In the race to serve the lucrative Florida generation trafficthinned last week, as Duke Energy announced it has shelved itsproposed Sawgrass pipeline project and allied with formercompetitor Williams’ Buccaneer Pipeline.

With Duke’s decision, the competition for Florida’s generationbounty now centers around two main players: the Buccaneerpartnership and El Paso Energy, which not only has its own Floridaplan through its stake in Florida Gas Transmission (FGT), but alsocould obtain ownership of the Gulfstream project, too, if itsmerger with Coastal Corp. is approved. Of course, if the mergerreaches completion, El Paso may decide to cancel Gulfstream infavor of FGT.

“Through this partnership, we have grown stronger, whilebecoming the only independent competitor to El Paso Energy inFlorida, in terms of new projects,” said Cuba Wadlington Jr., CEOof Williams Gas Pipeline. “That’s a fact. If El Paso merges withCoastal, they’ll have a significant stake in FGT’s project and ownthe Gulfstream Pipeline. The Buccaneer is the only alternative.”

Under the terms of the Buccaneer agreement, Duke and Williamswould hold equal ownership shares of Buccaneer. They will jointlydevelop, construct and operate the pipeline under the title ofBuccaneer Gas Pipeline Co. LLC. Although Duke did not pay to enterinto the project, it did agree to bring Duke Energy North America’s250 MMcf/d firm commitment, which was originally intended forSawgrass. With the capacity additions, Buccaneer now has firmcommitments for more than 50% of the project’s capacity of 900,000Dth/d.

The 674-mile system is proposed to have 411 miles of 36-inchpipeline extending from Mobile County, AL, across the Gulf ofMexico to Pasco County, FL. An additional 121 miles of 36-inchmainline and 142 miles of 16- to 30-inch laterals are designed todeliver gas to power generation facilities and other gas usersthroughout the state. The $1.5 billion project was filed with FERCon Oct. 28, 1999. It has a targeted in-service date of April 1,2002.

“We’re on track,” Wadlington said. “FERC is undergoingenvironmental studies right now, and we expect to receive our draftenvironmental impact statement (DEIS) in time to begin constructionin the January 2001 timeframe. We also feel very good about wherewe are with the Florida landowners and our right-of-way progress.We have invested a large amount of time and resources to talkingwith the landowners, and as a result, we have [fewer] issues withBuccaneer than we have with most of Williams’ other pipelineprojects.”

The rewards for becoming the dominant transporter to Florida areplentiful by any standard. The state will require more than 10,000MW of new power generating capacity by 2007, according to theFlorida Public Service Commission’s “Review of Electric Utility1998 10-Year Site Plans.” If fueled entirely by gas, this wouldrequire an additional 1.5 Bcf/d of capacity.

The risks are as large as the rewards, however. “We realizedthat there will probably be only one new pipeline built intoFlorida,” said Rick Rhodes, a spokesman for Duke Energy. “Williamsapproached us with the idea last fall, and we were impressed withtheir operation. We talked with many people in the industry andcame to the conclusion that because Buccaneer was a full year aheadof Sawgrass, and because the stakes were so high, that joiningBuccaneer gave us the best chance of serving the Florida market.”

The Sawgrass system would have had capacity of about 1 Bcf/d.Planned to begin near Coden, AL, cross southern Mobile Bay andcontinue into the Florida Panhandle and down the peninsula, itwould have cost about $1.3 billion.

For its part, Coastal was not fazed by the Buccaneerannouncement. “Our initial reaction is that Duke pledging itsmarket to Buccaneer doesn’t affect us at all,” said Joe Martucci, aCoastal spokesman. “Gulfstream has had strong customer commitments,which now total 10 firm agreements with non-affiliated utilitiesand power generators. Add to that our belief that we have selectedthe least harmful environmental path for the pipeline, and weremain positive that we have the better project.”

The 744-mile Gulfstream would originate near Mobile, AL, andcross the Gulf of Mexico with more than 400 miles of 36-inchdiameter pipeline to Manatee County, FL. In Florida, 292 miles ofmainline and laterals, ranging in diameter from 16 inches to 36inches, are planned to deliver gas to fuel new electric generationcapacity and other load throughout the state. The mainlineterminates in Palm Beach County along Florida’s East Coast.

FGT’s expansion project is far ahead of either Buccaneer orGulfstream in terms of regulatory approvals. The $700 million plusplan is designed to take place in two parts.

Phase IV (the first part) has already received a DEIS from FERC.It calls for the construction of about 140 miles of pipeline(laterals and looping) facilities in Mississippi and Florida, andwould expand the pipeline’s existing system by 196,405 MMBtu/d.The project will provide major supplies of gas to southwesternFlorida for the first time. The proposed in-service date is May2001.

FGT’s proposed $438 million Phase V Expansion includes signedfirm agreements with eight shippers for the entire 400 MMcf/d ofproposed incremental expansion space. The project would to expandFGT’s 4,800-mile transmission system by adding 231 miles ofunderground pipe and 90,000 hp of compression and associatedfacilities.

Martucci said the new El Paso is not worried about any potentialrun-ins with the FTC concerning pipeline additions through themerger with Coastal. The deal was announced last month (see NGI,Jan. 24) and will create a new company that will own more than58,000 miles of gas pipelines.

“When that deal went through, El Paso management was asked if itplanned to scale back or alter projects such as Gulfstream orIndependence,” Martucci noted.”Management said that they intendto follow through on these projects, and I know from Coastal’s sidethat we’re dedicated to seeing Gulfstream through as well.”

John Norris

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.