The Federal Energy Regulatory Commission yesterday ordered Trunkline Gas Co. to explain why it should be allowed to import higher-priced liquefied natural gas from Algeria.
Opponents of the move had called on the commission to bar the imports, arguing that allowing resulting price hikes would be insupportable because relatively-low-cost, domestic gas is available.
Trunkline Gas and Trunkline LNG Co., which are subsidiaries of Panhandle Eastern Corp., recently amended their contract with Algeria's state-owned gas company, Sonatrach, to include a formula that would allow prices to rise faster than they would have under the original contract. Trunkline has said that the amended agreement must be approved by the United States and Algeria before it can take effect.
As a result of reaching an agreement, Sonatrach is shipping LNG to Trunkline for the first time. A tanker carrying 1,256 cubic meters of super-cooled gas, shipped under what Panhandle says are the old terms of the contract, is expected to arrive this weekend at Panhandle's Lake Charles, La., terminal. Under the escalation allowed for in the original contract, the price of the gas has risen from the $3.37 per million British thermal units it would have been in 1977 to $7.13 per MMBtu, the energy commission said.
Although Panhandle has had a contract with Sonatrach, signed in 1975 and approved by the United States and Algeria in 1977, Sonatrach never has made deliveries under the contract.
The FERC did not take a position on the shipments yesterday, but repeated questions that opponents of the LNG deal have raised. Trunkline is required to state within seven days why the proposed deliveries of LNG are not "pursuant to what amounts to a new contract," why the companies should not be required to seek authorization to import LNG under the contract prior to any shipments from Algeria and why the Lake Charles terminal "should not be found to be no longer in the public convenience and necessity."
FERC spokeswoman Rachelle Patterson said it was an unusual step for the commission to raise such questions.
The State of Michigan, the Michigan Public Service Commission and a group called the Association of Businesses Advocating Tariff Equity had asked for a show-cause order. Three House members, Tom Corcoran (R-Ill.), Dan Coats (R-Ind.) and Clarence J. Brown (R-Ohio), also petitioned the commission and the Department of Energy's Economic Regulatory Administration protesting the shipments.
Panhandle spokesman Stan Wallace said yesterday that the company will respond to the FERC's order and questions "in a timely manner."
"The temporary surplus in the United States is just that -- temporary," Wallace said. "Under any reasonable expectations about an upturn in the economy, the natural gas surplus probably will have disappeared in two to three years.
"LNG is a 20-year undertaking," said Wallace, who noted that the contract would provide 3.3 trillion cubic feet of gas in that time. Domestic supplies cannot be contracted for similar periods of time.