UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION North Baja Pipeline, LLC ) Docket No. RP09- -000 JOINT PETITION FOR LIMITED CASE-SPECIFIC WAIVER Pursuant to Rule 207(a)(5) of the Rules of Practice and Procedure of the Federal Energy Regulatory Corurnission ("Corurnission"),! North Baja Pipeline, LLC ("NBP"), Shell Energy North America (US), L.P. ("SENA") and Gazprom Marketing & Trading USA, Inc. ("GM&T USA"i hereby submit this Joint Petition for Limited Case-Specific Waiver. As explained more fully below, the Parties are requesting a limited case-specific waiver of the Corurnission's capacity release regulations 3 and policies and Paragraph 19 ofthe General Terms and Conditions ("GT&C") ofnbp's tariff, as well as any other waivers or authorizations deemed necessary, in order to allow a permanent release of a portion of SENA's firm transportation capacity on NBP to GM&T USA at SENA's negotiated rate, as well as a long-term, temporary release of the balance of SENA's firm transportation capacity to GM&T USA at such rate. The Parties also request expedited action on their Joint Petition. As discussed more fully below, the Parties submit that this limited waiver will be in the public interest and should be granted expeditiously because it will facilitate a highly-structured, major international liquefied natural gas ("LNG") and natural gas delivery transaction with significant beneficial implications for U.S. gas consumers. The requested waiver is consistent with waivers previously granted by the I 18 C.F.R. 385.207(a)(5) (2008). 2 Collectively, NBP, SENA and GM&T USA are referred to herein as the "Parties." 3 Specifically, the Parties are seeking waiver of 18 C.F.R. 284.8(b), (d) and (e), ofthe Commission's regnlations, as well as a waiver ofthe Commission's prohibition on tying, to the extent applicable.
Commission in order to facilitate the importation into the United States ofregasified LNG on the North Baja Pipeline. 4 I. COMMUNICATIONS The names, titles, mailing addresses, and telephone numbers of those persons to whom correspondence and communications in this proceeding should be addressed, pursuant to Rule 203 ofthe Commission's Rules ofpractice and Procedure, are as follows: Carl M. Fink, Esq. Associate General Counsel *Ellen A. Berman Senior Counsel North Baja Pipeline, LLC 1400 SW 5 th Avenue, Suite 900 Portland, OR 97201 Telephone: (503) 833-4056 E-mail: Ellen_Berman@TransCanada.com *Lee A. Alexander, Esq. Stefan M. Krantz, Esq. Hogan & Hartson, LLP 555 Thirteenth Street, NW Washington, D.C. 20004 Telephone: (202) 637-5526 E-mail: LAAlexander@hhlaw.com Counsel for North Baja Pipeline, LLC *Michael Short Senior Legal Counsel Shell Oil Company 909 Fannin Houston, TX 77010 Telephone: (713) 767-5401 E-mail: Michael.short@shell.com *Charles H. Shoneman Bracewell & Giuliani LLP 2000 K Street, NW, Suite 500 Washington, D.C. 20006 Telephone: (202) 828-5860 E-mail: charles.shoneman@bgllp.com Counsel for Shell Energy North America (US), L.P. *G. Mark Cook Gregory S. Wagner Baker Botts L.L.P. TheWamer 1299 Pennsylvania Avenue, NW Washington, D.C. 20004 Telephone: (202) 639-7779 E-mail: mark.cook@bakerbotts.com Counsel for Gazprom Marketing & Trading USA, Inc. 4 See North Baja Pipeline, LLC, III FERC ~ 61,119 (2005); North Baja Pipeline. LLC, 109 FERC ~ 61,269 (2004). The Parties' request is also consistent with the procedures established by the Commission in Order Nos. 712 and 712-A, as NEP's pipeline and its upstream affiliate in Mexico, Gasoducto Bajanorte, are directly connected to an LNG import terminal in Mexico. See Promotion ofa More Efficient Capacity Release Market, 123 FERC ~ 61,286 at P 193 (2008); order on rehg, 125 FERC ~ 61,216 at P 146 (2008). -2-
*Persons designated for official service pursuant to Rule 2010 (NBP requests, to the exteut necessary, that the Commission waive the limitations in Rule 203(b)(3) of its Rules of Practice and Procedure so that each person designated above may be placed upon the official service list in order to avoid delays in responding to official documents and communications). II. BACKGROUND On October 16, 2007, SENA entered into a firm transportation services agreement ("FTSA") with NBP for 207,000 Dth/day ofnorthbound flow on the North Baja Pipeline owned by NBP (the "NB Pipeline"). The contract has a term of twenty years, begimung January 1, 2008, with an expiration date ofdecember 31,2027. The rate for service under this contract is a negotiated rate, fixed for the term of the contract. applicable NB Pipeline maximum recourse rate. s The fixed rate currently is lower than the As part of a larger commercial transaction between affiliates of SENA's parent company (Royal Dutch Shell) and GM&T USA's parent company (OAO Gazprom), SENA desires to permanently release 127,160 Dth/day of its capacity to GM&T USA under the same terms and conditions as set forth in the FTSA. SENA also desires to temporarily release the remaining 79,840 Dth/day of its capacity to GM&T USA under the same terms and conditions as set forth in the FTSA. Various subsidiaries of Royal Dutch Shell and OAO Gazprom have executed agreements giving OAO Gazprom subsidiaries access to the U.S. market through the Energia Costa Azul LNG import terminal in Baja California, Mexico and the Gasoducto Bajanorte Pipeline to the U.S. border andthe interconnection withthe NB Pipeline. Through this request for a limited case-specific waiver, the Parties seek Commission authorization to allow such permanent release and temporary release. III. PETITION FOR LIMITED CASE-SPECIFIC WAIVER The negotiated rate under the FTSA is a fixed rate that is currently less than NBP's maximum recourse rate. The Parties desire to preserve that bargain for the remainder ofthe term 5 The agreement was filed with the Commission on January II, 2008, in Docket Nos. CP06-61-004, et al. -3-
ofthe pennanent release and temporary release. Accordingly, the Parties request limited waiver ofthe Commission's capacity release regulations and policies and Paragraph 19 ofthe GT&C of NBP's tariff, as well as any other waivers or authorizations deemed necessary, effective immediately upon issuance of a Commission order approving such waiver, in order to allow SENA to pennanently release 127,160 Dth/day ofthe contracted-for capacity, and to temporarily release 79,840 Dth/day of the contracted-for capacity, under, in each case, the negotiated rate currently in effect, with such rate to remain in effect for the remainder of the tenns of the pennanent and temporary releases 6 The requested waiver would be limited to these. 7 transactions. The circumstances here are appropriate for the Commission to grant such a limited waiver. The pennanent capacity release and temporary capacity release from SENA to GM&T USA are part of a complex, multi-party, multi-national arrangement whereby affiliates of both SENA and GM&T USA will buy LNG from the Sakhalin II project in eastern Russia over twenty (20) years for redelivery to markets in the United States, Asia and Europe. The overall transaction includes a new pipeline supply agreement under which a SENA affiliate will receive gas for delivery from Russia to Europe. The transaction alsojncludes agreements under which a GM&T USA affiliate, through long-tenn assigrunent from a SENA affiliate and SENA, will take: (i) certain capacity in Sempra's Energia Costa Azul LNG import terminal in Baja California, Mexico; (ii) certain pipeline capacity in Mexico on the Gasoducto Bajanorte Pipeline; and (iii) certain capacity on the NB Pipeline to ship gas to Southern California and/or Arizona. This integrated transaction will facilitate the delivery of additional natural gas supplies to U.S. markets, using existing facilities. 6 Relevant information regarding these releases will be duly posted for informational purposes. 7 The Commission regulations and policies for which the Parties seek a waiver include the Commission's probibition against tying tbe release of capacity to other conditions and the bidding procedures for releases of capacity. -4-
Allowing the limited waiver requested herein is in the public interest for several reasons. First, the waiver will facilitate the importation of new supplies of natural gas into the United States by providing transactional, financial and regulatory certainty to SENA, GM&T USA and NBP. Like virtually all firm shippers on the NBP system, SENA's capacity is contracted under a negotiated rate contract, one that is structured on a levelized rate basis over the life of the contract (expiring in 2027). The Parties need confirmation that the economic underpinnings for their long-term relationships will not be changed and that NBP's capacity will be awarded to the entity committing to the entire chain of supply and transportation, including commitments to the liquefaction and regasification terminals. The Commission has granted requests for waiver under nearly identical circumstances because "by giving financial certainty to [the shippers] and North Baja, [the requested waiver] will facilitate the importation of natural gas from LNG terminals in Baja California, Mexico into the United States." North Baja Pipeline, LLC, III FERC ~ 61,119 at P 6 (2005); North Baja Pipeline, LLC, 109 FERC ~ 61,269 at P 1 (2004) ("This order benefits the public by facilitating the importation of natural gas into the United States"). Second, in order for SENA to be released from its obligations pursuant to the permanent release, and to assure that NBP will receive the benefit ofits long-term bargain under the FTSA, it is essential that NBP be financially indifferent to the release. To ensure that NBP remains financially indifferent, SENA's capacity rights on the NB Pipeline must be transferred to GM&T USA at the existing negotiated rate and adequate credit assnrances must be put in place prior to the release. 8 IV. REQUEST FOR EXPEDITED ACTION The Parties request expedited action on this Joint Petition. SENA, GM&T USA and their affiliates closed their transaction on April 30, 2009. SENA and GM&T USA desire to effect the 8 NBP, SENA and GM&T USA have entered into a mutually agreeable credit support arraugemeut under which GM&T USA and SENA have agreed to provide additional credit support so that NBP is financially indifferent to the release ofsena as a shipper for the portion ofthe capacity to be permanently released. - 5 -
permanent release and temporary release described herein as soon as possible after the closing. Accordingly, the Parties request expedited issuance of a notice of their Joint Petition for Limited Case-Specific Waiver, a shortened comment period of seven (7) days, and issuance of an order on this petition no later than July 24, 2009. Such expedited actions by the Commission will assist in facilitating the Parties' transactions and be in the public interest for the reasons described above. V. CONCLUSION Wherefore, pursuant to Rule 207(a)(5) of the Commission's Rules of Practice and Procedure, NBP, SENA and GM&T USA request that the COlTunission grant their Joint Petition for a Limited Case-Specific Waiver of the Commission's capacity release regulations and policies and Paragraph 19 of the GT&C of NBP's tariff, as well as any other waivers or authorizations deemed necessary, to provide the Parties with the authority to allow SENA to permanently release a portion of its capacity, and release temporarily the balance ofits capacity, under the FTSA to GM&T USA at the negotiated rate, as described above. Granting the waiver will not affect service to other NBP transportation customers and will be in the public interest. The Parties request the Commission to act on this Petition expeditiously (as described above) to provide them with the transactional and regulatory certainty they require to move forward. Carl M. Fink, Esq. Associate General Counsel Ellen A. Berman Senior Counsel North Baja Pipeline, LLC 1400 SW 5 th Avenue, Suite 900 Portland, OR 97201 Telephone: (503) 833-4056 E-mail: Ellen_Berman@TransCanada.com Lee A. Alexander, Esq. Stefan. M. Krantz, Esq. Hogan & Hartson, LLP 555 Thirteenth Street, NW Washington, DC 20004 Telephone: (202) 637-5526 E-mail: LAAlexander@hhlaw.com Counsel for North Baja Pipeline, LLC - 6 -
Is/Michael Shortll Michael Short Senior Legal Counsel Shell Oil Company 909 Fannin Houston, TX 77010 Telephone: (713) 767-5401 E-mail: Michael.short@shell.com Charles H. Shoneman Bracewell & Giuliani LLP 2000 K Street, N.W., Suite 500 Washington, D.C. 20006 Telephone: (202) 828-5860 E-mail: charles.shoneman@bgllp.com Counsel for Shell Energy North America (US), L.P. Is/G. Mark Cookll G. Mark Cook Gregory S. Wagner Baker Botts L.L.P. TheWamer 1299 Pennsylvania Avenue, NW Washington, DC 20004 Telephone: (202) 639-7779 E-mail: mark.cook@bakerbotts.com Counsel for Gazprom Marketing & Trading USA, Inc. Dated: June 25, 2009-7-