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PNGTS Says Maritimes Expansion Subsidizes Capacity on Affiliate Algonquin

Portland Natural Gas Transmission (PNGTS) told FERC last week that Maritimes & Northeast Pipeline (M&NP) plans to overbuild its expansion project in order to shift costs that would be more properly assessed to M&NP affiliate Algonquin Gas Transmission, which will receive deliveries from the expansion. M&NP filed an application with FERC for the 418,000 Dth/d expansion in May.

FERC previously signed off of the engineering design of the expansion (see NGI, April 24). The Commission granted Maritimes' request for a declaratory order, which found that the design was appropriate. However, the Commission did not find that the project is required by the public convenience or necessity, nor did it rule on the issues related to a contract dispute between Maritimes and PNGTS related to the operation of a 101-mile pipeline system that PNGTS and Maritimes jointly own.

The Maritimes expansion project would bring gas to the U.S. market from the Canaport liquefied natural gas (LNG) import terminal, which is being built by Irving Oil and Repsol in Saint John, NB. The pipeline expansion would include the addition of five compressor stations in Maine, 1.7 miles of 30-inch diameter pipeline looping and modifications to other existing U.S. facilities.

Emera Inc., which owns Nova Scotia Power, Bangor Hydro-Electric and a 12.92% stake in M&NP will invest $350 million to build a 90-mile, 30-inch diameter pipeline lateral from the proposed LNG terminal through southwestern New Brunswick to a connection with U.S. portion of M&NP at the international border near Baileyville, ME. The Brunswick Pipeline will be capable of carrying 850 MMcf/d of regasified LNG. Construction of both the Maritimes expansion and the Brunswick lateral is expected to be completed by late 2008.

PNGTS told the Commission last week that M&NP failed to comply with a certificate requirement that it receive notice of an expansion plan from M&NP 60 days prior to the filing of an application. PNGTS said M&NP "ignored" this requirement and "failed to honor its obligations." As a result, PNGTS said the application is "procedurally infirm and should be held in abeyance."

Secondly, PNGTS said the project is "uneconomical and unfairly benefits its affiliate at the expense" of the 101-mile joint pipeline facilities and PNGTS' own customers. PNGTS said the expansion plan is "significantly oversized. This is nothing new." Maritimes' last Phase IV expansion also was overly large and designed to subsidize its downstream pipeline affiliate, Algonquin, PNGTS said. After negotiations on the last project, PNGTS said that M&NP agreed to reduce the amount of proposed horsepower and cut the cost, saving joint facilities shippers $84 million.

"PNGTS' initial review of Maritimes' current proposal discloses that Maritimes is once again attempting to overbuild the Joint Facilities for the benefit of downstream interconnecting pipelines." PNGTS said its analysis shows that the current project, which is supposed to raise capacity by 418,000 Dth/d, would instead raise the capacity of the joint facilities by as much as 683,000 Dth/d.

"If Maritimes were to pursue a more efficient and more economical alternative, Maritimes could reduce the amount of power that would be required at the Eliot compressor from 15,738 horsepower to approximately 8,500 horsepower, while still increasing capacity by an additional 568,000 Dth/d," PNGTS said. "Such changes would result in a capital cost savings of approximately $5 million from Maritimes' May 16 proposal, plus additional operating and maintenance cost reductions and fuel savings."

PNGTS also noted that the plan requires the addition of a new compressor station on the Joint Facilities, boosting pressure at Dracut by more than 900 psi from the current 775 psi. "This increase will result in higher pressure and capacity on...Algonquin, which interconnects with Maritimes facilities at Beverly, MA. "If Maritimes proposal is approved, Algonquin will reap the benefit of increase pressure and capacity without bearing any of the financial cost associated with such increases. Conversely, shippers on the Joint Facilities will face increase capital costs of approximately $5 million..."

As a result, PNGTS said the Commission should hold the application in abeyance until the project is appropriately sized and configured.

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