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Rising Tide of Landowner Protests Cut Future Deliverability
While the sheer number of pending and projected natural gas pipeline projects may be staggering, that's not what sets them apart from projects that preceded them. Rather, the distinguishing factor is that they're coming at a time when the "complexity and volume" of environmental issues and the level of landowner anti-project sentiment have reached unparalleled heights, says a top FERC official.
In a nutshell, FERC has authorized about 13 Bcf/d, or just over 4,000 miles, of new pipeline capacity during the past three years. Still pending at the Commission is another 8 Bcf/d, or 4,000 miles, of new pipeline projects. And in the next year or so, it expects the industry to file projects totaling more than 7 Bcf/d, which represents about 1,200 additional miles of pipe facilities, said Randolph E. Mathura, director of the Division of Pipeline Certificates for FERC's Office of Energy Projects, at GasMart/Power 2000 in Denver last week.
If you add all of the projects that were certificated in the past three years, as well as those pending and anticipated, to the Energy Information Administration's estimate for current pipeline capacity (123 Bcf/d), "you can see that's an increase of system capacity [of] about 23% in just a few years time," he noted.
For the longer term, the Interstate Natural Gas Association of America (INGAA) projects an average of 1,500 to 3,000 miles of pipe will have to be built each year between now and 2010 to reach that "magic 30 Tcf" demand number, Mathura said. That's an additional 16,000 miles of new pipeline, which would be an 180% increase over the construction activity of the past five years. At the same time, the National Petroleum Council anticipates an estimated 30,000 miles of new and replacement pipelines must be built by 2015 to meet projected requirements of 150 Bcf/d.
"Now historically speaking, I would agree that this expected level of activity is not unprecedented. But what is significant about it is the increasing complexity and volume of environmental issues we're dealing with. Moreover, these issues are being championed by more different types of parties than you've ever seen at FERC proceedings," Mathura said.
FERC at one time thought the Kern River and Iroquois pipeline projects were "highly controversial," but that's nothing compared to "what we see in the ANR Independence [and] Transco cases." The Independence Pipeline project elicited more than 6,000 letters of opposition last year, mostly from landowners.
The majority of the new intervenors at the Commission are private landowners. "Not only are the issues that they're raising difficult and complex, but the folks are emotional and intense about these issues, and are willing to do whatever it takes to pursue them," Mathura told the energy executives at the conference.
The landowners also are becoming more organized and aren't afraid to ask their political leaders for help, he said. ".....[W]e're seeing more and more citizen groups being formed and actively participating. We're seeing a lot of involvement in our cases by local, state and U.S. congressional representatives."
The landowners, Mathura noted, "are demanding recognition of their private property rights. They want some assurance that it [the taking of their property] is really in the greater public interest of the nation. And they want to see hard evidence of this in our cases....."
Jamie Craddock of Williams Gas Pipeline-Transco, sole sponsor of the proposed MarketLink expansion and co-sponsor of Independence, knows first-hand about landowner opposition. Both projects are in limbo at the Commission, awaiting rehearing of December's interim order and/or final certificates, due in large part to the rising mettle of private landowners.
In the interim order, FERC conditionally approved the interrelated, multi-state SupplyLink, Independence Pipeline and MarketLink projects, but withheld certificates until further market showing for the projects could be furnished. Craddock said MarketLink already has enough market support to justify its project, and is awaiting Independence and SupplyLink, which Mathura said haven't provided any information to FERC yet.
"We have to date not separated our MarketLink" project from SupplyLink and Independence, said the manager of project development for Transco. "We were really kind of invited to do so in the Commission's interim order. But we've been holding, waiting to see what [will happen on] rehearing."
In the event "we don't get some relief in rehearing on some of the conditions" imposed by FERC on MarketLink, "we will have to do [just] that" - sever MarketLink from the other two projects. "MarketLink on its own can provide service without some of the upstream pieces," Craddock noted. While the SupplyLink and Independence projects "complement" MarketLink, they "[are] not fully necessary" to MarketLink's survival.
As initially proposed, the SupplyLink expansion and greenfield Independence projects were supposed to transport competitive Canadian gas supplies from the Chicago market to MarketLink to satisfy the growing demand on the East Coast.
Even if MarketLink would be severed, the opposition to the project still runs high. Landowners in Pennsylvania and New Jersey, where the MarketLink expansion of Transco's existing system would occur, don't want any part of it and the New Jersey governor has threatened to go to court to stop MarketLink if FERC approves it.
But Craddock and Williams remain convinced of the need for MarketLink in the Northeast market. Even during summer Transco is allocating its Northeast capacity for firm and non-firm service, she said. "It used to be if you needed non-firm capacity in the summertime [it was] no big deal," but that has changed over the past two summers.
The situation is much worse in the winter. "By no means was this year a record winter. We had [only] 18 days where it acted like winter." Still, delivered prices in the Northeast during this past January and February were 106% higher than a year ago, she said. In the New York market, delivered prices shot up to the $17 range on Transco's system. Such prices show there's a "delivery infrastructure problem" in the Northeast region.
Craddock also let it be known that she's not too happy with FERC's new policy statement on pipeline construction, which she said requires project sponsors to "balance" the disparate interests of landowners, their existing shippers and pipeline competitors in order to obtain certificates for their proposed projects.
"I feel it stands to delay the needed pipeline infrastructure, takes away customer choice, removes incentives for existing pipelines to find efficiency and it's going to increase pipeline risk and potentially project costs," she said.
Susan Parker, Denver
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