Gas Cos To Talk To FERC About Need For More Storage

Dow Jones & Company, Inc. - Oct 18

WASHINGTON (Dow Jones)--Officials from companies such as EnCana Corp. (ECA) and Sempra Energy (SRE) are scheduled to comment later this week on what the Federal Energy Regulatory Commission should do to spur construction of natural gas storage facilities.

FERC is holding a conference on Thursday in Washington on the state of the natural gas industry to hear, among other issues, what companies have to say about the need for new policies that encourage storage development.

Natural gas that's not needed right away is held in underground storage fields and withdrawn in the winter, when demand increases.

Although there appears to be enough gas in storage to meet this winter's demand, the natural gas industry sees a strong need for more storage facilities in order to help reduce price volatility in the gas market, FERC staff noted in a report released late last month that will be the main topic of discussion at Thursday's conference.

The National Petroleum Council and other industry groups have projected that North America needs about 700 billion cubic feet of new storage by 2025 in order to manage price spikes and maintain reliable gas service to customers.

In its report, FERC staff pointed out that not many new interstate storage fields have been built in recent years. At the same time, several old fields have been abandoned, the staff said.

Since 2002, FERC has approved 11 major interstate storage projects representing a total of about 75 bcf of new interstate working storage capacity, according to the staff report. About 20 bcf of that new capacity has been put on hold because companies have delayed or shelved projects.

The staff noted that several storage projects are delayed "for economic, environmental, geological and political reasons."

To address that problem, the staff recommended that FERC consider granting companies that build new storage fields certain financial benefits, such as the authority to charge market-based rates as opposed to those based on costs.

FERC staff explained that it might take some "creative ratemaking approaches" and "creative certificate and policy choices" to encourage storage development.

The staff expects to hear feedback on these recommendations at Thursday's conference.

In addition to EnCana and Sempra, officials from NiSource-subsidiary Columbia Gas Transmission, Duke Energy Corp. 's (DUK) Duke Energy Gas Transmission and Calpine Corp. (CPN) are among those scheduled to speak.

-By Maya Jackson Randall , Dow Jones Newswires; 202-862-9263; Maya.Jackson- Randall@dowjones.com

Dow Jones Newswires 10-18-04 1632ET