcfd (Quoddy Bay, LLC)

34. Robbinston, ME: 0.5 Bcfd (Downeast LNG - Kestrel Energy)

35. Elba Island, GA: 0.9 Bcfd (El Paso - Southern LNG)

36. Baltimore, MD: 1.5 Bcfd (AES Sparrows Point – AES Corp.)

37. Coos Bay, OR: 1.0 Bcfd (Jordan Cove Energy Project)

PROPOSED TO MARAD/COAST GUARD

38. Offshore California : 1.5 Bcfd (Cabrillo Port - BHP Billiton)

39. Offshore California : 0.5 Bcfd, (Clearwater Port LLC - NorthernStar NG LLC)

40. Offshore Louisiana : 1.0 Bcfd (Main Pass McMoRan Exp.)

41. Gulf of Mexico: 1.5 Bcfd (Beacon Port Clean Energy Terminal - ConocoPhillips)

42. Offshore Boston: 0.4 Bcfd (Neptune LNG - SUEZ LNG)

43. Offshore Boston: 0.8 Bcfd (Northeast Gateway - Excelerate Energy)

44. Gulf of Mexico: 1.4 Bcfd (Bienville Offshore Energy Terminal - TORP)

45. Offshore Florida: ? Bcfd (SUEZ Calypso - SUEZ LNG)

46. Offshore California: 1.2 Bcfd (OceanWay - Woodside Natural Gas)

Existing and Proposed

North American LNG Terminals

21

20

19

33

34

42

29

A

43

37

8

27

11

36

B,13

38

46

39

25

C,35

24

23

26

1,32

28

5

15

14

D

4,16

30

45

2

3

44

12

9

6

40

7

10

E

41

31

18

17

US Jurisdiction

FERC

MARAD/USCG

22

As of September 22, 2006

* US pipeline approved; LNG terminal pending in Bahamas

** Construction suspended

Office of Energy Projects

slide21

FERC

Potential North American

LNG Terminals

58

POTENTIAL U.S. SITES IDENTIFIED BY PROJECT SPONSORS

47. OffshoreCalifornia: 0.75 Bcfd, (Chevron Texaco)

48. St. Helens, OR: 0.7 Bcfd (Port Westward LNG LLC)

49. Philadelphia, PA: 0.6 Bcfd (Freedom Energy Center - PGW)

50. Astoria, OR: 1.0 Bcfd (Skipanon LNG - Calpine)

51. Boston, MA: 0.8 Bcfd (AES Battery Rock LLC - AES Corp.)

52. Calais, ME: ? Bcfd (BP Consulting LLC)

53. Offshore New York: 2.0 Bcfd (Safe Harbor Energy - ASIC, LLC)

54. Offshore California: 0.6 Bcfd (Pacific Gateway - Excelerate Energy)

55. Offshore California: ? Bcfd (Esperanza Energy - Tidelands)

POTENTIAL CANADIAN SITES IDENTIFIED BY PROJECT SPONSORS

56. Quebec City, QC : 0.5 Bcfd (Project Rabaska - Enbridge/Gaz Met/Gaz de France)

57. Rivière-du- Loup, QC: 0.5 Bcfd (Cacouna Energy - TransCanada/PetroCanada)

58. Prince Rupert, BC: 0.30 Bcfd (WestPac Terminals)

59. Goldboro, NS 1.0 Bcfd (Keltic Petrochemicals)

60.Énergie Grande-Anse QC: 1.0 Bcfd

POTENTIAL MEXICAN SITES IDENTIFIED BY PROJECT SPONSORS

61. Lázaro Cárdenas, MX : 0.5 Bcfd(Tractebel/Repsol)

62. Puerto Libertad, MX: 1.3 Bcfd(Sonora Pacific LNG)

63. Offshore Gulf, MX: 1.0 Bcfd(Dorado - Tidelands)

64. Manzanillo, MX: 0.5 Bcfd

65. Topolobampo, MX: 0.5 Bcfd

66. Baja California, MX : 1.5 Bcfd (Energy Costa Azul - Sempra - Expansion)

57

60

56

59

52

50

51

48

53

49

54

47

55

47

66

62

65

63

US Jurisdiction

FERC

MARAD/USCG

64

61

As of September 22, 2006

Office of Energy Projects

lng infrastructure additions
LNGInfrastructure Additions
  • Most speculative gas infrastructure project
    • Capacity usually reserved by marketers
  • Hackberry Decision encourages new LNG facilities by removing some of the economic and regulatory barriers to investment.
lng infrastructure additions cont
LNGInfrastructure Additions(Cont.)
  • Existing Deliverability = 5.8 Bcf per day
  • Since Hackberry Decision:
    • Approved by FERC = 25.3 Bcf per day
    • Pending before FERC = 13.6 Bcf per day
  • Potential Deliverability = 48.9 Bcf per day
lng infrastructure future additions
LNG InfrastructureFuture Additions
  • The NPC projects up to 9 new terminals and 9 expansions in North America are necessary by 2025 to provide a total of 15 Bcf per day of LNG imports.
  • The INGAA Foundation estimates that $9.4 billion in investment will be needed to develop LNG terminals in the U.S. and Canada between 2006 and 2020 to support LNG imports of about 19 Bcf per day.
conclusions
Conclusions
  • Infrastructure construction necessitates firm contracts for capacity.
  • The Commission is a responsible and responsive regulator - to both the public and the industry-the public interest.
  • We approve the siting of infrastructure, but the market ultimately decides what is built.
  • Contact [email protected]
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