122 FERC ¶ 61,197

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Joseph T. Kelliher, Chairman;

Suedeen G. Kelly, Marc Spitzer,

Philip D. Moeller, and Jon Wellinghoff.

+--------------------------------------------+----------+-------------+
| Port Barre Investments, L.L.C. Docket No.  | Docket   | CP06-66-002 |
| CP06-66-001                                | No.      |             |
|                                            |          |             |
| d/b/a Bobcat Gas Storage                   |          |             |
+--------------------------------------------+----------+-------------+

ORDER AMENDING CERTIFICATE

(Issued March 4, 2008)

1.  On September 25, 2007, as supplemented on November 13, 2007, Bobcat
    Gas Storage (Bobcat) filed an application in Docket No. CP06-66-002
    under section 7(c) of the Natural Gas Act (NGA) for amendment of the
    certificate of public convenience and necessity issued by the
    Commission on July 20, 2006 in Docket No. CP06-66-000, and
    previously amended on April 19, 2007 in Docket No. CP06-66-001.[^1]
    The amendment would increase Bobcat Gas Storage Project's authorized
    gas storage capacity. As discussed below, the Commission finds that
    Bobcat's proposal is in the public interest and grants Bobcat\'s
    request for amendment of its certificate authority, subject to
    conditions. This order also reaffirms the July 20, 2006 Order\'s
    grant of market-based rate authority to Bobcat.

    **[Background and Proposal]{.underline}**

2.  The Commission\'s April 19, 2007 Order amended Bobcat's certificate
    authorization to increase each of its two storage cavern's base gas
    capacity to 3.25 billion cubic feet (Bcf) and each cavern's working
    gas capacity to 6.75 Bcf, increasing the total facility storage
    capacity to 20 Bcf. The order also approved a decrease in the
    diameter of interconnecting pipelines, approved additional
    interconnecting natural gas pipeline, and approved an additional
    brine pipeline in Landry, Parish, Louisiana. The April 19, 2007
    Order reaffirmed Bobcat's authority to charge market-based rates for
    its storage and hub services. As currently certificated, the storage
    facility would be capable of delivering natural gas at the rate of
    1.2 Bcf per day and receiving injection gas at a rate of 0.9 Bcf per
    day. Construction of the Bobcat Gas Storage Project commenced on
    December 18, 2006, and currently is ongoing.

3.  Bobcat's current amendment application seeks certificate
    authorization to decrease each of its two storage cavern\'s
    authorized base gas capacity from 3.25 Bcf to 2.4 Bcf and increase
    each cavern\'s authorized working gas capacity from 6.75 Bcf to 7.8
    Bcf, increasing the total facility's storage capacity by 0.4 Bcf to
    20.4 Bcf. Thus, each storage cavern would have an authorized
    capacity of 10.2 Bcf. The amendment application also includes an
    updated market power study and requests Commission reaffirmation of
    Bobcat's market-based rate authority.

4.  Bobcat states that the proposed changes to base and working gas
    levels will require no surface facility construction beyond that
    already authorized by the Commission. Bobcat states that working gas
    capacity will be expanded by converting base gas to working gas by
    reducing the minimum operating pressure. Thus, Bobcat notes that the
    proposed changes would not impact additional landowners, or impose
    additional burdens on current landowners.

5.  The amendment application states that Bobcat seeks to expand working
    gas storage capacity to optimize service and delivery options to
    customers by better aligning the facilities with market demand
    expressed during open seasons. [^2] Furthermore, the changes would
    offer additional high-deliverable storage capacity in response to
    market demand.

    **[Notice and Interventions]{.underline}**

6.  Public notice of Bobcat's September 25, 2007 application for
    certificate amendment was published in the *Federal Register* on
    October 4, 2007 (72 Fed. Reg. 56,730). No responses to the notice
    were filed.

**[Discussion]{.underline}**

# A. Certificate Policy Statement

7.  Since the subject facilities will be used to provide natural gas
    service in interstate commerce subject to the jurisdiction of the
    Commission, Bobcat\'s proposal is subject to the requirements of the
    sections 7(c) and (e) of the NGA.

8.  The Commission's September 15, 1999 Certificate Policy Statement
    provides guidance as to how it will evaluate proposals for
    certificating new construction.[^3] The Certificate Policy Statement
    established criteria for determining whether there is a need for a
    proposed project and whether the proposed project will serve the
    public interest. The Certificate Policy Statement explains that in
    deciding whether to authorize the construction of major new pipeline
    facilities, the Commission balances the public benefits against the
    potential adverse consequences. Our goal is to give appropriate
    consideration to the enhancement of competitive transportation
    alternatives, the possibility of overbuilding, subsidization by
    existing customers, the applicant's responsibility for unsubscribed
    capacity, and the avoidance of the unnecessary exercise of eminent
    domain or other disruptions of the environment.

9.  Under this policy, the threshold requirement for pipelines proposing
    new projects is that the pipeline must be prepared to financially
    support the project without relying on subsidization from its
    existing customers. The next step is to determine whether the
    applicant has made efforts to eliminate or minimize any adverse
    effects the project might have on the applicant's existing
    customers, existing pipelines in the market and their captive
    customers, or landowners and communities affected by the route of
    the new pipeline. If residual adverse effects on these interest
    groups are identified after efforts have been made to minimize them,
    we will evaluate the project by balancing the evidence of public
    benefits to be achieved against the residual adverse effects. This
    is essentially an economic test. Only when the benefits outweigh the
    adverse effects on economic interests will we proceed to complete
    the environmental analysis where other interests are considered.

10. As stated, the threshold requirement is that the applicant must be
    prepared to financially support the project without relying on
    subsidization from its existing customers. Bobcat is a new entrant
    in the natural gas storage market, is in the process of constructing
    its initial natural gas storage facilities, and has no existing
    customers. Therefore, as was found in its prior expansion, there
    will be no subsidization. Moreover, by requesting market-based rate
    authority, Bobcat assumes the economic risks associated with the
    costs of the project's facilities to the extent that any capacity is
    unsubscribed. Thus, the Commission finds that Bobcat has satisfied
    the threshold requirement of the Certificate Policy Statement.
    Further, since Bobcat has not commenced service, its request for
    amendment of its certificate authority to modify certain facilities
    will have no other adverse impact on existing customers or services.

11. Since Bobcat\'s storage facilities will serve increased market
    demand, there should be no negative impact on existing storage
    providers or their captive customers. As discussed below, the
    proposed project will be located in a competitive market and will
    serve new demand in a region that is experiencing rapid growth in
    natural gas availability and use. The proposal also will enhance
    storage options available to pipelines and their customers, and
    thus, will increase competitive alternatives. Additionally, no
    storage company in Bobcat's market area has protested Bobcat's
    application. Also, there would be no additional effects on
    landowners and surrounding communities since the proposed amendment
    involves no new facilities and thus would cause no new effects not
    already considered. Accordingly, consistent with the Certificate
    Policy Statement and NGA section 7, we find approval of Bobcat's
    proposal to be in the public convenience and necessity.

**B. [Market-Based Rates]{.underline}**

12. In the instant filing, Bobcat seeks to increase the working gas
    capacity of each of the two authorized storage caverns from 6.75 Bcf
    to 7.8 Bcf, increasing total working gas capacity from 13.5 Bcf to
    15.6 Bcf (a 15.6 percent net increase). We examined the effect of
    this increase on the relevant calculations and results reflected in
    the Market Power Study filed by Bobcat. Although Bobcat\'s proposal
    will result in a 2.1 Bcf net increase in working gas, growth in the
    capacity of Bobcat's competitors accounts for (1) a 0.1 percent
    decrease in Bobcat's market share of capacity (i.e., from 1.8
    percent to 1.7 percent), and (2) an 11.1 percent decrease in the
    Herfindahl Hirschman Index (HHI)[^4]

    value for Bobcat's working gas capacity (i.e*.*, from 863 to 767).
    [^5] Accordingly, we find that Bobcat's proposed increase in working
    gas capacity does not change the Commission\'s findings in the July
    20, 2006 and April 19, 2007 orders that Bobcat will lack market
    power.

13. As required by section 284.504(b) of the Commission's regulations,
    adopted by Order No. 678 and stated in the July 20, 2006 Order,[^6]
    the Commission's approval of market-based rate authority for Bobcat
    is subject to re-examination in the event that: (a) Bobcat adds
    storage capacity beyond the capacity authorized in this order; (b)
    an affiliate increases storage capacity; (c) an affiliate links
    storage facilities to Bobcat; or (d) Bobcat, or an affiliate,
    acquires an interest in, or is acquired by, an interstate pipeline
    connected to Bobcat, since these circumstances could affect its
    market power status. Bobcat shall notify the Commission within 10
    days of acquiring knowledge of any such changes.[^7] The
    notification shall include a detailed description of the new
    facilities and their relationship to Bobcat. The Commission also
    reserves the right to require an updated market power analysis at
    anytime.[^8]

**C. [Engineering Analysis]{.underline}**

14. The Commission reviews and analyzes the design capacity of proposed
    natural gas facilities to ensure that the design is appropriate and
    effectively utilizes available resources. Even though no additional
    facilities were proposed, Commission staff performed an engineering
    analysis of Bobcat's proposal. Based on that review, Bobcat\'s
    certificate authority will be conditioned to provide that the
    maximum inventory of natural gas stored in Bobcat's facilities shall
    not exceed 20.4 Bcf at 14.73 psia and 60 F (15.6 Bcf working gas and
    4.8 Bcf base gas). Bobcat proposes to lower the minimum pressure
    gradient at its facility from 0.244 psi/ft to 0.18 psi/ft. Staff's
    analysis of the technical study submitted by Bobcat confirms that
    the cavern can be safely and effectively operated at a minimum
    pressure gradient of 0.18 psi/ft. Therefore, the minimum pressure
    gradient in each cavern will be limited to 0.18 psi/ft applied to
    the casing seats of the wells penetrating the caverns. Additionally,
    Bobcat shall continue to comply with all other engineering
    requirements set forth in July 20, 2006 Order.

15. Based on staff\'s analyses, we find that the proposed modifications
    are appropriately designed to enable Bobcat to withdraw up to 1.2
    Bcf of natural gas per day from storage and to inject up to 0.9 Bcf
    of natural gas per day into storage subject to the conditions herein
    and in the July 20, 2006 Order.

**D. [Environment ]{.underline}**

16. Bobcat's proposal involves no construction of facilities. Therefore,
    the Commission finds that there is a categorical exclusion under
    section 380.4(a)(27) of the Commission's regulations from the need
    for environmental review.[^9]

17. The Commission on its own motion, received and made a part of the
    record all evidence, including the application (s), as supplemented,
    and exhibits thereto, submitted in this proceeding and upon
    consideration of the record,

[The Commission orders]{.underline}:

\(A\) The certificate of public convenience and necessity to construct
and operate the storage facilities issued to Bobcat in Docket No.
CP06-66-000, and amended in CP06-66-001, is further amended to increase
Bobcat\'s authorized working gas and total storage capacity, and to
modify facility design and operation, as described more fully in the
application and in the body of this order.

\(B\) The certificate authorization granted in Ordering Paragraph (A) is
conditioned on Bobcat's compliance with all applicable Commission
regulations under the Natural Gas Act, particularly the general terms
and conditions set forth in Parts 154, 157, and 284, and paragraphs (a),
(c), (e), and (f) of section 157.20 of the regulations.

\(C\) Pursuant to section 157.20(b) of the Commission\'s regulations,
Bobcat must construct the authorized facilities and make them available
for service within the time required by the April 19, 2007 order.

\(D\) Pursuant to section 284.504(b) of the Commission's regulations,
Bobcat must notify the Commission within 10 days of acquiring knowledge
of significant changes that could affect its market power. The
notification shall include a detailed description of the new facilities
and their relationship to Bobcat. The Commission also reserves the right
to require an updated market power analysis at any time.

\(E\) The maximum inventory of natural gas stored in Bobcat's facilities
shall not exceed the certificated level of 20.4 Bcf at 14.73 psia and 60
F (10.2 Bcf per cavern);

\(F\) The maximum gas storage shut-in stabilized pressure gradient of
each cavern shall not exceed 0.9 psi/ft, and the minimum pressure
gradient in each cavern will be limited to 0.18 psi/ft applied to the
casing seats of the wells penetrating the caverns; and,

\(G\) Except as provided in this Ordering Paragraph, Bobcat shall comply
with the engineering conditions set forth in Appendix A to the July 20,
2006 Order. Based on our analyses, we find that the facilities as
amended are appropriately designed to withdraw up to 1.2 Bcf of natural
gas per day from storage and to inject up to 0.9 Bcf of natural gas per
day into storage subject to the conditions herein and in the July 20,
2006 Order.

\(H\) Bobcat shall continue to comply with the environmental conditions
set forth in Appendix B to the July 20, 2006 Order.

\(I\) Bobcat shall notify the Commission\'s environmental staff by
telephone,  

e-mail, or facsimile of any environmental noncompliance identified by
other federal, state, or local agencies on the same day that such agency
notifies Bobcat. Bobcat shall file written confirmation of such
notification with the Secretary of the Commission within 24 hours.

By the Commission.

( S E A L )

Nathaniel J. Davis, Sr.,

Deputy Secretary.

[^1]: *Port Barre Investments, L.L.C.*, 116 FERC ¶ 61,052 (2006), *Port
    Barre Investments, L.L.C.*, 119 FERC ¶ 61,057 (2007). Bobcat is a
    limited liability corporation organized and existing under the laws
    of Delaware. Bobcat is owned by members of management, Haddington
    Energy Partners III LP, a private equity fund managed by Haddington
    Ventures, LLC, and General Electric Co. (GE) Energy Financial
    Services, the energy investing unit of GE.

[^2]: Bobcat's third open season held October 9, 2007 through November
    7, 2007, offered 1.6 Bcf in Cavern 1 and 7.8 Bcf in Cavern 2. Bobcat
    is in the process of executing contracts for the bids that were
    accepted. 

[^3]: *Certification of New Interstate Natural Gas Pipeline Facilities*,
    88 FERC ¶ 61,227 (1999), *order on clarification*, 90 FERC ¶ 61,128,
    *order on clarification*, 92 FERC ¶ 61,094 (2000) (Certificate
    Policy Statement).

[^4]: The Commission uses the HHI test to determine market concentration
    for gas pipeline and storage markets.

[^5]: Bobcat does not propose to increase its peak day deliverability or
    its maximum injection rate of 0.9 Bcf/day. Therefore, the proposed
    increase in working gas capacity does not affect the Commission's
    July 20, 2006 Order's acceptance of Bobcat's market power analysis
    related to Hub Services.

[^6]: *Port Barre Investments,* 116 FERC ¶ 61,052 (2006).

[^7]: *Rate Regulation of Certain Natural Gas Storage Facilities*, Order
    No. 678, FERC Statutes and Regulations ¶ 31,220 at P 90-91. *See
    also* 18 C.F.R.§ 284.504(b) (2007).

[^8]: *See, e.g., Mississippi Hub, LLC,* 118 FERC ¶ 61,099, at P 29
    (2007); and *MoBay Storage Hub, Inc.,* 117 FERC ¶ 61,298, at P 34
    (2006).

[^9]: 18 C.F.R. § 380.4(a)(27) (2007).