FERC tied up all the loose ends of the Maritimes &amp NortheastPipeline project in a draft order released last week, clearing theway for the pipeline to begin delivering about 350 MMcf/d of SableIsland gas to power plants, paper mills and new markets in Maineand other New England states this fall.

“With final approval in hand, we will begin construction of themainline in the next few weeks,” said Tom O’Connor, president ofM&ampN Management Co., managing member of Maritimes. “We continueto move forward and remain on schedule to meet our in-service dateof Nov. 1, 1999.” Pipeline officials said they have agreements withlandowners on 90% of the right of way along the 200-mile route fromBaileyville to Westbrook, ME, and successfully drilled beneath theAndroscoggin River in March.

Over several protests, including one from the town of Pittston,ME, and another from Maritimes shipper Boston Gas, FERC approvedthe amended certificate application for the project, allowingMaritimes to lower the project’s firm capacity by 18%, deferconstruction of five laterals and raise its firm reservation rates22% to $0.715/Dth.

Maritimes raised the costs of its stand-alone pipeline to about$390 million, or $90 million more than what was projected in itsJuly 1998 certificate. Costs also increased $24 million on theJoint Facilities line, which is owned jointly with Portland NaturalGas Transmission (PNGTS) and extends 100 miles south fromWestbrook, ME, to Dracut, MA. The company said there wereunexpected increases in labor costs, engineering, overhead andother expenses. And the Commission agreed the rate hike wasjustified. The project still has substantial markets to serve, FERCsaid, contrary to the claims of its protesters.

The project was downsized to reflect the loss or delay ofnumerous markets in the state. Maritimes originally had 17shippers, but the amended version of the mainline project has onlyfour, excluding two new pipeline lateral customers. The town ofPittston had requested a rehearing and stay of the amended project,saying it was speculative because it lacked enduser support andbecame more of a “producer-shipper” project. But FERC rejectedPittston’s claims.

“The fact that the majority or even all of the capacity of aproposed pipeline is subscribed by marketers and/or producers doesnot render a project speculative, as Pittston suggests,” the ordersaid. Marketers or producers who signed long-term agreements”presumably have made a positive assessment of the potential forselling gas to end-use customers.”

The order also stated that Maritimes “appropriately downsizedits facilities.. Thus we find that there is no merit to Boston Gas’contentions that Maritimes’ market is in ‘free fall,’ that therehas been a reduced level of support of the project, or that theproject is oversized for the current level of subscriptions.”

Maritimes has “overwhelmingly demonstrated market demand for theproject as 82% of the pipeline’s capacity is subscribed underlong-term firm contracts,” Commissioner William L. Massey saidduring FERC’s meeting last Wednesday. “In short, this is a soundproject. It will provide a competitive source of new gas supplies,and it poses very little risk to shippers other than to Mobil andthe Sable Offshore producers, who have so heavily invested inMaritimes’ success.”

Maritimes has firm service agreements for 358,775 Dth/d ofmainline capacity with four shippers: Salmon Resources (15years/100,000 Dth/d), a subsidiary of Shell Canada; Canada Limited(10 years/30,240 Dth/d), a subsidiary of Nova Scotia Resources;Mobil Natural Gas (20 years/185,335 Dth/d); and Boston Gas (threeyears/43,200 Dth/d). The customers being served by the two newlaterals evidently will be utilizing up to 270,000 Dth/d ofcapacity subscribed by the other shippers.

“One aspect of Maritimes’ application that is interesting to meis its request to reduce the pipeline certificated capacity byabout 20%,” said Massey. “I’m not sure what the reduction in thecapacity of this project means. It may be a reflection of the factthat the market has not matured to the degree that Maritimesoriginally anticipated… Perhaps this is an anomaly in anotherwise robust market. Perhaps it’s a timing issue. In any event,I find it interesting and somewhat counterintuitive in theNortheast market. I’m pleased to support this order.”

FERC granted a waiver of its rules to allow the pipeline toprovide market information to its affiliate Mobil, a Sable OffshoreEnergy Project producer, because of Mobil’s willingness to sign anunusual backstop agreement that shields the pipeline and the otherMaritimes shippers from the risk of unsubscribed capacity.

The Commission also granted Maritimes’ request to construct andoperate two additional lateral lines to deliver about 270,000 MMBtuof gas to the proposed Casco Bay (a Duke Energy affiliate) andGorham Energy power plants in Maine. The customers did not sign upfor mainline capacity, but FERC noted Casco Bay will be fed withgas off of the mainline. The Gorham lateral will extend off theJoint Facilities line.

Rocco Canonica

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