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Transco Gets OK to Build Half of MarketLink

Transco Gets OK to Build Half of MarketLink

FERC last week cleared the way for Transcontinental Gas Pipe Line (Transco) to begin building two phases of its controversial MarketLink project that would expand its existing transportation system in western Pennsylvania and northern New Jersey, but it barred the pipeline from proceeding with a third phase until it can back up that part of the project with executed contracts.

Specifically, the Commission authorized Transco to construct 166,000 Dth/d of capacity to serve five shippers by Nov. 1, 2001 (Phase I), and 130,000 Dth/d of capacity to serve two shippers by Nov. 1, 2002 (Phase II). But it said Transco could not proceed with the remainder of its 700,000 Dth/d MarketLink expansion until it submitted executed contracts fully subscribing that capacity. In effect, FERC authorized Transco to construct less than half of the original MarketLink project.

It directed Transco to file the executed contracts within four months of the order. If Transco should fail to meet the deadline, the certificate authority it was awarded last April to build the remaining facilities would expire.

In limiting its approval to only two phases, FERC said in the order that while "the market for Phases I and II is amply demonstrated by executed contracts for all of that capacity, there is no longer evidence in the record to support a finding of need for the remaining facilities."

The Commission issued a certificate to Transco on April 26 to build the entire 700,000 MarketLink expansion project. Subsequently, however, several major shippers (Dynegy Marketing and Trade, Enron North America and Engage Energy) backed out of the project or requested service date extensions, which caused Transco in September to seek an amendment to its certificate that would allow it to phase in the project [CP98-540].

In its September petition, Transco indicated it intended to ask FERC in the future for the authority to build other phases as the market demand for the remainder of the MarketLink project evolved. But the Commission last Wednesday put the brakes on the pipeline's plans for a series of phases, saying Transco would have to build the entire MarketLink project in three phases.

If Transco meets the four-month deadline imposed by FERC for contracts, the pipeline will not need any additional certificate authorization to build Phase III. That phase of the project would have to be sized at about 400,000 Dth/d in order for MarketLink to reach 700,000 Dth/d. If Transco misses the cut-off date, it would have to apply for a new certificate to build additional facilities, according to the order.

Transco was dealt yet another blow when FERC refused its request to extend the completion date for MarketLink to Nov. 1, 2004. Instead, the Commission allowed the pipeline only two years from the date of the order to complete construction. That's "more than sufficient time," the order said.

On the plus side for Transco, the Commission rejected the state of New Jersey's request to stay the MarketLink project. "We find that New Jersey has not demonstrated that it will suffer irreparable harm absent a stay if Transco conducts surveys and acquires rights of ways for the MarketLink facilities," many of which Transco already has completed, the order noted.

The $123 million Phase I project calls for the construction of about 22.2 miles of 36-to-42 inch diameter looping in western Pennsylvania and New Jersey; a new 15,000 horsepower compressor unit in Columbia County, PA; a new 15,000 hp compressor unit in Mercer County, NJ; and associated facilities. Transco said it expects to begin construction on the initial phase during the first quarter of 2001. The $119 million Phase II entails the construction of about 30.3 miles of 12-to-42 inch diameter looping in Pennsylvania and New Jersey.

Phase I shippers that have executed 10-year binding contracts include Aquila Energy Marketing (25,000 Dth/d), Consolidated Energy (30,000 Dth/d), Consolidated Edison (10,000 Dth/d), St. Lawrence Cement (1,000 Dth/d); and Williams Energy (100,000 Dth/d).

Two shippers have signed firm contracts for the Phase II project. They include Virginia Power Energy Marketing (100,000 Dth/d) and PPL EnergyPlus LLC (30,000 Dth/d).

Susan Parker

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