NJ, Capitol Hill Knock FERC's Pipe Ruling
The fallout from FERC's unpopular decision on the
SupplyLink-Independence-MarketLink gas pipeline projects continued
throughout most of last week, first with New Jersey pledging to
take the Commission to court over MarketLink and then with the most
powerful energy lawmaker on Capitol Hill publicly accusing the
Commissioners of trying to undermine the construction of the
proposed $678 million Independence Pipeline to the Northeast.
New Jersey's attorney general (AG), acting on the directions of
Gov. Christine Whitman, vowed on Wednesday to seek a court appeal
of FERC's rehearing order conditionally awarding a certificate for
Transcontinental Gas Pipe Line to proceed with the construction of
its MarketLink expansion through the northern part of the state.
The state has up to 60 days to petition the U.S. Court of Appeals
for the D.C. Circuit to review the FERC order.
In rejecting New Jersey's petition for rehearing at FERC last
week, the Commission "overlooked the impact such construction would
have on the residents and the environment," said AG John J. Farmer
Jr. in a prepared statement. The Garden State intends to argue that
FERC failed to properly address the safety of the proposed
expansion, protect New Jersey's environment and to properly
consider a proposed alternative to the expansion.
The MarketLink project, which would expand the capacity of
Transco's existing 154-mile system in Pennsylvania and northern New
Jersey by 700 MMcf/d, has been hotly contested by landowners in
both states and by New Jersey lawmakers (see NGI Dec. 20, 1999)
Rep. Williams J. Pascrell Jr., through whose district MarketLink
would run, also may seek an appeal or stay of the MarketLink
decision in either the D.C. Circuit or the Third Circuit Court of
Appeals in New Jersey, said Joe Waks, press aide and legal counsel.
Or, he may join New Jersey's planned legal action, he noted.
"By no means is this a done deal," Waks said. "They [Transco]
need firm iron-clad, no-back-out contracts, which they haven't
gotten so far. They're a long way from putting the shovels in the
FERC approved the MarketLink expansion in December, but withheld
its certificate until it could produce evidence of further market
support for the project. The Commission acknowledged last week that
Transco, a Williams pipeline, had adequately demonstrated market
Nevertheless, FERC conditioned MarketLink's expansion
certificate on Transco first submitting executed contracts for 100%
of the project's capacity, ridding its project contracts of
market-out clauses and showing that its contracts will not be based
on the availability of upstream transportation on the proposed
Independence line [CP97-315-003]. Cuba Wadlington, president and
CEO of Williams Gas Pipeline, said Transco "absolutely" would be
able to satisfy the contract restrictions. He expects MarketLink to
be up and running by 2001.
But Rep. Pascrell has his doubts. "I am still not convinced that
they [Transco] can meet this heavy burden," he said. In addition to
the contract requirements, he pointed out the FERC order also
maintained the "stringent" environmental standards, and requires
Transco to put up a $1 million bond for any environmental damages
and hire an ombudsman and environmental monitors to address
complaints by affected residents.
While New Jersey and Pascrell want to stop a project, Chairman
Frank Murkowski (R-AK) of the Senate Energy and Natural Resources
Committee read the riot act to the Commissioners for not looking
favorably upon the proposed greenfield Independence line and the
associated SupplyLink expansion. FERC was in a no-win situation
He took the Commissioners to task for issuing an unprecedented
ultimatum to the sponsors of the two projects --- to either produce
long-term, non-affiliate contracts for 35% of the 1 Bcf/d capacity
of the projects within 60 days or face dismissal of the projects.
Many believe the decision, which was supported by the FERC majority
(Commissioner Curt Hebert Jr. dissented), is a kiss of death for
the associated gas pipeline projects.
"He was pretty rough" on the FERC Commissioners, who came to a
Senate hearing last Thursday expecting to answer questions on
electricity restructuring, a committee spokeswoman said. Murkowski
demanded an explanation from each as to "why you are not doing
everything you can to get this pipeline built as fast and as
cheaply as possible" to alleviate the Northeast's dependence on
high-priced oil. It also would help lower the cost of electricity
which Murkowski sees as doubling this summer if oil prices remain
between $22 and $28 a barrel. "The Commission's actions in the
Independence pipeline case seem to indicate that you really don't
want this pipeline built."
In imposing the deadline, FERC said sponsors had ignored its
request four months ago for further proof of market support. "By
providing the project sponsors with a drop-dead date 60 days hence,
the Commission intends to send an unmistakable signal that we want
to see a demonstration of market support" for Independence and
SupplyLink, said Commissioner William Massey. SupplyLink is
sponsored by ANR Pipeline, while the financial backers for
Independence are ANR, Transco and National Fuel Gas Supply. Both
projects have been pending at FERC for three years. Wadlington said
Transco continues to be "very much behind" the Independence
Likewise, the Commission hasn't given up on the Independence and
SupplyLink projects yet, Massey noted. "I must point out that
despite the myth to the contrary we have never said 'no' to these
projects, and we're not rejecting them today." And while MarketLink
achieved a triumph last week, it is by no means out of the woods.
If New Jersey and Rep. Pascrell have their way, it could be tied up
in the courts for awhile.
MarketLink initially was conceived as the last link to a
622-mile pipeline chain that was to transport up to 1 Bcf/d of
Canadian gas from the Chicago market to the East Coast. Based on a
relay-race concept, the gas was to be shipped from Joliet, IL, to
Defiance, OH, over an expanded ANR system (SupplyLink project),
picked up at Defiance by the proposed 400-mile Independence line
and delivered to the Leidy Hub in Pennsylvania, where it then was
to be shipped to East Coast markets over an expanded Transco system
(MarketLink). But MarketLink now says it's not dependent on the
upstream portions of the project (SupplyLink and Independence) for
its survival. Rather, it can receive Canadian and Gulf Coast gas
supplies from existing pipelines that tie into the Leidy Hub in
On rehearing, the Commission last week upheld the bulk of its
December interim order in which its approved SupplyLink,
Independence and MarketLink, but withheld their certificates until
further market support could be shown for their respective
projects. In the interim order, it had rejected as questionable a
contract with a brand new affiliate for 55% of the Independence
capacity, which cast serious doubt on the market demand for both
Independence and SupplyLink.
This order "does not register a generic distaste for affiliate
contracts. [Nor does it] set down a policy of going behind
contracts" to assess the adequacy of market demand for a pipeline
project, said Chairman James Hoecker. "It's our job to distinguish
between sound applications and questionable applications. And [all]
we ask in these cases is if the market exists, 'show us.'"
Hoecker believes FERC's decision to certificate the MarketLink
project "is ample indication that this Commission is not about to
stifle the legitimate growth in the natural gas markets in the
Northeast or anywhere else. So, I'd just say in both of these cases
the sky is not falling."
Hebert denounced the rehearing order, accusing the FERC majority
of trying to "strangle vitally needed pipeline expansion in the
Northeast. When and if there are rolling brownouts and blackouts
[of electric power], I hope this agency will take its share of the
blame for not fostering adequate [pipeline] infrastructure....."