Canadian Gas Accord, Tight Supplies Leave Voyageur in Doubt

The 1.4 Bcf/d Viking Voyageur pipeline expansion project is in danger of never making it past the planning stages. Its problems obtaining market commitments have been well documented at FERC. But with the competing Alliance Pipeline project racing toward final approval following the major accord signed two weeks ago by Canadian gas industry stakeholders, it appears more likely Voyageur will be squeezed out of the picture (NGI, 4/13/98, p.1).

Voyageur sponsors TransCanada PipeLines and Northern States Power were in meetings last week to discuss where to go from here with the 800-mile pipeline expansion/extension. "I think we're taking a look at the accord that happened.in Canada. But we had set out a goal with the producers to have our 1.4 Bcf signed up before [April 14] and we didn't get there as far as volume commitments," said Greg Palmer, president of Viking Gas Transmission and spokesman for Voyageur. "I'm not sure I can tell you at this point what we're going to do about it. One possibility is going ahead. Another possibility is [shelving the project].

"I think we had 929 MMcf/d [out of 1.4 Bcf/d]. And there are conditions in some of the agreements we have. Some of them are [conditioned on National Energy Board] approval by April 30, the availability of upstream transport. The upstream part hasn't even been filed. Some of it was contingent on closure of the Wisconsin contracts - approval of the Public Service Commission of Wisconsin - and that's happened. But really the biggest issue, the one that is the cause of most of the [uncertainty] is that we had set a goal on shipper agreements.and we didn't get there."

Voyageur was designed as an alternative to the 1.3 Bcf/d Alliance project. But Voyageur targeted some different markets in the Midwest by following a different route that paralleled the existing Viking Gas Transmission system from Emerson, MB, through Minnesota and Wisconsin and extending Viking to the Chicago hub. Its link to those markets was viewed as a strength, but trouble farther upstream may be a real weakness, according to some observers.

There is a question about available supply. With Alliance remaining partly a producer-backed project, it's the one likely to capture most of what's available, and with rapid decline rates on Canadian wells some observers think there won't be enough left over for Voyageur. Like other recent TransCanada pipeline expansions, particularly its huge Nexus project, Voyageur may have to be downsized or canceled.

Sponsors already had filed a request with FERC to place the project at risk for the first 10 years of operation because of inadequate capacity subscriptions. "My understanding was that that was done in order to keep the regulatory process in motion but even the owners weren't willing to risk a third of the project being empty. So even though FERC may not require it, once the project was built I think the owners would require substantially the same thing," said Mark T. Maranger, CEO of Wisconsin Fuel and Light and leader of a coalition of Wisconsin gas distributors supporting the Voyageur project.

Maranger said he would be greatly disappointed if Voyageur was not built because it's his only hope to get out from under the monopoly control of ANR Pipeline. He said even if Alliance is built, bringing 1.3 Bcf/d to Chicago and dropping Chicago gas prices sharply, Wisconsin distributors will not benefit because they will still have to go through ANR. And ANR will not allow them to get out of their Gulf Coast contracts, fearing it could end up like NGPL with huge capacity turnback problems.

Nevertheless, Maranger fears that even if Voyageur were built there wouldn't be enough Canadian supply to fill the pipe. A Viking official admitted potential shippers are having difficulty finding Canadian supply to flow on the line. Canadian producers may even have difficulty filling the 750 MMcf/d Northern Border expansion this year, he said, let alone the on-going TransCanada expansions, Alliance, and Voyageur.

Rocco Canonica

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