Independence Ruling Upheld; Transco, ANR Projects Advance
FERC last week held firm to its July order in which it awarded a
much-sought-after certificate to the controversial Independence
Pipeline, rejecting numerous requests to reconsider whether the
project's precedent agreements were binding and its market need
justified. Federal regulators also gave the go-ahead for Phase II
of ANR Pipeline's Wisconsin expansion, a Reliant Energy Gas
Transmission looping expansion in Arkansas, and accorded a
preliminary determination to Transcontinental Gas Pipe Line for its
proposed Sundance expansion in the Southeast.
The rehearing decision on the Midwest-to-East Coast Independence
was a dose of good news for the project's sponsors, which include
ANR, Transco and National Fuel Gas Co. But it now makes the case,
which has been entangled in a regulatory maze at FERC since March
1997, ripe for the courts, where --- given the decibel level of
opposition to the project --- it's likely to wind up next.
In the July order, the Commission awarded Independence a
certificate after it had negotiated precedent agreements with
Dynegy Marketing and Trade for 38% of the proposed capacity of the
pipeline, which met a condition previously imposed by FERC.
However, protesters continued to argue that the Dynegy precedent
agreements were not binding because they contained board of
Although FERC's policy on what constitutes a binding commitment
"has never been clearly articulated," the order said the Commission
"generally [has] accepted" precedent agreements subject to board of
directors' approval, but has rejected agreements that contain
"market out" clauses.
"We find the Dynegy contracts are sufficient to satisfy the
Commission's contract requirement" imposed by FERC in a decision
last December, according to the order [CP97-315-004]. "Dynegy is an
established, existing, non-affiliated marketing company, with
worldwide wholesale natural gas sales of more than 10 Bcf/d. We
find the fact that Dynegy is willing to commit to 38% of the
capacity for this project.....is sufficient to support our finding
that there is a need for the Independence project."
But Independence cannot begin construction of the project until
it files with FERC binding executed contracts (with no out clauses)
for 68.2% of firm capacity of its proposed project. The Commission
rejected requests to condition its order on Independence producing
the needed contracts within 12 months or face termination.
"Independence is already under a requirement to complete
construction of its authorized facilities and place them into
service within three years. Thus, there is a de facto limit on the
time it has to execute contracts and commence construction. We do
not believe it is necessary to establish additional limits," the
Moreover, it dismissed challenges to the need for the
Independence project. FERC "finds that there is sufficient
evidence.....to demonstrate market need and support a finding that
the pipeline is required by public convenience and necessity."
The proposed Independence line, combined with ANR's associated
SupplyLink expansion, would transport 1 Bcf of Canadian natural gas
from Chicago to the Leidy Hub in Pennsylvania, where it could be
picked up by other pipelines and shipped to East Coast markets.
Landowners in both Ohio and Pennsylvania have been opposed to the
project from the start, and have filed numerous protests at FERC to
try to stop construction.
ANR/Wisconsin Phase II
The Commission also awarded a certificate to ANR for the
construction of the second phase of its system expansion from the
Joliet, IL, hub to southwestern Wisconsin, which would add 84,950
Dth/d of firm transportation capacity. The action comes less than a
year after FERC approved the first phase of the project that will
add 109,000 Dth/d of system capacity into the state.
The FERC decision gives ANR a leg-up over the much larger
Guardian Pipeline project in providing expanded service to the
southern Wisconsin market. The 149-mile Guardian line received a
preliminary determination from the Commission in June.
ANR initially proposed its Wisconsin expansion as one project,
but it later decided to phase it into two parts when the Commission
deferred action on its upstream SupplyLink project. While phase one
could be acted on independently, the construction of phase two, ANR
told FERC at the time, hinged on SupplyLink being certified, which
it was in July.
ANR's second-phase project includes minor looping of its
existing Michigan Leg South system in Kendall County, IL; a new
1,500 horsepower (hp) turbine compressor unit at its existing
Weyauwega Compressor Station in Waupaca Country, WI; a 1,500 hp
reciprocating compressor unit at its existing Janesville Compressor
Station in Rock County, WI; and minor related facilities. The
certificate requires the second phase, which will cost about $13.7
million, to be constructed and in operation within two years.
The Commission said the ANR project complied with its policy
statement on pipeline construction, which requires that new
projects not adversely affect existing shippers, landowners and
"ANR is proposing to serve new and projected near-term demand
load not currently served by another pipeline. Thus, the project
will not impact any existing pipeline or its customers," the order
said [CP00-241]. "In addition, since the project mainly consists of
compression additions to existing stations and only approximately
3.11 miles of new pipeline facilities, the impact on landowners
from taking of land by eminent domain will be minimal."
Moreover, it rejected the claims of Wisconsin Fuel & Light,
Wisconsin Gas Co. and the Wisconsin Public Service Corp. that the
costs of the ANR project might be shifted to existing customers.
ANR has not negotiated any precedent agreements yet for the
second half of the project, but the Commission agreed the presently
uncommitted capacity is needed to meet the projected near-term
market demand growth in Wisconsin. For the first phase, ANR has
executed firm contracts with non-affiliated shippers for about
55,000 Dth/d of new firm service to begin Nov. 1 of this year, and
an additional 28,950 Dth/d to start Nov. 1, 2001.
The fully-subscribed Transco Sundance expansion cleared the
first step of the regulatory process, receiving a preliminary
determination on non-environmental issues. The 38-mile pipeline
project is an incremental expansion (236,383 Dth/d) of Transco's
existing system in North Carolina, Georgia, Alabama and
Mississippi, and seeks to cash in on the growing gas-fired
generation demand in the Southeast.
The $134 million expansion consists of 42- and 48-inch looping
of Transco's mainline in Mississippi, Alabama and North Carolina; a
new 18,975 horsepower compressor unit, plus upgrading two existing
compressor units, at Transco's existing Compressor Station No. 115
in Coweta County, GA; a new 15,000 hp compressor unit, plus an
upgrade of an existing compressor unit, at Transco's existing
Compressor Station No. 125 in Walton County, GA; and gas coolers at
Compressor Station No. 150 in Iredell County, NC.
Transco has negotiated precedent agreements with 12 shippers for
100% of the proposed new capacity on its Sundance expansion, with
the lion's share going to Southern Company Services Inc. (140,000
Dth/d) and Carolina Power & Light (75,000 Dth/d). The
agreements are for firm service for 15 years.
"The Sundance project will serve growth requirements of new
electric generating plants to be constructed or the expansion of
existing plants." Consequently, "there is no evidence that other
pipelines or their captive customers will be adversely affected by
this project," the FERC order said [CP00-165].
Also, given that 96% of the Sundance project's route will be in
or adjacent to existing right-of-way, the order said "no landowners
will be permanently affected and any adverse effects on landowners
will be minimized."
Transco proposed maximum recourse rates of $9.1897/Dth for firm
service on the Sundance expansion project, but FERC adjusted the
rates downward to $9.1769/Dth. However, the Commission agreed with
the proposed rate for expanded firm capacity on Transco's North
Georgia extension --- $3.7323/Dth.
Lastly, the Commission awarded a certificate to Reliant Energy
Gas Transmission to construct minor looping facilities so it can
provide 40,000 Dth/d (or more) of firm transportation capacity to a
new cogeneration plant being built by Pine Bluff Energy LLC in
Jefferson County, AR. Pine Bluff also has executed a lease
agreement with a nearby plant of International Paper Co., which
plans to extend its lateral to connect with the Pine Bluff