Like a grizzly bear accidentally stepping on a porcupine, VikingVoyageur has routed its 2.3 Bcf/d gas line near the childhood homeof a Wisconsin landowner whose husband happens to be a Noble Prizewinning economist with a dislike for pipeline infrastructure.

Merton H. Miller, McCormick Distinguished Service Professor ofFinance, Emeritus, of the Graduate School of Business, Universityof Chicago, filed testimony at FERC recently on behalf of his wifeKatherine D. Miller, blasting the Voyageur project. He warned theCommission if its goal in approving new pipelines is to benefitconsumers then it should toss Voyageur. The pipeline would have “nobeneficial price impact on consumers,” said Miller, a winner of theNobel Memorial Prize in Economic Sciences and a current member ofthe board of directors of the Chicago Mercantile Exchange. “Thegains from this project are strictly private and to be dividedamong producers, shippers and local distributors.”

Miller said Voyageur would provide no greater benefit forWisconsin endusers than the proposed 2.3 Bcf/d Alliance Pipelineproject even though Alliance doesn’t touch Wisconsin soil.Wisconsin gas prices are basically Chicago hub prices plustransportation to Wisconsin via ANR. If gas prices decrease inChicago – and Miller expects they will if Alliance is built -prices also will drop in Wisconsin. But even though Voyageur wouldrun through Wisconsin before reaching Chicago, Wisconsin customerswould not experience any additional benefits.

“What matters for gas users ultimately is the total supply ofgas entering the system, not where it enters,” said Miller. “Thetotal would be virtually the same whether supplied by Alliance orViking Voyageur. What would be different is only the size of thenetbacks to Canadian gas producers. Netbacks would be higher on theViking Voyageur line by virtue of the saving of transport cost fromChicago to Wisconsin. Wisconsin consumers, however, will see nodifferences. Viking Voyageur and its suppliers would have noincentive to pass their netback gains along to their Wisconsincustomers. Prices in Wisconsin will still be Chicago plus transportto Wisconsin. The Canadian producers, the owners of Viking Voyageurand some local shippers and distributors will share theWisconsin-Chicago transportation differential. That’s why they wantto build the line after all. But those are purely private gains,not gains to the general public.”

Rocco Canonica

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