Midwest Market Growth, Voyageur Troubles Prompt New Pipeline Project
Although supply concerns forced the 1.3 Bcf/d Viking Voyageur to
close up shop earlier this year, it became clear last week Voyageur
discovered an area of market growth begging to be served. An
unlikely coalition of El Paso Energy, Enron, Peoples Energy and
Northern Border Pipeline has jumped in to claim that territory.
They are proposing a new pipeline system that would extend into
Wisconsin from a connection with Northern Border at Joliet, IL.
The venture partners plan to build a $220-$280 million 36-inch
diameter pipeline, called the Illinois Wisconsin Express Project,
which would stretch 150-200 miles to Fond du Lac, WI, about 50
miles north of Milwaukee from Joliet, IL. The pipeline would be
designed initially to carry 650 MMcf/d of gas.
"Each of the different partners are bringing their own area
expertise to this. It kind of made sense for the four of us to
bring this together," said Peoples' spokesman Rod Sierra. "We have
a considerable storage and wheeling capability here in the Chicago
area. That is going to help turn this project around and get that
gas back out into Illinois and Wisconsin. The others have the key
experience on the pipelines, the access to the Canadian supply.
Enron has the market knowledge on these kinds of projects."
And there's plenty of market available, particularly because of
the need for new gas-fired generation. "I'm sure you've been
following the woes of the electric generation companies this week
across the country but especially in the Midwest. And a week ago,
we announced our own electric generation plant (potentially 600 MW)
to serve the region," Sierra noted. "So there's a big need for an
ample supply of gas to fuel these plants. We think they all will be
fueled by natural gas."
"Viking was a little early and probably did not see as much
opportunity on the power generation side as I think we are going to
encounter," said Mike Stokdyk, coordinator of the project at El
Paso subsidiary Tennessee Gas Pipeline. The companies plan to file
an application for the project by summer 1999 with service
beginning in November 2001. The size of the project will determine
the rates, but sponsors are projecting reservation rates to be
between 10 and 20 cents/Dth/d.
Stokdyk said the plan should avoid the pitfalls encountered by
Viking Voyageur because it would not be competing for Canadian
supply with the Alliance Pipeline and Northern Border projects.
Instead it would provide downstream transportation for gas entering
the region on those upstream pipeline expansions.
Meanwhile, Voyageur and the existing transportation monopoly in
the region, ANR Pipeline, said last week they aren't about to step
aside and watch others raid their territory. ANR announced plans
last week to hold an open season starting July 1 for another
incremental expansion that would be in place Nov. 1, 2000. The
pipeline already captured some of the incremental growth in the
region with its 1997 project, dubbed the "10-cent solution," which
received preliminary approval from FERC in May. That $24 million
project would provide 118 MMcf/d of new firm transportation at
discounted rates (67% of ANR's max rate) to eight shippers.
Viking Voyageur sponsors said last week they're still not out of
the picture. A TransCanada spokesman said Voyageur has kept markets
informed of its plans to file a revised project that would serve
"What's happening is people are finally catching on to what good
market potential there is in Wisconsin," said TransCanada spokesman
Gary Davis. "We're right there. We were the first in. We know the
markets very well. There's no need for us to be making
pronouncements until we have some solid information for people. At
this point, we have no intention to drop out [and] relinquish our