Natural gas pipeline capacity appears “adequate” to meet mostpeak-day demands as the nation heads into the 2000-2001 winterheating season, assuming the weather is average. But there are someareas where capacity constraints and bottlenecks could crop up —most notably in the Northeast region, according to a new report bythe Energy Information Administration (EIA).

Overall, gas pipelines in the Northeast last year had thehighest utilization rate (77%) compared to pipelines in all otherregions of the Lower 48 States, Canada and Mexico, whichunderscores the region’s high vulnerability to capacityconstraints. This compares to an average usage rate of 66% for allpipelines in the Lower 48 in 1999, the EIA noted.

Capacity constraint problems continue to persist in theNortheast even though 15 expansion projects totaling 2.3 Bcf/d ofadditional deliverability were placed into service in 1999-2000 —more than in any other region in the nation, the report said.

Specifically, the Department of Energy (DOE) agency singled outNew York City, Boston and the Leidy hub in Pennsylvania aspotential deliverability trouble spots for this winter. In New YorkCity, “several constraint points have developed in recent years,”and while new pipe projects — such as the Cross Bay Pipeline —have been proposed to relieve the situation, they aren’t expectedto be in service until 2002 at the earliest.

Other major projects — the 1 Bcf/d Independence Pipeline, 714MMcf/d Millennium Pipeline and the proposed 160 MMcf/d Eastchesterexpansion of Iroquois Gas Transmission System — should provideadded capacity into the New York City market within the sametimeframe, but “incremental growth in demand also might be met byless extensive expansions on the existing portions of theTranscontinental Gas Pipe Line and Texas Eastern [Transmission]systems serving the region,” said the EIA report, which wasreleased last week.

The Leidy hub “could become a potential constraint point forpipeline gas flowing to the East Coast, particularly the northernNew Jersey, New York City area,” according to the EIA. “Currentpipeline capacity in the area appears sufficient, but growingdemand for gas trading and transport capacity probably will requiresome expansion of existing pipelines in the area.” It believes theIndependence project and Transco’s MarketLink expansion – whichhave run into a wall of opposition from landowners and the state ofNew Jersey – would provide “significant development of capacity inthe area.”

In the Boston market, “where pipeline capacity is alreadyheavily utilized, demand has been growing and is expected to growrapidly over the next several years, especially from developers ofgas-fired power generation plants,” the agency noted. Some of thisgrowth already is being met by the Portland Natural GasTransportation System/Maritimes & Northeast pipeline system, itsaid. Looking ahead, Tennessee Gas Pipeline anticipatesconstruction of its 288 MMcf/d Eastern Express expansion will becompleted by June 1, 2001. Also, Algonquin Gas Transmission hasproposed its HubLine project to bring as much as 600 MMcf/d to theBoston area from interconnections with a proposed extension of theMaritimes & Northeast system. The project was targeted to be inoperation in 2000-2001, but has been pushed back.

The EIA said it also foresees capacity problems cropping up inthe western region, specifically in California. “Utilization levelson the major transmission pipelines serving the state have beenwell above 90% in recent months and could reach their limit ifdemand levels continue to increase.” Also, the “service needs inthe southern Nevada area continue to remain at a very high level,suggesting the need for system expansion in that area as well.”

In the 1999-2000 period, however, the western region had theleast amount of new pipeline development, completing only fiveprojects totaling 397 MMcf/d of additional capacity. But that couldchange.

According to the EIA, “there is growing interest in directingsome of the expanding Power River Basin production to theCalifornia/Nevada marketplace.” Although there hasn’t been any”significant expansion” of the pipeline systems that ship RockyMountain, San Juan and Permian Basin gas to the western statessince 1993, “there are signs that during peak-demand periodsadditional pipeline capacity will soon be needed to handle growingdemand swings for natural gas in the region.”

The Central Region (Wyoming, Montana, Colorado et al) is facedwith the problem of excess gas production and limited receipt orexit pipeline capacity, the EIA said. “Expanding coal-bed methaneproduction in the region has outpaced the development of long-haulcapacity to carry the gas to end-use markets. New gathering andheader systems [1/15 Bcf/d of capacity] have been built this pastyear to move the gas from the field to the mainline, but not enoughmatching interstate pipeline capacity has been installed.” But thisis about turn around, the EIA noted, as a number of pipelines —Trailblazer Pipeline, Colorado Interstate Gas and Williams GasPipeline-Central — have proposed projects in the past severalmonths to expand the area’s interstate systems. Also, WyomingInterstate Pipeline, a principal transporter in the Central Region,increased its pipeline capacity by 36% (275 MMcf/d), and plans anadditional expansion of 675 MMcf/d to be completed in 2001.

The EIA doesn’t anticipate any major capacity problems occurringin the Midwest, Southeast or Southwest regions. Markets in theMidwest “should have little or no problems [receiving] natural gassupplies” this winter. In fact, the DOE agency believes there couldbe “some short-term excess capacity” in the region this wintercoinciding with the startup of the 1.3 Bcf/d Alliance Pipeline.That’s because the interconnecting projects that were to take someof the Alliance gas from the Midwest to Canadian and U.S. Northeastmarkets either have been delayed briefly or simply aren’t in place.

The Southeast states of Florida, North Carolina and SouthCarolina have seen “significant growth in natural gas demand overthe past decade, but sufficient additional pipeline capacity hasbeen installed to match the increase in demand.” The EIA estimatedthat about 1.9 Bcf/d of capacity was added in the Southeast in1999-2000, primarily to improve deliverability within the region.

In the Southwest region, “there are no apparent interstatecapacity constraint problems, although some local bottleneckproblems on gathering or intrastate systems in the region couldlimit service to the interstate systems” during severe weather, theDOE agency said. “The growing market for natural gas in theregion’s electric generation sector may bring about some localizedservice limitations in the near term, but the growth in natural gaspipeline capacity in the region is keeping pace with this growingdemand.”

By the close of this year, the EIA estimates that $4.6 billionwill have been spent on new pipeline and system expansions sinceJanuary 1999. About 70% of the expenditures will have gone for newpipeline development and major extensions/laterals to existingsystems, while the remainder will have been earmarked forexpansions (looping, added compression), it said. While in 1999 thebiggest expenditure ($1.1 billion) was on projects that terminatedin the Northeast region, this year it will be on projects thatterminate in the Midwest ($1.9 billion), the EIA noted.

Susan Parker

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