It’s clearer now than ever before that significant additionalcapacity is needed to the Northeast, said Millennium PipelineChairman David Pentzien.

In the last month, the one- and two-year forward curves onNortheast basis (the difference in price between the Henry Hub andspot points in the Northeast) have blown out from 50 cents to atleast a dollar, sometimes even more depending on who you’re gettingquotes from, he said in an interview with NGI.

“If you look at what’s happened to the Northeast basis duringthe last month-and-a-half, it just indicates to me that people areresponding to the demand and that portion of the Northeast islooking for additional transportation,” Pentzien said.

“To experience this type of basis change in the summer isphenomenal. It’s usually something that’s driven by the onset ofcold weather as opposed to the anticipation of shortages in thewinter. Right now it’s a pretty significant shift.

“And there is higher volatility on top of that, he added. “Ifyou look at Dawn basis — [Dawn, ON] is essentially whereMillennium would start — it’s trading at about 20 cents. You lookat New York City basis of about $1, and you have 80 cents inbetween. Millennium is a 50-cent project. It tells me that, coupledwith our contracts, the power plants were proposing to serve, yousee a pretty strong motivation for expansion.”

He also said that after a long, bumpy ride the Millenniumproject appears poised to cross the last few mile markers in theregulatory process in the next few months and should be in-servicein November 2001. The fate of the project now depends on twothings: the evaluation of the route change in Westchester County,NY, and a final environmental impact statement, which must bereviewed by other several federal agencies regarding the pipeline’sHudson River crossing.

“I look at the Westchester County issue as being one that issolved,” Pentzien said. “We’ve been dotting all the I’s andcrossing all the T’s. FERC told us they needed a little bit moreinformation to make their evaluation to expedite their analysis andas I said in a letter to them last week, we are more than happy tocomply and they’ll have that information by the middle of June.We’re doing our best to get them everything they need.”

Regarding the controversial Hudson River Crossing, Pentziennoted that the New York Department of Environmental Conservationalready has issued a water quality certificate. “The biggest thingis the federal agencies need to have the final environmental impactstatement to make their final determinations,” he said.

Related to that is the Commission’s request that Millenniumexamine Iroquois’ recently filed Eastchester extension project as apossible replacement to Millennium. Pentzien said the two projectswould serve two entirely different markets with different customers(see NGI, May 29).

“If people would refer back to the draft environmental impactstatement on Millennium, you’ll notice there’s a section in therethat compares our system to 10 or 15 other types of alternatives,so the fact the FERC asked us to do this with [Iroquois’]Eastchester project, I think, is more procedural in nature.”

Iroquois filed an application for the project last month. The$170 million, 30-mile extension would help meet gas demand in NewYork City. It would run from Iroquois’ mainline in Northport, LongIsland 27 miles beneath Long Island Sound to a connection withConEd’s gas lines in the Bronx. It also would involve buildingseveral new compressor stations and adding compression at existingstations. If approved, the Eastchester Extension project will startservice in 2002. It initially would deliver about 220 MMcf/d of gascompared to Millennium’s proposed 714 MMcf/d. It also would besignificantly cheaper to build than the $650 million, 442-mileMillennium project, which would extend from Canada under Lake Erieto the New York metropolitan area.

“My official response is I think Eastchester’s filing is justanother indication of the market in the immediate Northeast area.We are serving two entirely different markets in my opinion,”Pentzien said.

“We have signed contracts. There’s a huge amount of power plantinfrastructure that either exists in the area or will be built inthe area, and the basis is blowing out,” said Pentzien. “There area lot of good things happening. The optimism level is pretty highin that the things that we set out to do three years ago, which wasto add capacity to this marketplace, are at the point whereeverything is finally coming together.”

Rocco Canonica

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