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Midwest Market Growth, Voyageur Troubles Prompt New Pipeline Project

Midwest Market Growth, Voyageur Troubles Prompt New Pipeline Project

Although supply concerns forced the 1.3 Bcf/d Viking Voyageur to close up shop earlier this year, it became clear last week Voyageur discovered an area of market growth begging to be served. An unlikely coalition of El Paso Energy, Enron, Peoples Energy and Northern Border Pipeline has jumped in to claim that territory. They are proposing a new pipeline system that would extend into Wisconsin from a connection with Northern Border at Joliet, IL.

The venture partners plan to build a $220-$280 million 36-inch diameter pipeline, called the Illinois Wisconsin Express Project, which would stretch 150-200 miles to Fond du Lac, WI, about 50 miles north of Milwaukee from Joliet, IL. The pipeline would be designed initially to carry 650 MMcf/d of gas.

"Each of the different partners are bringing their own area expertise to this. It kind of made sense for the four of us to bring this together," said Peoples' spokesman Rod Sierra. "We have a considerable storage and wheeling capability here in the Chicago area. That is going to help turn this project around and get that gas back out into Illinois and Wisconsin. The others have the key experience on the pipelines, the access to the Canadian supply. Enron has the market knowledge on these kinds of projects."

And there's plenty of market available, particularly because of the need for new gas-fired generation. "I'm sure you've been following the woes of the electric generation companies this week across the country but especially in the Midwest. And a week ago, we announced our own electric generation plant (potentially 600 MW) to serve the region," Sierra noted. "So there's a big need for an ample supply of gas to fuel these plants. We think they all will be fueled by natural gas."

"Viking was a little early and probably did not see as much opportunity on the power generation side as I think we are going to encounter," said Mike Stokdyk, coordinator of the project at El Paso subsidiary Tennessee Gas Pipeline. The companies plan to file an application for the project by summer 1999 with service beginning in November 2001. The size of the project will determine the rates, but sponsors are projecting reservation rates to be between 10 and 20 cents/Dth/d.

Stokdyk said the plan should avoid the pitfalls encountered by Viking Voyageur because it would not be competing for Canadian supply with the Alliance Pipeline and Northern Border projects. Instead it would provide downstream transportation for gas entering the region on those upstream pipeline expansions.

Meanwhile, Voyageur and the existing transportation monopoly in the region, ANR Pipeline, said last week they aren't about to step aside and watch others raid their territory. ANR announced plans last week to hold an open season starting July 1 for another incremental expansion that would be in place Nov. 1, 2000. The pipeline already captured some of the incremental growth in the region with its 1997 project, dubbed the "10-cent solution," which received preliminary approval from FERC in May. That $24 million project would provide 118 MMcf/d of new firm transportation at discounted rates (67% of ANR's max rate) to eight shippers.

Viking Voyageur sponsors said last week they're still not out of the picture. A TransCanada spokesman said Voyageur has kept markets informed of its plans to file a revised project that would serve Wisconsin markets.

"What's happening is people are finally catching on to what good market potential there is in Wisconsin," said TransCanada spokesman Gary Davis. "We're right there. We were the first in. We know the markets very well. There's no need for us to be making pronouncements until we have some solid information for people. At this point, we have no intention to drop out [and] relinquish our lead."

Rocco Canonica

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