NE Hub Hangs on Consultant's Recommendations
A new analysis to be delivered under wraps to FERC by Reed
Consulting could decide the fate of the proposed NE Hub, a major
salt cavern storage facility and market hub that would add 500
MMcf/d of daily deliverability to the gas grid in northern
Pennsylvania. But an eleventh-hour motion by CNG Transmission, a
competitor of the project, could influence and delay the outcome.
Reed is scheduled to decide the amount and terms of insurance or
indemnity NE Hub Partners, the developer and owner of the project,
must buy to address potential damages to CNG's and Penn Fuel's
existing Tioga storage field, under which the NE Hub salt caverns
are to be leached. CNG and Penn Fuels for years have argued NE
Hub's plan to drill ten 28-inch diameter wells through their
storage field could result in the loss of 10% (2.7 Bcf) of the
working gas in the existing field and do irreparable damage.
The Commission issued a certificate to NE Hub in April over the
opposition but conditioned the certificate on more than 20
environmental and operational changes. FERC also requested Reed
Consulting's evaluation of the potential damage to the assets of
CNG and Penn Fuel, including their surface facilities, gas in
storage and contractual obligations. NE Hub already has agreed to
purchase $110 million in insurance. But CNG and Penn Fuels argue
potential damages could exceed $600 million.
CNG and Penn Fuel now believe the risk is even greater in light
of data submitted by NE Hub last month. NE Hub informed FERC and
Reed that the greatest risk to its storage project and to CNG's
existing storage operations is related to the presence of shallow
gas, or gas migrating upward from the existing storage facility.
CNG has worked with the State of Pennsylvania for more than a
decade to correct the migrating gas problem, which likely is the
result of historic production activities in the Oriskany formation.
But CNG claims NE Hub's admission that the existing "dangerous
condition" could be exacerbated by the development of its new
storage facility is not new, has not been adequately considered by
the Commission and could change the outcome of the case.
"[T]his is a remarkable chutzpah, even for NE Hub," CNG said in
its motion. "NE Hub remains resolute to site its project at Tioga
and thereby, in NE Hub's words, risk 'accidents, explosions, fires,
or other events'. If this alleged factual scenario is considered by
the Commission for any purpose at all, it would not establish what
NE Hub claims, namely, some sort of countervailing risk to offset
insurance it should procure, but rather it impeaches any sound
evidentiary basis by which NE Hub could have continued to locate
its site at Tioga rather than an alternative site. It also would
destroy any evidentiary basis under which the Commission could have
granted NE its certificate." CNG has called on the Commission to
reopen the record to consider the "important new evidence."
Andrea Hilliard, an attorney for Market Hub Partners, a partner
in the NE Hub, noted CNG has known about the migrating gas all
along and is just bringing it up now to influence Reed's decision
and further delay development of the salt cavern. "That's why this
is so cynical," she said. "If we take all 15 days to respond and if
Reed decides it wants to read our response, that's another two
weeks. And this has been the plot all along. We can't even clear
the site until the insurance issues have been resolved." Hilliard
indicated the migrating gas poses no significant danger to the
development of the new storage facility, but CNG and Penn Fuel will
use all potential risks to reverse the Commission's decision.
"I think they honestly believe that life on this planet is going
to cease to exist, and the earth will start rotating the other
direction on its axis if this project is built," said Hilliard.
"They honestly believe that our science is bad and theirs is good.
And they will do anything to prevent development, despite the fact
that we have a lot of experience in drilling big holes - we do it
all the time. The record at FERC is replete with examples like this
one - [storage facilities] that are operating under other
production and storage fields. It's not an unusual thing. Obviously
competitive issues also are involved."
Hilliard indicated the 6 Bcf storage facility, which is expected
to be in service in late 2000, could be jeopardized if Reed
recommends "excess insurance." MHP clearly is frustrated with the
regulatory process. "We filed this three years ago, and all we have
are a couple of Osprey nests, which the Corps. of Engineers
required. That's the only construction we have done."