East Tennessee's Patriot Project Takes Heat at FERC

East Tennessee Natural Gas system's proposed phased 510 MMcf/d extension and expansion project is coming under fire at the Federal Energy Regulatory Commission. The East Tennessee Group (ETG), which represents the pipeline's municipal distribution customers, said it was "extremely concerned" that the "massive expansion," which would nearly double East Tennessee's existing capacity, "would significantly degrade services to its members." It called for the Commission to schedule a technical conference on the pipeline's application for its Patriot project.

The $289 million extension/expansion "would include substantial pressure increases on many segments of the pipeline," the group said, adding that it was especially concerned about the proposed pressure increase to 643 psig at East Tennessee's Bradley interconnect with Southern Natural Gas. "It is not clear that... volumes could flow into East Tennessee [from Southern] if the pressure on the East Tennessee side were as high" as that.

ETG also noted that it had some misgivings about the shipper profile of the Patriot project. Two of the project shippers are East Tennessee affiliates, which account for more than 25% of the proposed capacity. "There is a heightened risk with affiliates that they will not ultimately be bound by their precedent agreements and may be released by the pipeline." In addition, six of the seven shipper precedent agreements "contain significant contingencies that make them not binding on the shipper," the group said in its protest of the pipeline's application [CP01-415].

It also took issue with the fact that nearly 70% of Patriot's project will go to serve electric generation plants. This "rush to commit such large quantities of this nation's premium energy source, clean-burning natural gas, to fuel 35% efficient power plants is a travesty. This practice needs to be limited by a reasoned National Energy Policy." The dedication of greater gas supplies to power generation "also has detrimental consequences for long-time natural gas consumers in that it leads to much higher gas prices and even potentially gas supply shortages for those consumers," the group said.

Transcontinental Gas Pipe Line, a competitor of East Tennessee's, appeared apprehensive that the Patriot project "relies a great deal" on a proposed interconnect with Transco's mainline in Rockingham County, NC, as a primary receipt and delivery point for project shippers.

"According to the Patriot precedent agreements, approximately 34%, or 150,000 Dth/d, of the subscribed firm transportation capacity under the Patriot project is to be received at the Transco interconnect," Transco said. The agreements further stipulate that about 44%, or 196,000 Dth/d, of the subscribed firm transportation quantities for Patriot shippers are to be delivered to the Transco interconnect.

"While it is evident that the Patriot shippers will rely extensively on the Transco interconnect for their firm transportation service, 1) Transco currently does not have any available firm (forward-haul) transportation capacity on its mainline in the area of the proposed interconnect; 2) East Tennessee has not provided any evidence that the Patriot shippers have arrangements in place for upstream or downstream firm transportation service on Transco's system for their Patriot quantities; and 3) East Tennessee has not indicated whether the Patriot shippers intend to rely on alternative firm service arrangements on Transco's system, such as released firm transportation capacity or firm backhaul transportation service," Transco told FERC in comments.

Transco recently conducted an open season for its Cornerstone Expansion Project, "which would create new firm transportation capacity on Transco's mainline in the area of the proposed interconnect, but Transco cannot determine whether the Cornerstone service requested by the Patriot shippers is in connection with or in lieu of the Patriot service," it said.

Transco also indicated that it is concerned that East Tennessee, "which consists of a single 24-inch line with limited available linepack and a limited amount of storage attached," will look to it to provide the operational flexibility to maintain the scheduled and confirmed deliveries to Patriot power generation shippers on its system.

"While the 'no-notice' hourly and daily flexibility of the Transco system is a very substantial benefit to Transco's shippers because of the unpredictable and substantial load changes they often experience, this flexibility should not be used to subsidize East Tennessee's project or its shippers."

The Patriot project proposes to extend East Tennessee's existing system 94 miles from central Virginia to North Carolina, enabling the pipeline to provide service to portions of southwestern Virginia for the first time and to introduce competitive supplies of gas to North Carolina from Appalachian and Gulf Coast production. East Tennessee also seeks to expand its existing system in Tennessee and Virginia via 85 miles of looping, 25 miles of pipeline relays, 77 miles of upgrades and new compression.

The entire project would boost East Tennessee's existing design capacity of 700 MMcf/d to more than 1.2 Bcf/d in three separate phases. The pipeline hopes to have the first phase completed and in service by May 2003.

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