Hebert, Transco Lobby for Northeast Pipe Projects
In the wake of spiraling heating oil prices, Commissioner Curt
Hebert Jr. last week challenged his FERC colleagues to follow in
the Clinton administration's footsteps to help reduce the
Northeast's dependence on the higher-priced fuel. A
Transcontinental Gas Pipe Line official made a similar pitch to
remove regulatory roadblocks to new natural gas pipeline
construction last week at a Senate hearing.
Hebert said several of the measures taken by the Clinton
administration in recent weeks to address the high heating oil
prices were "consistent with my own [views], and [I] suggest that
my colleagues step forward in the same manner." But while Hebert
commended the administration, Senate Energy Committee Chairman
Frank Murkowski (R-AK) last week blamed its lack of a "coherent
energy policy" for the heating-oil price spikes.
In response to the rising prices, President Clinton announced
that approximately $130 million in federal aid would be available
for qualified homeowners in the Northeast to meet their winter
heating bills, and he proposed that Congress provide $600 million
in aid as well, according to Hebert. Clinton also recommended a
"split" from heating oil to natural gas dependence in the
Northeast, as well as an improvement in energy transportation. But
Murkowski saw these as only short-term fixes to a much larger
"...[T]he cost of this aid, $730 million, almost equals the cost
of building the ANR SupplyLink project and the Independence
Pipeline project at $803 million," Hebert said during the
Commission's regular meeting last Wednesday. FERC has conditionally
approved the two Northeast pipeline projects, but is withholding
their certificates until greater demand can be demonstrated.
While the Commission struggles with the issue of the need for
more pipeline deliverability to the Northeast, Hebert said the
region's heating-oil customers are paying the price. "...[S]hould
this Commission continue to...[hold] captive the consumers of the
Northeast and force them to pay excessive prices to heat their
homes and businesses? Or, should this Commission foster and enhance
the alternatives available to the consumers? We all know the
Even gas customers paid the price when New York citygate prices
soared to high levels in mid to late January, while prices at the
Henry Hub languished in the cellar. Many pinned the reason for the
higher gas prices on the severe cold weather in the Northeast then,
which put a strain on existing pipeline deliverability.
Although this was a relatively mild winter overall, "a review of
operational and pricing data from this winter shows that the
existing pipeline infrastructure was clearly challenged to meet gas
demand in the Northeast," said Gary D. Lauderdale, Transco's senior
vice president and general manager, at a Senate hearing into the
heating-oil price spikes last Thursday.
Transco was able to meet its firm contractual commitments this
winter in the Northeast, but it wasn't able to supply gas to
interruptible customers, many of whom were forced to switch to fuel
oil, he told the Senate Energy and Natural Resources Committee.
Several other pipelines serving the Northeast had to restrict their
deliveries of gas for "limited periods of time." Lauderdale said
Transco proposed a 700,000 Dth/d expansion of its existing line in
Pennsylvania and New Jersey to serve the growing demand in the
region, but the project (MarketLink) has been caught in an
"extremely slow regulatory approval process."
The "scarcity of pipeline capacity" into the region was
reflected in the higher increases in delivered gas prices in the
Northeast during January. While the average delivered gas price on
Transco's system for Zone 6 (non-New York) rose 106% in January to
$4.89 from $2.37 a year ago, the increase on Transco's system into
New York in January rose 129% to $5.87 from $2.56 a year ago, he
noted. The price increases in February were even "more dramatic."
"In January and February 2000, customers in the Northeast
experienced record high daily gas prices of $15.34 for deliveries
into New York and $12.31 for other Zone 6 deliveries," Lauderdale
testified. In comparison, the average delivered gas prices at the
Henry Hub rose only 29% to $2.39 in January from $1.84 a year ago,
and in February prices increased 55% to $2.75 from $1.77 in
"If the existing pipeline infrastructure is currently taxed,
what will happen when the projected growth in natural gas demand
occurs?" he asked. The Energy Information Administration (EIA)
projects that gas demand in New England, Mid-Atlantic states and
South Atlantic states will rise by a total of 3.3 Bcf/d by 2005.
Transco's MarketLink expansion project has been pending at FERC
since May 1998.
Commissioner Linda Breathitt defended FERC's action, saying
"it's hard for me to make the leap that a price spike [in heating
oil] translates to an immediate demand for natural gas" in the
Northeast. "There's a conversion process that would have to take
place over a period of time," she noted. "I do not believe that the
demand for gas in the Northeast requires the Commission to issue
carte blanche authority to construct pipelines facilities."