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NGPL, TETCO Target Eastern Markets

NGPL, TETCO Target Eastern Markets

The landscape of projects and programs to move Canadian gas arriving in Chicago on to the East changed again last week. Kinder Morgan's Natural Gas Pipeline Co. of America (NGPL) and Texas Eastern Transmission (TETCO) are targeting the market with a reciprocal capacity lease arrangement.

NGPL says the transportation service can be provided with only one additional interconnect, so it is far more cost effective than the greenfield projects already proposed, which require massive construction. "With the growth of Canadian imports via the Northern Border and Alliance pipelines, Chicago will become a major supply source for natural gas," said Kinder Morgan CEO Richard D. Kinder. "HubAmerica will utilize NGPL's strategic location, wide variety of interconnects and flexible transportation and storage services to enable shippers to move natural gas from the Chicago area efficiently and cost effectively to other geographical markets throughout America. We believe this program will benefit our customers and significantly increase throughput on NGPL."

NGPL signed a letter of intent with Duke Energy's Texas Eastern for a long-term reciprocal gas pipeline capacity lease. Under the agreement, TETCO and NGPL will lease capacity on each other's pipeline systems to offer seamless transportation services of natural gas from the Chicago area to eastern markets.

An NGPL interconnect to TETCO is planned at Bald Knob, AR, said NGPL President Deb Macdonald. "This is the first of many kinds of alliances with other interstate pipelines that we're going to enter into." NGPL also is in discussions to enhance its interconnect with Transwestern, she said.

Macdonald said NGPL will file with the FERC following an open season. She said any challenges to the pipeline's plan can be overcome by the fact that, besides the interconnect, it does not include any new facilities, unlike competing projects.

TETCO is labeling its part of the plan the "Enhanced Spectrum " program, following on its earlier eastbound "Spectrum" project. The plan is to use capacity turnback on TETCO and back-haul capacity on NGPL. Service under Enhanced Spectrum is designed to be available beginning Nov. 1, 2000, coinciding with the start-up of Alliance Pipeline, said Robert B. Evans, president of Duke Energy Transmission.

The proposed capacity-lease arrangement between the two pipelines appears to be a new, and seemingly improved, twist to a proposal that TETCO had been pushing at FERC for months as an alternative to the greenfield Independence Pipeline and SupplyLink and MarketLink expansions, which still are pending. TETCO has argued all along that it has or will have enough unsubscribed firm capacity on its system to meet most of the needs of the customers that would be served by the Chicago-to-East Coast pipeline projects. Therefore, it reasoned that construction of the pipelines was not necessary. The Commission staff, however, flatly rejected TETCO's proposal as a viable alternative in its final environmental review of the three projects.

Several companies have proposed projects to move gas east of Chicago by constructing new pipelines that would cost millions of dollars. "Through this agreement, NGPL and TETCO will be able to move gas to eastern markets on our existing systems simply by adding an interconnection between our pipelines. This is a superb example of two companies partnering to provide the marketplace and customers with important natural gas transportation solutions," Kinder said. Over time, NGPL intends to expand the reach of HubAmerica by entering into similar strategic arrangements with other transporters. These alliances will enhance the value of HubAmerica by providing direct access to markets not directly connected to NGPL's system.

In addition to natural gas from Canada, NGPL has access to Rocky Mountain supplies through interconnects with Kinder Morgan's Trailblazer and Pony Express pipelines. HubAmerica will provide direct access to major markets in Illinois, Indiana, Iowa and Wisconsin; and indirect access to Dallas, Houston, St. Louis, Kansas City and to markets on the West Coast, East Coast and Southeastern states through numerous downstream interstate and intrastate pipelines.

HubAmerica will offer firm and interruptible transportation services in conjunction with other NGPL services, such as parking and loaning transactions and other storage and balancing services. Daily rates for transportation service will be conveniently posted on NGPL's bulletin board.

Enhanced Spectrum will be accepting capacity commitments of three years or more. Both companies will hold their open seasons from May 15 through June 15 to determine the level of customer interest. Information meetings have been scheduled for May 9 in Houston and May 11 in Calgary. Contacts are Bruce Page, director of HubAmerica, (877) 482-2637 and Randy Riha for Enhanced Spectrum, (713) 627-4746 or rjriha@duke-energy.com.

Joe Fisher, Houston

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