Pipeline Projects Getting No Respect in Wisconsin
Two pipeline projects that were to provide takeaway capacity
from the Chicago hub to the southern Wisconsin market have been
rebuffed by LDC customers there, causing the sponsors to cancel one
and place the other on indefinite hold.
Biting the dust was the watered-down 1 Bcf/d Voyageur Pipeline
project, which was sponsored by TransCanada Pipelines and Nicor
Inc. "We just couldn't get enough contracts to make it financially
viable," said Carl Alston, a spokesman for Nicor, parent of Nicor
Gas. "Even though we had strong [initial] market indications of
support for the project, customers...were not willing to commit to
the contracts that were needed" to make it work, he noted.
Likewise, the competing 650 MMcf/d Illinois-Wisconsin Express
Project, which is being financed by a coalition of companies, has
been relegated to a kind of limbo - put on hold - reportedly until
an unnamed Wisconsin utility can commit to the project that would
target a region in the state, which primarily is served by
Wisconsin Gas and the gas operations of Wisconsin Electric Power.
"The utility, I guess, is trying to strike their deal with their
gas suppliers, and they just have not been able to come back and
give firm commitments on what volumes they need and the type of
service," said Paula Delaney, a spokeswoman for one of the
coalition members, El Paso Energy. The duration of the hold is
"pretty dependent" on that Wisconsin utility, she added.
In the meantime, the coalition between El Paso, Enron, Peoples
Energy and Northern Border Pipeline still exists, she noted. "But
as long as it's on hold each of the companies has kind of got the
right to go out to see if they can generate their own opportunities
on that [market]."
The sidelining of the two pipeline projects - whether
permanently or temporarily -begs the question: what's going on in
Wisconsin? "Apparently each of the projects haven't been
attractive to enough customers along the route to make it really
work," a Wisconsin utility source told NGI. "For whatever reason,
they [the potential LDC customers] have been unable to make the
kind of long-term commitments that the pipes need to back
themselves. And some of it has to do with the services that are
[being] offered, the price of the services."
Specifically, he thinks the Voyageur project lacked appeal to
the Wisconsin customers, while the Express Project left something
to be desired for northern Illinois customers. He doubted that
opposition from ANR Pipeline, the sole existing pipeline between
northern Illinois and southern Wisconsin, entered into the picture
much. ANR "has been pushing hard to make sure none of these
projects get built," but he didn't think ANR was "enough of a
factor" or had "enough moxy" to defeat competing projects,
especially ones supported by LDC customers.
The inability of customers to commit so far doesn't mean that
they don't want a new pipeline project along the Joliet-to-southern
Wisconsin route, the utility representative said. However, "they
want to commit to the project that is most likely to be built
because they don't want to make a commitment and then have it all
get snagged up in regulatory approvals."
Despite all the uncertainty, he believes "a new steel pipeline"
still is in the cards for northern Illinois and southern Wisconsin.
"Sooner or later somebody's going to get it right, and they're
going to get everybody signed up and bingo they're going to go. But
I have no idea who's going to own it. I have no idea when they're
going to get it together and get the customers signed up. So far,
it's been an excruciatingly slow process." He said he wouldn't be
surprised to see a third pipeline proposal surface "because you
would think that if any of the existing ones were front-runners
they'd be much further down the road" now.
The company that builds the pipeline is "going to have to go
like gangbusters to get in service" by the time the Alliance
Pipeline starts operation, which would be either in late 2000 or
late 2001. "They have a long way to go to get there" because
acquiring a right-of-way through congested urban areas in northern
Illinois will prove to be a "long, contentious" issue.
In the end, the differing routes of the competing projects won't
mean a thing to southern Wisconsin shippers, he noted. "It's going
to be the services [and prices] that are offered on there that's
going to distinguish one project from another."
The scaled-down Voyageur project had other problems also. "I
think that they [Voyageur sponsors] weren't serious about going to
Wisconsin. I think that even though it was labeled as a
Joliet-to-Wisconsin pipeline, the sponsors of that project were
mostly interested in moving gas to northern Illinois," the
Wisconsin source said. "...[T]heir generic proposal...had kind of
what I call a goofy two-part rate for a 120-mile pipeline," which
was "tilted against the Wisconsin customers to benefit Illinois
customers. You had to kind of conclude that they were building it
for their own systems." He questioned "how serious they [the
Voyageur sponsors] were when they started it. It takes a lot of
gumption to build one of these things. And I'm not sure they had
the staying power."
The Viking Voyageur project - as it was originally called - was
conceived as a 773-mile, 1.4 Bcf/d Manitoba-to-Chicago line in
1997, but it lost out to the competing Alliance Pipeline and the
Northern Border expansion projects in the western Canada-to-U.S.
Midwest race. In an attempt to keep their foot in the door,
partners TransCanada and Nicor floated plans last July for a
downsized Voyageur project, which would go in the opposite
direction with a 1 Bcf/d, 150-mile line from the Chicago hub north
toward Milwaukee, WI - an area bypassed by the big incoming
That placed the reconfigured TransCanada/Nicor project in
competition with the Illinois-Wisconsin Express pipeline project,
which would have traversed a similar path. But Nicor's Alston said
competition between the pipeline projects played only a minor role
in TransCanada's and Nicor's decision to abort the Voyageur
project. The "key" reason the sponsors canceled Voyageur was lack
of commitments from LDC customers, he said.
Nicor and TransCanada held an open season for their revised
Voyageur project in August-September and made the decision in
mid-October to abandon the project. They still intend, however, to
keep a close eye on the northern Illinois-southern Wisconsin
market. "Both companies are going to keep looking at that market
just to see what the developments are" as part of the "regular
course of daily work," Alston said, but they have no other
particular project in mind right now.
The canceled Voyageur project and the on-hold Illinois-Wisconsin
project were intended to offer southern Wisconsin customers
alternatives to ANR, which has had a lock on the Chicago
hub-to-southern Wisconsin transportation route for years. But ANR
did not take the threat to its territory lying down. It is in the
process of adding about 116 MMcf/d of capacity to its system in
southern Wisconsin, a project which was approved by FERC in
September and is expected to be in service in early 1999. Neither
the scaled-down Voyageur nor the Express Project ever filed a
proposal at FERC.
The expanded ANR capacity will provide the growing Wisconsin
market with the means to access the cheaper Canadian gas supplies
expected to be available, said ANR spokesman Joseph Martucci.
Demand growth in southern part of Wisconsin is being fueled by the
addition of new gas-fired power generation plants and the
conversion of existing power plants to natural gas.
ANR also is weighing the possibility of a further expansion of
its system following the "positive response" it received from
customers in an open season that ended Aug. 31. That's "actively
under consideration," Martucci told NGI last week.
"I don't have any firm numbers yet. We're still working with
customers to determine what level of interest they have, and to
work out precedent agreements." When that is completed, Martucci
said ANR likely would file another proposal at FERC. If the
pipeline decides on the additional expansion, it would be for
service in 2000 and beyond.