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Transco Admits MarketLink Contracts are 'Non-traditional'

Transco Admits MarketLink Contracts are 'Non-traditional'

Transcontinental Gas Pipe Line defended its 700 MMcf/d MarketLink project against charges it is not supported by the market because many of its contracts with shippers contain rights to terminate under certain circumstances. Singling out the protests and "motions to reject" of CNG Transmission and Consolidated Edison, Transco reminded the Commission many of its agreements are not unlike those filed to support other projects. A few contracts - about 34% of its capacity - are, however, a little different than what has arrived at the Commission in the past, the pipeline acknowledged.

With regard to the shipper's right to terminate if the MarketLink Project or the upstream Independence Pipeline is not available by date certain, Transco asserts that "this type of provision is typical in precedent agreements and has been accepted by the Commission. Moreover, contract law provides that a contract is binding and not illusory if the power to terminate the agreement is conditioned on events that are beyond the control of the contracting party." Transco said numerous pipeline applications have been filed with "board out" provisions, which allow the shipper's board of directors to make final decisions on contracts. Transco noted the Maritimes &amp Northeast project contained such a provision, as did the Liberty Pipeline project. Iroquois Pipeline's contracts contained "partnership outs."

The agreements that give shippers the right to terminate if markets don't materialize to support their capacity subscription, probably are something new to the Commission, Transco admitted without providing a reason for the Commission to accept them as "binding." However, the pipeline said it "suspects" similar agreements were filed under confidential seal by its competitor, Millennium Pipeline. "It would be discriminatory to treat disparately the MarketLink and Millennium Projects, which are competing for the same markets," Transco said.

Transco also explained that, contrary to several protests, MarketLink, Independence and SupplyLink, are not interdependent and should not be treated as a single pipeline. "The Independence and MarketLink projects.satisfy different supply and market needs and alternatives, and.would proceed without the other." Transco said MarketLink, which would add 154 miles of pipeline looping and 62,400 hp of compression along Transco's Leidy line in Pennsylvania and New York, would have adequate access to upstream supply even if Independence did not make it through the regulatory process.

Rocco Canonica

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