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Vol. 24, No.20 Week of May 19, 2019
Providing coverage of Alaska and northern Canada's oil and gas industry

RCA orders review of CINGSA tariff

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Says non-revenue components of gas storage facility’s tariff need updating in light of operational experience; questions Enstar link

Alan Bailey

Petroleum News

The Regulatory Commission of Alaska has issued an order initiating a review of the non-revenue components of Cook Inlet Natural Gas Storage Alaska’s tariff. In response, CINGSA has filed a request that the review should be delayed, given what it says is the significant overlap between this review and a docket currently in progress, seeking approval of CINGSA’s new tariff for its services. CINGSA provides gas storage services for Southcentral Alaska gas and power utilities, enabling the utilities to warehouse gas during periods of low gas demand for use when gas demand is higher. CINGSA is the only commercial operation in Southcentral Alaska providing this type of service.

The fees and conditions associated with use of the CINGSA facility impact the cost of gas and electricity that the utilities supply to their customers.

Needs updating

The RCA says that the non-revenue terms in the CINGSA tariff were established prior to the facility going into operation in 2012. Although the terms were appropriate at that time, given various unknowns regarding the operational characteristics of the facility, the RCA thinks that the tariff needs updating, based on what is now understood.

The RCA also expressed concern about the relationship between CINGSA and Enstar Natural Gas Co. The two companies are affiliates, with Enstar operating the storage facility on behalf of CINGSA while also being a major customer. The lack of structural and informational firewalls between CINGSA and Enstar creates the potential for unreasonable tariff terms and would be illegal for natural gas infrastructure that comes under the jurisdiction of the Federal Energy Regulatory Commission, the RCA said.

Facility characterization

One area of CINGSA’s tariff that now needs review is the characterization of the CINGSA facility, in particular the specification of the facility’s storage capacity and its performance capabilities for the injection and retrieval of gas, the RCA said. The facility stores gas in a depleted subsurface sand reservoir of the Cannery Loop gas field on the Kenai Peninsula. At the time the facility went into operation there were significant unknowns regarding the geologic characteristics of the reservoir sands and their storage capabilities. But now those characteristics are well understood, the RCA said.

In particular, the facility has a design storage capacity of 11 billion cubic feet of gas. But there is now known to be at least an additional 4.5 bcf of available working storage capacity. That increase has resulted from the reservoir turning out to be larger than originally thought, and from approval from the Alaska Oil and Gas Conservation Commission to use higher storage pressures than had originally been planned, the RCA said.

Moreover, CINGSA has not provided a substantiated assessment of the daily injection and withdrawal capabilities of the facility, based on operational use: CINGSA needs to provide assessments of the range of reservoir pressures within which the facility can be allowed to operate, and the range of maximum injection and withdrawal rates across that pressure range. CINGSA also needs to document the impact on injection and withdrawal rates of one of the CINGSA wells being unavailable for service, the RCA said.

If the CINGSA tariff were to more accurately characterize the facility’s actual storage capabilities, excess capacity above the facility’s base design could be more readily and transparently acquired. That, in turn, would lead to a reduction in the facility’s rates. Moreover, a more accurate understanding of the facility’s injection and withdrawal capabilities would enable customers to better ensure adequate gas storage support for their operations, the RCA said.

Lack of transparency

The RCA also questioned provisions within the tariff, allowing CINGSA to make decisions regarding what services to make available at any particular time, based on CINGSA’s internal understanding of its facility’s performance capabilities. Those provisions were appropriate at the time of the facility’s inception but, with seven years of operational history behind it, CINGSA knows enough about the facility’s performance characteristics to publicly post its capabilities in its tariff. That would enable customers to determine storage availability without having to disclose to Enstar, via CINGSA, potentially sensitive competitive information, the RCA said. Moreover, both existing and new gas producers would then have better insights into the possibility of being able to sign up for firm gas storage services, the RCA said.

A similar lack of transparency regarding the availability of capacity for providing some other services creates the potential for discrimination in the provision of these services while inhibiting customers from noticing possible discrimination. Enstar, on the other hand, has full access to the information it needs to make commercial decisions, the RCA said. However, the agency emphasized that it is not accusing CINGSA of actually engaging in discriminatory conduct.

The RCA also questioned a lack of provision in the CINGSA tariff for the temporary release of firm gas storage capacity for a customer who has a temporary need for that capacity. The absence of this provision is economically inefficient and differs from normal practice as regulated by FERC, the RCA said.

Facility expansion

The RCA questioned provisions in the tariff giving CINGSA the right to decide on whether to expand it facilities in response to a customer request. By statute, RCA has the authority to require a facility expansion, depending on the circumstances. And, now that the geology of the facility is well understood and CINGSA knows that it can expand the facility’s capabilities, there is no longer any rationale for the existing expansion rules in the tariff, the RCA suggested. The agency also questioned a provision in the tariff, under which a customer could have to reimburse CINGSA for upgrade costs associated with additional services.

CINGSA needs to provide its best understanding of what expansion to its services may be available, and to clarify reasonable terms for an expansion request, the RCA suggested.

The RCA also raised some other specific issues in the CINGSA tariff, including provisions relating to the timing of rate changes, the relative priorities of certain services, the charging of additional fees for service overruns, and some questions regarding definitions.



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