Energy Legal Blog

A FERC judge has approved the gas quality and interchangeability standards that Florida Gas Transmission (FGT) proposed for the liquefied natural gas (LNG) introduced into its pipeline system.  The judge's decision could usher in standards for not only FGT but all pipeline systems throughout the U.S.   

The case began with a proposed interconnection agreement between AES Ocean Express LLC (AES) and FGT, under which AES – through its proposed Ocean Express LNG terminal in the Bahamas – would deliver re-gasified LNG into FGT's interstate pipeline system.  AES complained to FERC that FGT's proposed gas quality and interchangeability standards for these deliveries were too restrictive.   

The FGT standards fell between the lenient standards that LNG suppliers favor and strict standards advocated by Florida's gas-fired power generators.  The judge ruled that FGT had struck the appropriate balance between encouraging increased imports of LNG and protecting domestic pipeline systems from damage.  He deferred the issue of cost allocation for testing regasified LNG, however, claiming that a separate hearing should be established to address that issue.  Also raised but not addressed was whether the standards for imported LNG should also apply to domestic gas supplies. 

Although AES has yet to obtain approval from Bahamas regulators to construct the terminal, a FERC approval of the ALJ's decision could still have far reaching implications, as the standards proposed by FGT would apply to all LNG terminals planning to inject re-gasified natural gas into FGT's system.  Such approval may also set a baseline for future FERC proceedings to establish gas quality standards applicable to re-gasified LNG nationwide.