U.S. Delay Imperils Millennium

An early test is developing of the U.S. government's declared intentions to help speed up gas pipeline projects, and of pledges by Canadian authorities to co-operate in cross-border projects. After waiting fruitlessly for a year for U.S. partners to obtain approvals, the Canadian Millennium Project has asked the National Energy Board to give it a last chance to stay alive on the Canadian side and wait for U.S. action.

The proposal has been in limbo, with public hearings on the Canadian side adjourned, since the U.S. leg of the project tripped over a thicket of state and federal regulatory jurisdictions, as well as routing disputes in mid-2000.

The NEB agreed to keep alive only until this summer a joint review panel that also includes Canadian environmental authorities, and it has told the project that the apparatus cannot be kept together much longer. The Canadian sponsors say the project cannot afford delays that would be caused by withdrawing the application, then submitting it to restart the whole process over again.

The project is a 700 MMcf/d gas highway that would originate at the Dawn trading hub in southern Ontario, cross the international boundary beneath Lake Erie and reach the Atlantic seaboard in Westchester County, New York. The plan calls for 175 kilometers (110 miles) of pipeline costing C$340 million (US$227 million) in Canada, to fill a 445-mile, US$684 million route to the Atlantic seaboard.

Millenium's sponsors -- an international consortium of St. Clair Pipelines, TransCanada PipeLines, Westcoast Energy, Columbia Gas Transmission and MCN Energy--have been attempting to win approval since 1998. The project is billed as a big part of the answer to rising gas demand in the northeastern United States and along the Atlantic seaboard.

In a letter to the NEB, TransCanada says it "has been and remains very concerned about continued delays in obtaining regulatory approvals for the U.S. portion of the Millennium Pipeline and the impacts these delays may have on the viability of the Canadian Millennium Project."

In appealing to the NEB to let the proposal stay live a while longer, TransCanada says the U.S. partners are optimistic of seeing some action from the Federal Energy Regulatory Commission. The NEB is being asked to let the hearings adjournment continue and hold the review panel together until the FERC has a chance in September to issue a long-awaited environmental impact statement. St. Clair told the Canadian board it should be patient a while longer "in view of the recently announced U.S. government policy intention to expedite certification of new energy infrastructure."

Evidence before the NEB shows that declared supporters of Millennium include both of New York State's senators, Hillary Clinton and Charles Schumer, as well as the New York Public Service Commission and the New York State Energy Research and Development Agency. They have urged FERC to get the regulatory process moving, with Schumer warning in a letter that "New York has an enormous need for increased natural gas supply to generate electricity and heat homes and businesses...swift construction should be a priority."

Not all of Millennium's problems have been on the regulatory front. The past year of surging gas demand and prices has prompted an overhaul of the project's commercial side. "The market has changed," the sponsors said in written submissions to the NEB.

Millennium was born as a "supply-driven" plan, driven by Canadian exporters' desires to expand their competitive foothold in the U.S. The driving force has changed to "market growth-demand pull," with the customers for the new delivery capacity becoming U.S. gas distribution companies, industrial consumers, gas-fired power plants and marketers representing them.

"This has required the applicant (Millennium) to restructure contracts, focus on their requirements and provide services, terms and pricing more in line with the expectations of this market segment." Millennium has come to concentrate on gas-fired generating projects spawned by rising electricity demand and power deregulation. The NEB has been told "each of these plants have their own unique regulatory approval process...and were reluctant to underpin a project of the size and scope of Millennium until they received additional approvals."

The NEB is also being assured that Washington's sense of urgency, expressed in a nutshell by President George W. Bush's repeated warnings of an imminent "energy crisis," is starting to show results for the prospective customers of the pipeline project. Millennium says "fortunately, the approval process for these plants is rapidly advancing and creating an environment that allows them to enter into long-term agreements (for gas transportation)."

The NEB has been told "in many cases these power plants require their first deliveries of natural gas in 2003 . . . only minor delays in the Canadian Millennium Pipeline Project can be tolerated."

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