Cross Bay Sponsors Asked to Defend Pipe Project
FERC last week directed the Cross Bay Pipeline Co. L.L.C. to
respond to a series of questions mostly focusing on the East Coast
project's byzantine financial and capacity-lease arrangements that
have prompted protests from customers.
In a letter containing nine pages of detailed questions, Daniel
M. Adamson, director of the FERC Office of Energy Projects, asked
the sponsors last Tuesday to address the "complex issues and
problems" raised by several current customers of Williams'
Transcontinental Gas Pipe Line, a sponsor of the Cross Bay project
that seeks to boost natural gas deliveries in the New York City
metropolitan areas by 125,000 Dth/d. The other partners include
Duke's Texas Eastern Transmission and KeySpan Energy Development.
"Because of the complexities of natural gas deliveries in the
New York area, it is not clear to us, or these parties, that your
proposal holds Transco's current customers harmless," he said. "If
you can show us that this latter point is substantially true, then
we will be in a position to balance any remaining adverse affects
of your proposal with its likely public benefits."
A number of Transco shippers contend the existing application
for Cross Bay - which involves the construction of new facilities
and the acquisition of existing pipeline from Transco, as well as
the leasing of capacity to and from Transco - outlines an
unnecessarily complicated financial and legal structure for the
Specifically, Adamson asked the sponsors to provide FERC with an
"illustrative proposal" in which Transco would be the sole sponsor
of Cross Bay and alone would create the 125,000 Dth/d of additional
capacity; explain the "financial, accounting or tax benefits" of
Transco providing 37 miles of existing pipeline to Cross Bay; offer
a "detailed qualitative and quantitative explanation of the public
and private economic or financial benefits" of the proposed
upstream lease arrangement between Transco and Cross Bay, and
discuss the "interdependency, or lack thereof, between [Transco's]
Cross Bay and MarketLink projects." Replies to the Commission
staff's questions are due within a month.
Cross Bay proposes to build new facilities and acquire 37 miles
of existing pipeline from Transco to form a new interstate pipeline
system that would extend from Middlesex County, NJ, across the
lower New York Bay, all the way to Nassau County, NY. Cross Bay
would have total firm transportation capacity of 614,628 Dth/d, of
which 125,000 Dth/d would be available for new shippers and 489,628
Dth/d would be leased to Transco. The capacity lease agreement
would cost Transco about $61,483/month, and would enable the
Williams pipeline to continue serving the customers who are
currently receiving service on the facilities that it seeks to
transfer to Cross Bay. As part of the deal, Cross Bay would acquire
the 125,000 Dth/d under an "upstream pipeline lease" agreement that
would cost $31,878/month.
This upstream lease agreement of Cross Bay's has been at the eye
of the storm. Existing Transco shippers say it would provide the
new shippers on Cross Bay with a "very large, unjustified rate
discount" at their expense. They argue it violates the "no subsidy"
standard established in FERC's certificate policy statement on new
Adamson suggested that the Commission staff "could host a
technical conference to assist you and your customers in discussing
these issues and problems after you have responded to our
Staff believes it can "bring a final certificate recommendation
before the Commission in the time frame that you request," he told
the Cross Bay sponsors, but it's "unlikely" a preliminary
determination will be issued in the near term due to the
"unresolved issues and problems raised by parties."