FERC tied up all the loose ends in the Maritimes & NortheastPipeline project in a draft order released yesterday, clearing theway for the pipeline to begin delivering about 350 MMcf/d of SableIsland gas to power plants, paper mills and new markets in Maineand other New England states this fall.

The Commission granted Maritimes & Northeast Pipeline’srequest to construct and operate two lateral lines to deliver about270,000 MMBtu of gas to the proposed Casco Bay (a Duke Energyaffiliate) and Gorham Energy power plants in Maine. Over severalprotests, including one from Maritimes shipper Boston Gas, FERCalso approved an amended certificate application for the projectthat lowers its firm capacity by 18%, defers construction of fiveother laterals and raises its firm reservation rates 22% to$0.715/Dth.

The project changes were prompted by the loss or delay ofnumerous markets in the state and by a $90 million increase incosts. The Maritimes Phase II project now will cost $390 million,rather than the $300 million originally expected at the time of itsJuly 1998 certificate primarily because of unexpected increases inlabor costs, engineering, overhead and other expenses, FERC noted.

However, the Commission said the rate increase is justified, andthe project still has substantial markets to serve, contrary to theclaims of protesters Boston Gas and Pittston. “.Maritimes hasappropriately downsized its facilities to reflect the level ofcurrent firm subscriptions on the system,” the draft order stated.”Thus we find that there is no merit to Boston Gas’ contentionsthat Maritimes’ market is in ‘free fall,’ that there has been areduced level of support of the project, or that the project isoversized for the current level of subscriptions.”

Maritimes has “overwhelmingly demonstrated market demand for theproject as 82% of the pipeline’s capacity is subscribed underlong-term firm contracts,” said Commissioner William L. Massey. “Inshort, this is a sound project. It will provide a competitivesource of new gas supplies, and it poses very little risk toshippers other than to Mobil and the Sable Offshore producers, whohave so heavily invested in Maritimes’ success.”

FERC granted a waiver of its rules to allow the pipeline toprovide market information to its affiliate Mobil, a Sable OffshoreEnergy Project producer, because of Mobil’s willingness to sign anunusual backstop agreement that shields the pipeline and the otherMaritimes shippers from the risk of unsubscribed capacity. FERCagreed that because Mobil is paying for capacity under its backstopagreement to cover unexpected costs, Maritimes will be able tonotify Mobil of any request for capacity the pipeline receives sothat Mobil can negotiate a prearranged deal for its backstopcapacity. “The circumstances that would trigger the need for thewaiver are extremely limited,” said Massey. “For this reason, Idon’t believe the capacity rights of other shippers will bedenigrated. I’m convinced the waivers we are granting today will beof limited impact and are necessary to allow this project to goforward,” he added.

“One aspect of Maritimes’ application that is interesting to meis its request to reduce the pipeline certificated capacity byabout 20%,” said Massey. “I’m not sure what the reduction in thecapacity of this project means. It may be a reflection of the factthat the market has not matured to the degree that Maritimesoriginally anticipated… Perhaps this is an anomaly in anotherwise robust market. Perhaps it’s a timing issue. In any event,I find it interesting and somewhat counter intuitive in theNortheast market. I’m please to support this order.”

Maritimes has firm service agreements for 358,775 Dth/d ofmainline capacity with four shippers: Salmon Resources (15years/100,000 Dth/d), a subsidiary of Shell Canada; Canada Limited(10 years/30,240 Dth/d), a subsidiary of Nova Scotia Resources;Mobil Natural Gas (20 years/185,335 Dth/d); and Boston Gas (threeyears/43,200 Dth/d). The customers being served by the two newlaterals evidently will be utilizing up to 270,000 Dth/d ofcapacity subscribed by the other shippers.

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