The leaders of a major pipeline association and a key electricutility group jointly have expressed their support for FERC toconvene a conference “in the near future” to assess post-2000natural gas demand in the Northeast and the need for new pipelinecapacity to serve customers, particularly power generators, in thatmarket. Meanwhile, a new study sees no need for new capacity to theNortheast until 2004 (See related story this issue).

The request comes in the wake of the Commission majority’saction two weeks ago to forego preliminary determinations (PDs) forfour controversial pipeline projects intended to carry westernCanadian gas from the U.S. Midwest market to the Northeast. Withthat move, FERC, in effect, placed the projects on the back-burneruntil early next fall, when it’s expected to decide thecertification issue. The Commission indicated a key factor in itsdecision to bypass the PDs centered on the question of “need” andthe lack of firm contracts with potential customers of the proposedprojects – Independence, Millennium, MarketLink and SupplyLink.Pipeline sources privately were steaming, saying FERC’s move wouldseriously jeopardize the construction of new capacity to a marketthat’s widely expected to experience high growth in gas demand inthe post-2000 period. “This is a very serious issue,” remarked onesource.

Given forecasts that gas consumption by electric generators inNew England is expected to more than double by 2005, “we believe itis imperative that the Commission assess whether there is adequatepipeline capacity in place to meet this rapidly growing demand,”wrote Jerald V. Halvorsen, president of the Interstate Natural GasAssociation of America (INGAA), and Thomas R. Kuhn, president ofthe Edison Electric Institute (EEI), in a March 15th letter to FERCChairman James Hoecker. Halvorsen said Hoecker indicated followingthe last Commission meeting that he was considering calling aconference to explore these issues. However, Hoecker’s office saidlast week that he hadn’t made a decision yet.

“What this hearing will do, I think, is paint a picture that youreally have a demand there [in the Northeast] that’s growing prettyquickly, and almost all of the projects that are projected to go inthere are going to be able to find a market,” Halvorsen said in aninterview with NGI. “We’re not necessarily alarmed [by FERC’s PDaction], but we’re just saying the whole concept of stepping backand taking a look at the big picture is something we ought to do.”

Halvorsen said he and Kuhn support a “generic-type” hearingwhere FERC would “call in the electrics and the industrials, someof the political leaders and some of the ISO people to try to getan updated picture on what the demand really is [in the Northeast].Then I think the Commission will be better able to say we’reweighing all these landowner concerns on one hand, but we also havethese demand considerations on the other hand. So if anything, itshould help to kind of balance everything out” in the end.

Kuhn told NGI he believes the time is “ripe” for FERC toinvestigate these issues in a conference, which he said should beheld in the “next couple of months.” EEI believes “at this point intime probably additional pipeline capacity is going to be needed,”but “I think that we need to get people on the same page withrespect to the timeframe and amounts” of capacity. He refused to”prejudge” the level of capacity that will be needed. “I thinkthat’s exactly why we need a conference to discuss those issues, toget all the views on the table.”

A new study by Energy ERA, a Calgary, AB-based consulting firm,concludes that the need for additional pipeline capacity to theU.S. Northeast isn’t immediate. It said the “planned and underwaycapacity additions from eastern Canada and the Gulf Coast [will be]sufficient to fill Northeast gas demand for the next few years,”and added that “economics do not support a majorMidwest-to-Northeast pipeline before at least 2004.”

The Energy Information Administration’s Annual Energy Outlookfor 1999 seems to bear this out, projecting a steady rise in gasconsumption by electric generators on the East Coast (New Englandand Mid-Atlantic) during the post-2000 period – with the mostsignificant increases beginning in the 2003-2005 period. Itestimates gas demand for power generation on the East Coast willjump 136% from 0.535 quadrillion Btus per year in 2000 to 1.26quads in 2005.

Susan Parker

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