Natural Gas Interchangeability Integrating supply diversity and end-use predictability

Jennifer Baber Deegan Federal Regulatory Affairs Washington Gas Light CompanyApril 28, 2004

Washington Gas Light Company (WGL)

Natural gas local distribution

company serving Washington

D.C. and the surrounding

metropolitan region in Maryland

and Virginia

970,000 customers; 90%

residential

1.7 Bcf peak day requirement;

100 MDth per day base load

20+ gate stations connect WGL

with four upstream interstate

natural gas pipelines

Gate Stations on CPLNG pipeline1 Centreville 2 White Plains 3 Gardiner Road4 Chalk Point 5 Prince Frederick 6 Patuxent

Cove Point

1

6

3 4 5

2

WGL has 6 Direct-Connect Gate Stations on the Cove Point LNG pipeline - the Transco, DTI & TCO Gate Stations are downstream of Cove Point

Washington Gas System Profile

Dominion Cove Point LNG

§January 2001 Reactivation Application

7.8 Bcf LNG Storage Capacity1 Bcf/day Sendout CapacityReactivation Summer 2003

§Washington Gas protestNatural gas interchangeability concernsLack of competitive alternatives to LNG imports

§FERC reactivation authorization, but without quality ranges desired by Dominion Cove Point and LNG importers

Dominion Cove Point Initial Gas Quality Criteria

§ Maximum high heating value (HHV) of LNG received: 1138 Btu/scf(dry basis)

At Cove Point’s option, higher HHV permitted to be received

But only if can be modified to meet sendout criteria (below)

§ Maximum HHV of vaporized LNG sent out: 1100 Btu/scf

Prior to sendout, inject with nitrogen as necessary to lower HHV to 1100 Btu/scf

Maximum nitrogen in sendout gas: 4.0%

§ Specific composition limits typical of domestic pipeline tariffs (e.g. maximum 1.0% CO2 ; 0.02% O2)

80%

85%

90%

95%

100%

Nigeria Abu-Dhabi

Algeria Qatar

Methane Ethane Propane Butane Pentane Nitrogen CO2

1143 1142

10981132

10651036

1066

Nigeria Abu-Dhabi

Algeria Qatar Trinidad WGL

Expected high Btu of LNG relative to WGL history of traditional supply

WGL

More heavy hydrocarbons can produce undesirable combustion characteristics

•Carbon monoxide production•Reduced appliance life•Environmental compliance implications

Source: TIAX Interchangeability Assessment for WGL’s Service Territory July 7, 2003 Final Report (Cove Point LNG Docket No. CP01-76)

Btu Interchangeability

Potential Changes in Combustionwith the introduction of LNG

§ Thermal effects

Greater or lesser heat input compared to rating

Potential for thermal stress

§Lifting

Gases with higher inerts have lower average flame velocity

May become less than velocity of gas through burner ports -- flame will lift

§Flashback

Gases with higher flame velocity (e.g. hydrogen)

May burn back through ports into burner

Normal

Lifting

Potential Changes in Combustion with the introduction of LNG

§Yellow-tippingHigher heating value gases need more primary airLower ratio of primary air to fuel leads to flame yellowing and elongation, impingement on surfaces, sooting

§Incomplete combustionCan occur alone or in combination with the above Excessive production of carbon monoxideParticularly critical with unvented appliances (cooking, fireplaces, heaters)

Yellow-tipping

Maintaining end-use predictability and supply diversity

§ WGL seven step approach focused on field and lab testing

§ Provided a method to manage diversity in LNG sources with a minimum investment in blending and dilution facilities

WGL Interchangeability Approach

1. Identify Historical Range

Variation can serve as a benchmark for tolerancesEvaluate length of time of sustained extreme conditionsEvaluate impact of other resources on-system and downstream

Gardiner Road

1025

1030

1035

1040

1045

1050

1055

1060

1065

1070

1075

1080

11/1/98 2/9/99 5/20/99 8/28/99 12/6/99 3/15/00 6/23/00 10/1/00 1/9/01 4/19/01 7/28/01

Date

He

ati

ng

Va

lue

(B

tu/s

cf)

Daily average heating value

Average heating value

2. Determine the appliance characteristics of the affected area

3. Select representative appliances for testing

4. Establish baseline appliance performance criteria

5. Lab test actual consumer appliances from impacted area and new appliances

Rates of CO production

Yellow-tipping characteristics

Sooting potential

Lifting tendencies

6. Identify supply and dilution combinations that produce results comparable to the baseline

WGL Interchangeability Approach

7. Translate supply source’s molecular components and dilution combinations into quality criteria

Dominion Cove Point LNG Interchangeability Settlement

§5-Party Agreement between

WGL, Dominion Cove Point

LNG and LNG importers

§Interchangeability study

conducted based on an

agreed-upon methodology

Provided information to all parties that a wider range of interchangeability results can be incorporated

§Competitive alternative

provided (Cove Point East

CP03-74)

§Interchangeability limits for

delivery to WGL incorporated

into the Dominion Cove Point

LNG tariffYellow-tippingLiftingIncomplete CombustionHeating Value (Btu)

§Natural gas quality

monitoring capability

establishedMonitor hourly

Remedy within 3 hrs

Natural Gas Quality & Interchangeability

Quality - Merchantable; operator flexibility Btu range Objectionable Properties

Particles, liquid or solid matter Hydrogen Sulfide Sulfur Nitrogen Carbon Dioxide Oxygen Harmful Contaminants Bacteria or bacterial agent

Molecular Structure Hydrocarbon Dew Point (HDP)

Interchangeability - Extent to which a substitute gas can replace the gas normally used and produce similar combustion characteristics

Lessons Learned

Local, historical natural gas characteristics are the starting point for developing interchangeability indices because every market developed differently

Heating value is not the sole factor for determining interchangeability; the ratio of heavier hydrocarbons to methane must be considered

Current pipeline tariff gas quality ranges/limits do not necessarily reflect the actual historic gas quality at the appropriate level of detail

Burner-tip solution is not viable and would limit future access to alternative supplies

No broad assumptions can be made about the ability of design certified appliances to operate with a wide variety of gases absent field testing

Interchangeability indices can provide flexibility for alternative supplies while facilitating greater predictability in appliance response to variations in gas supply

Thank you

©2003 WGL Holdings, Inc. For questions or copies, please contact Jennifer Baber Deegan at jdeegan@washgas.com, or 703.750.5146