01-3349. Cove Point LNG Limited Partnership; Notice of Application and Notice of Rate Settlement

February 5, 2001.

Take notice that on January 30, 2001, Cove Point LNG Limited Partnership (Cove Point), P.O. Box 1396, Houston, Texas 77251, filed applications pursuant to Section 7(c) [Docket No. CP01-76-000] and Section 3(a) [Docket No. CP01-77-000] of the Natural Gas Act (NGA) seeking approval to construct certain new facilities, and to reactivate and operate certain existing facilities at Cove Point's liquefied natural gas (LNG) terminal located in Calvert County, Maryland. Cove Point proposes to provide open access LNG tanker storage services to customers with waterborne supplies of LNG. Cove Point also filed in Docket No. RP01-217-000, a Stipulation and Agreement (Rate Settlement) pursuant to Rule 602 of the Commission's Rules (18 CFR 385.602) which was reached among itself, certain existing LNG peaking and transportation customers, and the new proposed waterborne LNG customers. The Rate Settlement would set initial rates for proposed new customers pursuant to Section 7(c) of the NGA, and would change existing rates for existing customers pursuant to Section 4 of the NGA. Take notice of the special Rule 602 comment procedures in this case, as set forth below.

The filing may be viewed at http://www.ferc.fed.us/​online/​rims.htm (call 202-208-2222 for assistance). Questions regarding the details of this proposed project and Rate Settlement should be directed to Virginia C. Levenback, Senior Counsel, Cove Point LNG Limited Partnership and Williams Cove Point LNG Company, L.L.C., P.O. Box 1396, Houston, Texas 77251-1396; Telephone: [phone].

In the late 1970's and through 1980, the LNG facilities now owned by Cove Point were used for waterborne, imported LNG, but LNG imports ceased and the facilities were “mothballed”. In 1994, Cove Point was authorized by the Commission to reactivate the mothballed onshore LNG facilities and to construct an LNG liquefaction unit for the purpose of storing domestic natural gas during the summer for use at peak times during the winter. Now Cove Point seeks to reactivate the offshore LNG facilities and build additional onshore facilities in order to provide waterborne LNG tanker services once again. These waterborne shipments of LNG will in all likelihood be imported, but the importation of LNG, per se, is subject to the jurisdiction of the Department of Energy under Section 3 of the NGA (10 CFR 590).

Cove Point requests Commission approval to repair, improve, upgrade, or replace various existing unloading, control, LNG flow, vaporization, and safety systems. Cove Point is seeking a certificate under Section 7(a) of the NGA, and Part 157 of the Commission's regulations, (18 CFR Part 157) to reactivate, repair or replace the following existing facilities:

Refurbishment/Replacement of unloading arms;

Refurbishment of offshore control building;

Refurbishment/upgrade of hazard detectors;

Refurbishment/upgrade of fire detectors;

Refurbishment/upgrade of electrical systems;

Refurbishment/upgrade of offshore fire water systems;

Refurbishment/upgrade of second stage send out pumps;

Refurbishment of cold blowers;

Refurbishment of insulator systems;

Upgrade and expand office buildings;

Refurbishment of fuel gas system and heaters;

Upgrade fire protection on all LNG storage tanks; and

Refurbishment of vaporizers (including the replacement of tube bundles).

Cove Point is also seeking a certificate to construct the following new facilities:

Installation of a fifth new 850,000-barrel LNG storage tank (2,800,000 Dth vapor equivalent);

Installation of Btu reduction facility; and

Installation of a Cove Point metering station.

Cove Point states that the proposed reactivation of the LNG terminalling operation is estimated to cost about $65 million, and the construction of the fifth storage tank is estimated to cost about $38 million.

Cove Point seeks approval to provide the LNG tanker services on a firm and interruptible basis pursuant to Part 284 of the Commission's regulations and under proposed new Rate Schedules LTD-1 and LTD-2, respectively. Cove Point proposes to offer open-access, non-discriminatory LNG tanker services, which would include the receipt of waterborne LNG, LNG storage, LNG vaporization, and pipeline transportation of vaporized LNG into the interstate pipeline grid through Cove Point's pipeline's existing interconnections with Dominion Transmission Inc., and Columbia Gas Transmission Company in Loudoun County, Virginia.

Cove Point says that it had an open season in early 2000 to offer LNG tanker services and as a result it executed binding precedent agreements for one hundred percent (100%) of the firm LNG tanker services that was offered at the maximum rate and for twenty year primary terms with three customers. The three customers are BP Energy Company, Shell NA LNG, Inc., and El Paso Merchant Energy, L.P. Cove Point states that a firm LNG tanker services customer will contract for and pay a monthly reservation fee based upon its Maximum Daily Delivery Quantity (MDDQ). The total available MDDQ offered by Cove Point in its open season was 750,000 Dth per day, and the three winning bidders were awarded the entire available delivery quantity, each receiving 250,000 Dth per day. Cove Point states that the customers are allocated LNG storage capacity based on fixed ratio of storage capacity to contracted MDDQ.

Cove Point currently provides 10-day, 5-day and 3-day firm LNG peaking services under Rate Schedules FPS-1, FPS-2, and FPS-3, respectively, and firm and interruptible transportation services under Rate Schedules FTS and ITS. The peaking services now consist of the receipt and liquefaction of domestic natural gas during a summer injection season (April 16-December 14), storage of the LNG, vaporization of the LNG and delivery of the natural gas during a winter withdrawal season (December 15-April 15).

After approval of the waterborne LNG reactivation and the firm and interruptible LNG tanker services under proposed new Rate Schedules LTD-1 and LTD-2, Cove Point will continue to provide 3-day, 5-day and 10-day peaking services to its peaking customers under existing Rate Schedules FPS-1, FPS-2 and FPS-3. With the commencement of waterborne LNG receipts, however, Cove Point will operate its facilities on an integrated basis, which will enable Cove Point to serve existing peaking and transportation customers at lower rates due to the expected discontinued operation of its LNG liquefaction facilities. Those reduced rates will be placed into effect upon the commencement of the proposed LNG tanker services pursuant to the terms of a Stipulation and Agreement (Rate Settlement) among Cove Point, certain of the existing peaking and transportation customers and three new LNG tanker services customers, all as identified in the Rate Settlement. The Rate Settlement is submitted pursuant to Rule 602 of the Commission's Rules of Practice and Procedure (18 CFR 385.602).

Cove Point states that the Rate Settlement resolves certain non-environmental issues related to this application, including agreed-upon rates for both LNG tanker services, peaking services, and transportation services. The Rate Settlement addresses how Cove Point's existing and proposed tanker discharge, storage and transportation capacity and the costs the facilities that create such capacity will be allocated between its existing and new customers. The specific rates for new and existing customers proposed in the Rate Settlement are listed as an appendix to the Rate Settlement (Exhibit U of Cove Point's application), and in Exhibit P of Cove Point's application. The Rate Settlement also allows for inclusion of the costs of for certain pipeline line enhancements listed as an appendix to the Rate Settlement, including the planned construction of an interconnection with Transcontinental Gas Pipe Line Corporation in Fairfax County, Virginia.

Cove Point's application also includes a pro forma copy of the revised FERC Gas Tariff under which Cove Point will provide firm and interruptible LNG tanker services on an open access basis and the continuance of its LNG peaking and transportation services. The proposed pro forma tariff includes new rate schedules for firm and interruptible LNG tanker discharging services, minor conforming changes to the rate schedules of existing services, changes to the General Terms and Conditions and conforming changes to pro forma service agreements. Changes to Cove Point's currently effective tariff sheets are reflected in the redlined version of the proposed tariff which is included in Exhibit P of Cove Point's application.

In addition, Cove Point seeks authorization to construct, site, and modify the import facilities at the terminal in Calvert County, Maryland under Section 3(a) of the NGA, and Part 153 of the Commission's regulations, 18 CFR Part 153.

Cove Point requests that the Commission issue a final order granting the requested certificates, approvals and authorizations by July 25, 2001. Cove Point states that this proposed schedule will enable it to refurbish and reactivate the above listed LNG facilities by April 1, 2002, and to construct and place in service the proposed fifth LNG storage tank at the terminal by September 1, 2003.

There are three ways to become involved in the Commission's review of this project. First, any person wishing to obtain legal status by becoming a party to the proceedings for this project should, on or before February 27, 2001, file with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, a motion to intervene in accordance with the requirements of the Commission's Rules of Practice and Procedure (18 CFR 385.214 or 385.211) and the Regulations under the NGA (18 CFR 157.10). A person obtaining party status will be placed on the service list maintained by the Secretary of the Commission and will receive copies of all documents filed by the applicant and by all other parties. A party must submit 14 copies of filings made with the Commission and must mail a copy to the applicant and to every other party in the proceeding. Only parties to the proceeding can ask for court review of Commission orders in the proceeding.

However, a person does not have to intervene in order to have its comments considered. The second way to participate is by filing with the Secretary of the Commission, as soon as possible, an original and two copies of comments in support of or in opposition to this project. The Commission will consider these comments in determining the appropriate action to be taken, but the filing of a comment alone will not serve to make the filer a party to the proceeding. The Commission's rules require that persons filing comments in opposition to the project provide copies of their protests only to the party or parties directly involved in the protest.

Persons who wish to comment only on the environmental review of this project should submit an original and two copies of their comments to the Secretary of the Commission. Environmental commenters will be placed on the Commission's environmental mailing list, will receive copies of the environmental documents, and will be notified of meetings associated with the Commission's environmental review process. Environmental commenters will not be required to serve copies of filed documents on all other parties. However, the non-party commenters will not receive copies of all documents filed by other parties or issued by the Commission (except for the mailing of environmental documents issued by the Commission) and will not have the right to seek court review of the Commission's final order.

A third way to participate is to file initial and/or reply comments about the Rate Settlement under Rule 602 of the Commission's Rules of Practice and Procedure (18 CFR 385.602). However, in this case, because of the commonality of Cove Point's requests in the above referenced dockets, the prescribed time for such initial and reply comments under Section 385.602(f)(2) is hereby set such that initial comments on the Rate Settlement must be filed with the Secretary on or before February 27, 2001, and reply comments must be filed with the Secretary on or before March 14, 2001. The date of March 14, 2001, should coincide with the date by which any appropriate answers to motions to intervene or other motions must be filed in accordance with the requirements of the Commission's Rules of Practice and Procedure (18 CFR 385.213).

The Commission may issue a preliminary determination on non-environmental issues prior to the completion of its review of the environmental aspects of the project. This preliminary determination typically considers such issues as the need for the project and its economic effect on existing customers of the applicant, on other pipelines in the area, and on landowners and communities. For example, the Commission considers the extent to which the applicant may need to exercise eminent domain to obtain rights-of-way for the proposed project and balances that against the non-environmental benefits to be provided by the project. Therefore, if a person has comments on community and landowner impacts from this proposal, it is important either to file comments or to intervene as early in the process as possible.

Comments and protests may be filed electronically via the Internet in lieu of paper. See, 18 CFR 385.2001(a)(1)(iii) and the instructions on the Commission's web site at http://www.ferc.fed.us/​efi/​doorbell.htm.

If the Commission decides to set the application for a formal hearing before an Administrative Law Judge, the Commission will issue another notice describing that process. At the end of the Commission's review process, a final Commission order approving or denying the certificate and authorization, and accepting or rejecting the Rate Settlement will be issued.

David P. Boergers,

Secretary.