Boston Gas Calls for Closer Scrutiny of Maritimes
The only non-affiliated shipper that has signed up for firm
transportation service on the Maritimes & Northeast Pipeline
project clearly is regretting it now. Boston Gas told FERC last
week a request by Maritimes in January to amend its pipeline
certificate, eliminate about 140 miles of laterals in Maine and
raise its mainline rates 61% because of the loss of numerous U.S.
markets shows a lapse in rationality.
Rather than raising its rates to such a degree that the project
becomes uneconomic for its shippers, the sponsors should downsize
the pipeline and should be placed at risk for the cost of
unsubscribed capacity, Boston Gas told the Commission. Maritimes
should not be allowed to make the same mistake twice. The pipeline
already admitted a previous rate increase on its proposed U.S.
laterals made service uneconomic for potential end users in Maine,
the utility added.
Maritimes informed the Commission in January that "market
changes" in Canada, Maine and Massachusetts forced it to propose
phasing in or deferring about 140 miles of U.S. pipeline laterals.
Maritimes said it was caught off guard by markets in eastern
Canada, which matured more rapidly than originally anticipated. But
it also said its lateral line rate hikes-which more than doubled
transportation costs-were partly to blame for the loss of most of
its Maine markets.
"The market demand that the Commission relied upon in issuing
the [Maritimes] certificate is in free fall," and the risk and
financial burden of the project is being shifted to Boston Gas, the
company said of Maritimes recent application to amend its
certificate (Dockets CP96-178-008, CP96-809-007, and CP97-238-008).
"At the time the Commission made its determination regarding the
market support for the project, there were 17 shippers that had
executed precedent agreements for long-term firm service on
Maritimes' system. These shippers included significant numbers of
entities that were not affiliated with Maritimes or with the Sable
Island Project Partners. In stark contrast, Maritimes
current...application shows it has obtained firm service agreements
from only four shippers and only one of those, Boston Gas, is not
affiliated with Maritimes or any of the Sable Island Partners."
The pipeline still has signed precedent agreements for 360,000
MMBtu/d, or 82% of the expected full capacity, including agreements
with Boston Gas (43,200 Dth/d), Mobil Natural Gas (185,335 Dth/d),
Salmon Resources (100,000 Dth/d) and another company (30,240
Dth/d). It also has a backstop agreement with Mobil for an
additional 174,665 Dth/d. However, Boston Gas said the level of
market support is inadequate and the project should be downsized.
In its motion to intervene, protest, request for expedited
evidentiary hearing and request for stay, the Boston-based gas
distributor requested that the Commission stay the authority
granted to Maritimes in its July 1998 certificate and prohibit the
pipeline from building the project until its size has been
re-evaluated in an evidentiary hearing.
In the hearing, Maritimes also should be required to demonstrate
that the majority of the gas will not be delivered to Canadian
markets, Boston Gas said. There is a "high probability" Canadian
markets will soak up much of the Sable Island production, and as a
result most of the proposed downstream pipeline project will not be
The utility warned the Commission that Maritimes also has
significantly altered its backstop agreement with affiliate Mobil,
placing less risk of unsubscribed capacity on its affiliate.
Because the backstop agreement was a major factor in FERC's
approval of the project, the commission should reevaluate the
project now that the backstop agreement has been changed, the
Other troubling aspects of the project that have come to light,
Boston Gas said, include the negotiated rate caps and revenue
sharing provisions the pipeline granted its affiliates. Boston Gas
said it was not offered the same terms of service, which
constitutes a violation of FERC's affiliate rules.