US FERC grants Tres Palacios some of capacity reduction requested

Houston (Platts)--22 Sep 2017 517 pm EDT/2117 GMT

The US Federal Energy Regulatory Commission authorized Tres Palacios to reduce the capacity of its natural gas storage facility in Texas, but not by as much as the company had wanted.

In a ruling that could apply to all gas storage operators, FERC on Thursday said operators are allowed to request a change in the authorized capacity of their systems, as long as the changes do not affect the structural integrity of the facilities.

In this case, the commission said, Tres Palacios had failed to show that reduced gas levels in two of the three caverns at its facility would not hurt the integrity of the caverns, but FERC allowed the company to reduce the capacity of the third cavern.

FERC set the total certificated storage capacity for cavern 3 at 10.695 Bcf, comprising 7.859 Bcf of working gas and 2.836 Bcf of base gas. Previously the allowed capacity of the cavern was 15.57 Bcf, comprising 11.35 Bcf of working gas and 4.22 Bcf of base gas.

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According to Platts Analytics' Bentek Energy unit, the allowed reduction in storage capacity is not large enough to be significant to customers or the market because it is less than the amount of unused capacity the facility has had.

Tres Palacios had wanted to institute slightly larger reductions at cavern 3 as well as reductions at caverns 1 and 2. "All other certificated parameters for the storage facility remain unchanged," FERC said.

FERC also asked the company to conduct a sonar survey and mechanical integrity tests on caverns 1 and 2 as steps to ensure integrity.

In 2007, FERC approved the construction and operation of the three-cavern facility with an allowable capacity of 53.99 Bcf, with 36.04 Bcf of that being working gas and 17.95 Bcf base gas. In 2010, FERC approved an increase in the capacity to 57.26 Bcf, with 38.4 Bcf of working gas and 18.86 of base gas.

FERC denied in 2015 an earlier attempt to abandon capacity as inconsistent with commission policy and the Tres Palacios certificate.

In April 2016, Tres Palacios, a subsidiary of Tres Palacios Holdings, a joint venture of Crestwood Equity Partners and Brookfield Infrastructure Fund II, asked FERC to let it abandon 7.41 Bcf of working gas capacity at the salt dome gas storage facility in Matagorda, Colorado and Wharton counties. Tres Palacios also asked the commission to let it reduce the certificated base gas capacity by 3.35 Bcf. Tres Palacios said the requested volumes were based on new information and, because the proposed working gas remaining in the facility would be more than its contractual commitments, none of its customers would be affected.

FERC denied requests for rehearing and other motions by Underground Services Markham and Riverway Storage Holdings. The companies had objected to the Tres Palacios bid to lower the certificated capacity, arguing in part that the storage operator was doing this just to reduce payments to them. The payments are based on the certificated working gas capacity. Markham is the leaseholder of the property, and Riverway participated in the development of the facility.

--Sean Sullivan,

--Mitch Derubis,

--Edited by Keiron Greenhalgh,

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