Federal Process for Siting Natural Gas Infrastructureproject siting and development, balancing environmental and other concerns, ensuring compliance, safeguarding the public, and providing

Michael J. McGeheeDirector, Division of Pipeline Certificates

Office of Energy ProjectsFederal Energy Regulatory Commission

Williamsport, PA May 11, 2010

Federal Process for SitingNatural Gas Infrastructure

May 11, 2010 Federal Energy Regulatory Commission 1

FERC Organizational Structure


How the Commission is Appointed

The Federal Energy Regulatory Commission (FERC or Commission) is composed of up to five Commissioners who are appointed by the President of the United States with the advice and consent of the Senate. Commissioners serve five-year terms, and have an equal vote on regulatory matters.

To avoid any undue political influence or pressure, no more than three Commissioners may belong to the same political party. There is no review of FERC decisions by the President or Congress, maintaining FERC's independence as a regulatory agency, and providing for fair and unbiased decisions. The Commission is funded through costs recovered by the fees and annual charges from the industries it regulates.

One member of the Commission is designated by the President to serve as Chair and FERC's administrative head.


Office of Energy Projects


Office of EnergyProjects - Functions

OEP has the engineering and environmental expertise to:

certificate new gas pipeline projects,

Authorize LNG import / export projects

authorize and monitor hydroelectric projects, provide “backstop authority” to site electric transmission facilities, and

analyze energy infrastructure needs and policies. OEP focuses on:

project siting and development,

balancing environmental and other concerns,

ensuring compliance,

safeguarding the public, and

providing infrastructure capacity information. Other FERC Offices

OGC has corresponding hydro and pipeline legal responsibilities

Other offices also have input to our products


Gas Pipeline Program

Evaluate applications for facilities to import, export, transport, store or exchange natural gas

Authorize the construction and operation of facilities for such services

Approve abandonment of such facilities

Conduct environmental reviews of proposals involving construction, modification, or abandonment

Implement the “Pre-Filing Process”

Conduct inspections of LNG facilities and pipeline construction


Natural Gas Act

The Natural Gas Act is the law that sets out FERC’s areas of responsibilities:

Section 1 – Identifies projects exempt from FERC jurisdiction

Section 3 – Allows FERC to authorize import / export projects

Section 7 – Allows FERC to authorize interstate pipeline projects (including storage) and grant eminent domain


Projects Exempt fromFERC Jurisdiction

Local Distribution Company facilities (e.g., Baltimore Gas and Electric, Washington Gas Light, etc.)

Intrastate pipelines (where gas is produced, transported and consumed within a single state)

Hinshaw pipelines (gas is produced in one state, but is transported and consumed within another)

Gathering facilities


Natural Gas Act

Case Specific Section 7(c) Certificate

Conduct a full review of proposal including engineering, rate, accounting, and market analysis

Conduct an environmental review by preparing an Environmental Assessment or an Environmental Impact Statement


How Does FERC Evaluate All Of These Major Projects?

What Are The Criteria Used inThis Evaluation?

Project Evaluation


Balancing Interests

People Like... But They Also Want...

Due Process Expedited Process

Smaller Government Effective Government

Less Regulation Assurance of Fair Markets

Market-dictated OutcomesProtection from Market

Dysfunctions, Unexpected Risk,and Unjust Rates

Protection for the Environment andProperty Interests

Ample Supplies ofLow-cost Energy


Dual Paths of Review

Application Filed

Non-Environmental Review

Environmental Review

Draft Order Prepared Commission Action


Certificate Process Overview

Application Filed

Order Issued

Non-Environmental Review and Analysis• Engineering – GQI, storage, hydraulic flow• Tariff – rates, terms & conditions of service• Policy – precedents, rules, regulations• Accounting

Environmental Review and Analysis• Biological – fish, wildlife, vegetation• Cultural – historic preservation• Land use – recreation, aesthetics• Soils and geologic• Air and noise – quality, loudness• Socioeconomic impacts• System alternatives

Parallel Processing Paths


Public Interest Review(aka “Need”)

New Certificate Policy Statement issued on September 15, 1999.

Clarification of Certificate Policy Statement issued on February 9, 2000.

Further clarification issued on July 26, 2000.


• Goals─ Foster Competition─ Consider Captive Customers─ Avoid Unnecessary Physical Impacts─ Achieve Optimal Amount of Facilities─ Encourage Complete Record─ Expedite Review Time

Certificate Policy Statement


Certificate Policy Statement

Develop Record

Adverse Impacts on• Existing Customers and Pipelines

• Landowners

• Communities

Specific Benefits (meet new demand, eliminate bottlenecks, access new supplies, lower

cost to consumers, new interconnects to improve grid, provide competitive alternatives, increase electric reliability, clean air objectives, etc)

Need and Market (precedent agreements, demand projections, etc)

Condemnation Impact


FERC Process

FERC’s process is a model of efficiency

Pre-filing

Application Analysis

Post-authorization

This process works for all stakeholders

Project sponsors

Federal, state, and local agencies

NGOs

Landowners

Other concerned entities


PGC Resource Assessments, 1990-2008Total Potential Gas Resources (mean values)

Source: Report of the Potential Gas Committee (December 31, 2008) “Potential Supply of Natural Gas in the United States” June 18, 2009

The growing importance of shale gas is substantiated by the fact that, of the 1,836 Tcf of total potential resources, shale gas accounts for 616 Tcf (33%).

17

May 11, 2010 Federal Energy Regulatory CommissionFebruary 22, 2010 Federal Energy Regulatory Commission

18

Shale Gas PlayBasins

Marcellus ShaleShale Gas Play

Basins

Marcellus ShaleShale Gas Play

Basins

Marcellus Shale

Gas Shales Plays in the United States

Source: EIA’s Exploring Pipeline Dynamics to Connect New Markets – Slide Entitled: Gas Shales in the United States


United States Shale Basins Maximum Reported Gas-in-Place (in Tcf)

Source: Energy Velocity and Navigant Consulting’s North American Natural Gas Supply Assessment – July 4, 2008

WoodfordShale (101)

Lewis Shale(61)

Cane CreekShale

NiobraraShale (13)

Baxter/Lewis/MowryShale (265)

Palo DuroShale(42)Monterrey/McClure

Shale

Marcellus Shale

(1,500)

Bakken Shale(15)

BarnettShale(168)

HaynesvilleShale(717)

FayettevilleShale (52)

Antrim Shale(76)New Albany Shale(160)

Floyd/Chattanooga Shale (22)

Barnett and Woodford Shale (265)

CaneyShale

Pearsall Shale

Huron Shale

Devonian Shale (244)

Total Shale Gas3,700 Tcf

Note: While some shale basins have been identified with reserve estimates, others have no reserve data available.

19


The Marcellus Shale spans six states in the northeastern U.S.

Covers an area of 95,000 square miles at an average thickness of 50 ft to 200 ft

Estimated depth of production is between 4,000 ft and 8,500 ft

As of September 2008, there were a total of 518 wells permitted in Pennsylvania and 277 of the approved wells have been drilled

The average well spacing is 40 to 160 acres per well

The technically recoverable resources is estimated to be 262 Tcf

The amount of gas in place is estimated to be up to 1,500 Tcf

Source: Exhibit 19 and text - Marcellus Shale in the Appalachian Basin, DOE’s Modern Shale Gas Development in the United States; A Primer, dated April 2009

Marcellus Shale in the Appalachian Basin


Marcellus Shale Projects

Source: FERC

Clarington

AppalachianBasin

Oakford

Tennessee’sStation 219

Corning

Leidy

Linden

Rivervale

Transco’sComp Sta 195

Princeton

Lambertville

Source: FERC

Northern Bridge, TIME 3, TEMAX (TETCO)NiSource/MarkWest & NiSource

Appalachain Expansion (NiSource)Line 300 Exp (Tennessee) Northeast Supply (Williams)*

West to East Connector (NFG)Keystone (Dominion/Williams)

Appalachia to MarketExpansion (TEAM 2012-13) (TETCO)Projects 2010 -12 (Equitrans)

Approved or Pending Projects Potential Projects

* Combined Transco’s Rockaway Lateral and Northeast Connector Projects

Appalachian Gateway (Dominion)Line N, R & I Project (NFG) NYMarc (Iroquois)Tioga County Extension (Empire)

New Penn (NiSource)

Potential Projects

Marcellus Shale Projects

Marcellus to Manhattan (Millennium)Low Pressure East-West (Equitrans)

Northeast Upgrade (Tennessee)

Northern Access (NFG)

Northeast Supply Link (Transco)

East-West – Overbeck to Leidy (NFG)NJ-NY Project (TETCO & Algonquin)


Summary of Natural Gas Facilities Impacting the Marcellus Shale Basin

Source: FERC


In the United States, there are approximately 217,300 miles of interstate natural gas transmission pipeline.

Source: Based on data from Ventyx Global Energy Decisions, Inc., Velocity Suite, January 2010, and EIA’s Natural Gas Pipelines.


Transco (204,236,323,309)

Southern (336,330, 375)

Kern River(135,886,145)

6

NorthBaja

(500, 81 2,700)

Tuscarora (96)

Northwest (162,113)

Kern River (282)

TETCO(250)

Northwest (224)

NFS/DTI (150)

1

23

4

Northwest(191)

East Tenn. (225)

Tennessee (320)

El Paso (230,320,620,150)

WBI(80)

25

Ocean Express(842)

22 CheyennePlains (560,170)

24

8

Calypso (832)

Discovery (200)

Transwestern (150,375,500)

5

Trunkline(1,500)

Trunkline (200)

Questar (272,102,175)

6

GTN(207)

Florida Gas (239,270,100, 820)

East Tenn. (170)

7

9

Millenium (525)

10

11

Southern Trails (120)

Gulfstream(1,130, 345, 155)

12Trailblazer(324)

2123

El Paso (502)

Center Point (113,132)

Vista del Sol (1,100)

Golden Pass (2,500)

13

26 27

San Patricio (1,000)Dominion South (200)

Columbia(172, 100)

East Tenn. (86)

Tennessee (400,200,100)

Cheniere Corpus Christi (2,600)

East Tenn. (276)

Midwestern(120)

8

14Dominion (700)

Cameron(1,500,850)

Cheniere Creole Trail (2,000)

Port Arthur (3,000)

15

28

Questar Overthrust (550, 750, 300)

Center Point (1,237, 280, 274)

Equitrans(130)

16Empire(250)

Gulf LNG (1,500)

17

Transco (165)

29

Trunkline (510)

TETCO (150, 150, 455)

Kinder Morgan (3,395)

Natural (200,300)

Sonora (1,000)

Point Comfort (1,000)

18

Rockies Express East (1,800)

Midcontinent (1500, 300)Southern/Magolia (82)

30

NorthernStar (1,300)

MarkWest (638)

19

20

21. CIG (282,92)22. CIG (85,133,118,105,899,130)23. TransColorado (125,300,250)24. WIC (120,116,675,350,556,330,230)25. El Paso (140) 26. Rendezvous (300) 27. Entrega (1,500) 28. Northwest (450) 29. Rockies Express West (1,800)30. White River Hub (2,565)31. Northwest (582)32. Rockies Express (200)33. Sundance Trail (Northwest) (150)34. Diamond Mountain (WIC) (180)

1. Algonquin (285, 131)2. Islander East (285)3. Iroquois (230,85, 100, 200)4. Columbia (135,270) 5. Algonquin (140) 6. Transcontinental (105)7. Transcontinental (130)8. Transcontinental (100,142, 250)9. Columbia (94) 10. Maritimes (80,360,418)11. Algonquin (301)12. Tennessee (500)13. Mill River (800)14. Tennessee (136)15. Texas Eastern (900)16. Algonquin (325)17. Algonquin (800)18. Broadwater (1,000)19. Mid-Atlantic (1,500)20. Algonquin (140, 281)

31

Oasis Pipeline(600)

3233

Port Dolphin(1,200)

Pacific Connector (1,000)

34

Ruby Pipeline (1,456)

Tiger (2,000)

Major Pipeline Projects Certificated (MMcf/d)January 2000 to April 2010

110.37 BCF/D Total15,866 Miles


Pipeline ApprovalsJanuary 2000 – April 2010

Source:FERC

Capacity(Bcf/day)

Miles of Pipe

Compression(HP)

Cost(Billions)

2000 2.3 1,102.8 151,096 0.82001 8.6 2,688.4 870,767 4.42002 5.5 1,555.6 543,765 3.12003 1.7 352.4 221,545 1.02004 5.5 619.3 83,538 1.22005 14.2 784.5 123,036 1.82006 14.0 1,340.5 327,257 3.92007 23.0 2,727.0 849,110 8.02008 16.1 2,142.4 648,838 7.72009 14.1 1,276.1 748,749 7.62010 5.4 1,276.8 351,616 5.2TOTAL 110.4 15,865.8 4,919,317 44.7


Pipeline Facilities In-Service January 2000 – April 2010

Source: FERC

Capacity(MMcf/day)

Miles of Pipeline

Compression(HP)

2000 2,639 1,224 400,1702001 3,051 654 229,4472002 6,951 2,713 622,3402003 5,202 1,775 559,0102004 3,029 656 351,7632005 3,312 247 74,6952006 3,716 388 61,8412007 8,748 1,224 310,9502008 18,556 2,461 833,7722009 14,984 2,382 811,2862010 4,600 209 123,005TOTAL 74,787 13,933 4,378,279

Presenter

Presentation Notes

Based on Major Projects Certificated since 2000, as shown in OEP data bases. Includes major projects below 80 MMcf/d.


All Storage Projects(Capacity in Bcf)

Falcon MoBay (50.0)

County Line (6.0)

Bluewater(29.2)

Columbia (12.4)Natural (10.0)

Dominion (9.4)

Texas Gas (8.2)

Freebird (6.1)CenterPoint (3.0)

Starks (19.2)

Falcon Hill-Lake (3.0)

Liberty (17.6, 18.9) Petal (4.0)

SemGas (5.5)

Certificated Since 1/1/05

On The Horizon

Currently Pending

Falcon Worsham-Steed (12.0)

Unocal Windy Hill(6.0)

Natural (10.0) Bobcat (12.0,1.5, 24.0)

Dominion (18.0)

Caledonia (11.7, 5.2)

Arizona Natural Gas(3.5)

ANR Pipeline(14.7)

Mississippi Hub(12.0, 15.0)

Leaf River Energy (32.0)

Central NY (13.0)Dominion (4.4)

Floridian Natural (8.0)

Pre-Filing

SG Resources (12.0)

Northern Natural(8.5)

Petal (2.8)

ANR Pipeline(17.0)

Texas Gas (11.3)

Texas Eastern (3.0)

Egan Hub (8.0)

Enstor-Waha Storage (7.2)

Four Mile Creek (8.0)

ANR Pipeline (70.0)

Tres Palacios (36.0)

Black Bayou (15.0)

CIG (7.0)

Copiah (12.2)Enterprise (10.0)

PetroLogistics (6.0, 5.3)

AGL (16.0)Enstor (30.0)

Steckman Ridge (12.0)

Columbia (6.7)Tenasda (17.5)Northern

Natural (6.0) Texas Gas (8.25)

Northern Natural(2.1)

Monroe Gas (12.0)

Columbia (5.7)

Pine Prairie (24.0)

Natural (10.0)Chestnut Ridge (25.0)

Orbit (5.0)Tarpon Whitetail (8.6)

Bobcat (2.1, 9.3)

EnergySouth (12.0)Petal (10.0)

Atmos (15.0)

SourceGas(10.4)

Spectra Energy (6.5)

Southeast Gas Storage (24.7)

SG Resources (16.0)

Arlington Storage (7.0,1.4)

Henry Gas (46.0)

NFG (8.5)

Mississippi Hub (3.0)

Sempra Energy (2.5)

Cadeville (16.4)

Perryville(15.0)

East Cheyenne(18.9)

Blue Sky (4.4)

Magnum Gas(11.2)

Tricor Ten(22.4)

UGI LNG (0.2, 1.0)Magnum Gas

(42.0)

KM (1.0)

Dominion (0.1)

ANGS/El Paso (20.0)

Turtle Bayou (12.0)

Southern Star (4.0)

UGI (14.7)

BCR (15.0)

Falcon MoBay (3.2)

Petal (5.0)

Multifuels (8.0)

Leader One (7.5)

Ryckman Creek (25.0)


Storage ApprovalsJanuary 2000 through April 2010

Source:FERC

Deliverability(MMcf/day)

Capacity(Bcf)

Compression(HP)

2000 700 3.6 20,0002001 500 17.6 44,1302002 2,647 36.6 60,8202003 1,631 33.3 68,4832004 2,675 31.1 53,2502005 2,914 97.6 119,9172006 4,749 157.6 168,8982007 5,590 133.9 163,6462008 7,821 216.0 231,5992009 6,460 128.1 206,1552010 600 29.6 9,500TOTAL 36,287 885.0 1,146,398


Storage Facilities In-Service 2002 – April 2010

Source: FERC

Deliverability(MMcf/day)

Capacity(Bcf)

Compression(HP)

2002 1,200 24.4 64,1302003 1,247 21.3 16,6212004 331 11.6 52,8622005 82 8.2 13,6222006 1,336 70.9 43,8802007 1,846 84.2 71,3232008 4,412 81.9 123,5212009 3,806 59.7 39,0282010 800 20.0 0TOTAL 15,059 382.2 424,987


US JurisdictionFERCMARAD/USCG

U.S.A. Everett, MA : 1.035 Bcfd (SUEZ LNG - 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)F. Offshore Boston: 0.8 Bcfd, (Northeast Gateway-

Excelerate Energy)G. Freeport, TX: 1.5 Bcfd, (Cheniere/Freeport LNG

Dev.)H. Sabine, LA: 2.6 Bcfd (Sabine Pass Cheniere LNG)I. Cove Point, MD : 0.8 Bcfd (Dominion –

Expansion)*J. Hackberry, LA: 1.8 Bcfd (Cameron LNG - Sempra

Energy)K. Sabine, LA: 1.4 Bcfd (Sabine Pass Cheniere LNG –

Expansion)*

CanadaL. St Johns, NB: 1.0 Bcfd, (Canaport- Irvin Oil)

MexicoM. Altamira, Tamulipas: 0.7 Bcfd,

(Shell/Total/Mitsui)N. Baja California, MX: 1.0 Bcfd, (Sempra)

North American LNG Import TerminalsExisting

A

B, I

C

D

E

M

As of April 12, 2010

F

GH,K

N

* Expansion of an existing facility

L

J

30


North American LNGImport TerminalsApproved

* Expansion of an existing facility

127

9

2186

11

101 13 14

19

163

22

4

24

15

2


5

25

17

26

18

23

20

31March 24, 2010 31

APPROVED - UNDER CONSTRUCTIONU.S.1. Sabine, TX: 2.0 Bcfd (Golden Pass - ExxonMobil)2. Elba Island, GA: 0.9 Bcfd (El Paso - Southern LNG Expansion)*3. Pascagoula, MS: 1.5 Bcfd (Gulf LNG Energy LLC)4. Offshore Boston, MA: 0.4 Bcfd (Neptune LNG - Tractebel)

APPROVED - UNDER CONSTRUCTIONMexico5. Manzanillo, MX: 0.5 Bcfd (KMS GNL de Manzanillo)

APPROVED - NOT UNDER CONSTRUCTIONU.S. - FERC6. Corpus Christi, TX: 1.0 Bcfd (Ingleside Energy - Occidental

Energy Ventures)7. Corpus Christi, TX: 2.6 Bcfd, (Cheniere LNG)8. Corpus Christi, TX : 1.1 Bcfd (Vista Del Sol - 4Gas)9. Fall River, MA : 0.8 Bcfd, (Weaver's Cove Energy/Hess LNG)10. Port Arthur, TX: 3.0 Bcfd (Sempra)11. Logan Township, NJ : 1.2 Bcfd (Crown Landing LNG – BP)12. Cameron, LA: 3.3 Bcfd (Creole Trail LNG - Cheniere LNG)13. Freeport, TX: 2.5 Bcfd (Cheniere/Freeport LNG Dev. -

Expansion)14. Hackberry, LA: 0.85 Bcfd (Cameron LNG - Sempra Energy -

Expansion)15. Pascagoula, MS: 1.3 Bcfd (Casotte Landing - ChevronTexaco)16. Port Lavaca, TX: 1.0 Bcfd (Calhoun LNG - Gulf Coast LNG

Partners)17. LI Sound, NY: 1.0 Bcfd (Broadwater Energy-TransCanada/Shell)18. Bradwood, OR: 1.0 Bcfd (Northern Star LNG - Northern Star

Natural Gas LLC)19. Baltimore, MD: 1.5 Bcfd (AES Sparrows Point - AES

Corporation)20. Coos Bay, OR: 1.0 Bcfd (Jordan Cove Energy Project)U.S. - MARAD/Coast Guard21. Port Pelican: 1.6 Bcfd, (Chevron Texaco)22. Gulf of Mexico: 1.0 Bcfd (Main Pass McMoRan Exp.23. Offshore Florida: 1.2 Bcfd (Hoëgh LNG - Port Dolphin Energy)

Canada24. Rivière-du- Loup, QC: 0.5 Bcfd (Cacouna Energy -

TransCanada/PetroCanada)25. Quebec City, QC : 0.5 Bcfd (Project Rabaska - Enbridge/Gaz

Met/Gaz de France)Mexico26. Baja California, MX : 1.5 Bcfd (Energy Costa Azul - Sempra -

Expansion)



PROPOSED TO FERC1. Robbinston, ME: 0.5 Bcfd (Downeast LNG - Kestrel Energy)2. Astoria, OR: 1.5 Bcfd (Oregon LNG)3. Calais, ME: 1.2 Bcfd (BP Consulting LLC)

PROPOSED TO MARAD/COAST GUARD4. California Offshore : 1.4 Bcfd, (Clearwater Port LLC)5. Gulf of Mexico: 1.4 Bcfd (Bienville LNG - TORP Technology)6. Offshore Florida: 1.9 Bcfd (SUEZ Calypso - SUEZ LNG)7. Offshore New York: 2.0 Bcfd (Safe Harbor Energy - ASIC, LLC)4

1

6

North American LNG Import TerminalsProposed

2

5

7


3

32



LNG Imports by Terminal

Source: Data from EIA and Fossil Energy

4078 85

163226 238 229

507

652 631584

771

352

452

33


Monthly Prices & Volumes: United Kingdom, LNG, and Henry Hub Prices With U.S. LNG Volumes

Source: Henry Hub prices from Platts Gas Daily; LNG prices and volumes from Fossil Energy; and United Kingdom price from Bloomburg.

March 24, 2010 Federal Energy Regulatory Commission 34

Presenter

Presentation Notes

In January 2010, there is a spike in the volume of LNG imported into the US. This may reflect the increase in world wide liquefaction and reduced demand in Europe. The continued increase in the Henry Hub price over the LNG price may be due to cold weather in the US.


Existing and Projected LNG Imports

35


Net Canadian Imports andNet Mexican Exports

Source: Based on EIA Spreadsheets.

36


Future Net Canadian Importsand Net Mexican Exports

Source: Based on EIA Spreadsheets.

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

Bcf

/Yr

Total Net Imports from Canada Total Net Exports to Mexico

37


Market Knows Best

FERC is not the market

FERC will present a “menu” of infrastructure solutions that are:

In the public interest

Will cause the least environmental impact

Will be safe

The market is in the best position to select the infrastructure projects that get built


Conclusions

The Commission process has benefited all stakeholders in natural gas projects

More needs to be done Turn opposition into understanding

Continue to refine the siting process

More infrastructure is coming Alaska

Pipes from non-traditional sources

Hydrokinetics

Electric transmission


Contact Info:

Michael J. McGehee

Director, Division of Pipeline Certificates

Office of Energy Projects

Federal Energy Regulatory Commission

[email protected]

202-502-8962

Documents

Federal Process for Siting Natural Gas Infrastructureproject siting and development, balancing environmental and other concerns, ensuring compliance, safeguarding the public, and providing