Coastal, Williams Battle for Shot at Florida Panhandle
A battle for a grip on the growing gas market in the Florida Panhandle
has flared up, involving a trio of gas pipeline companies, two of which
are planning new offshore routes to the state from producing platforms
near Mobile Bay, AL.
The incumbent monopoly provider, Florida Gas Transmission, didn't give
up any ground the last three times its old adversary Coastal Corp. entered
the fray with proposed pipeline expansions to Florida and it isn't willing
to start this time around. But it also will have to defend its ground against
Williams-Transco, which launched an open season last week for its own offshore
pipeline project, announced in December.
Transco officials said they were not surprised when Coastal announced
a pipeline expansion that is nearly identical to their own. "It certainly
is a good market," said Frank Ferazzi, vice president of customer
service and rates for Transco. "And my other reaction is I'm not surprised
they chose the route that they did. I presume they chose it for the same
reason that we did. It made a lot of sense.
"First of all, the Mobile Bay area is the closest supply to Florida.
Building an offshore route is both short in terms of distance, and you
avoid a lot of the environmental issues that you would have to face with
an all-land project," said Ferazzi. "The environmental rules
in Florida are strict, but they are the same rules that anybody is going
to have to follow to build new infrastructure; I'm talking about Coastal
Corp., Williams or Florida Gas for that matter."
The Coastal and Williams Gulf-crossing projects are nearly identical.
They both would start in Mobile Bay - though Transco argues Coastal has
no infrastructure there - and extend in a southeasterly direction to make
landfall near Tampa. They would traverse the center of the state, crossing
Orlando and then would move toward West Palm Beach - although Transco said
its line wouldn't extend that far south. Both are expected to carry between
700 MMcf/d and 1 Bcf/d of gas. And both projects also are expected to be
filed with FERC later this year with in-service dates in June 2002.
Coastal said last week it has the early market lead with nine shippers
to back its 700-mile pipeline project. "There is strong market support"
for the Gulfstream Natural Gas System project, said Jeffrey A. Connelly,
senior vice president of natural gas for Coastal. "Nine non-affiliated
customers already have executed letters providing sufficient volume commitments
to proceed with development of the project. However, Gulfstream will hold
an open season from March 15 through March 29 for additional parties interested
in contracting for firm transportation service."
"I'm not sure what they mean by letters," responded Ferazzi.
"You know the FERC rules require an open season. They may have letters
expressing interest in the project but in terms of actual binding commitments
that's the purpose of the open season. Anything they get prior to the open
season [means little or nothing]. The open season can change all that."
Last week, following Coastal's announcement Williams scheduled its own
March open season for its proposed Buccaneer Pipeline project. Ferazzi
said the upstream links are important assets for Buccaneer. "I think
that gives us an advantage over Coastal because we own substantial infrastructure
that is attached to reserves in the [Mobile Bay] area and they do not."
The big attraction is Florida's serious power generation growth. The
state is expected to need more than 10,000 MW of additional power generation
by 2007, according to the Florida Reliability Council. Coastal said pipeline
laterals are planned to deliver gas to fuel new electric generation capacity
at various locations along the Peninsula.
"We're talking to the same markets they're talking to. It's going
to be almost exclusively to serve power generation, both independent power
producers as well as electric distribution companies," said Ferazzi.
He said Tampa and Orlando are two major cities that would be served.
Florida pipeline monopoly Florida Gas Transmission, a Citrus Corp. subsidiary,
filed an application with FERC in December to expand its system by 225,000
Dth/d to serve multiple shippers but primarily Florida Power &Light.
FP&L is experiencing sharp power demand growth, particularly in the
Fort Myers area of Southwest Florida. The FGT expansion/extension would
run from Tampa to Fort Myers, an area that's not being targeted by Buccaneer
or Gulfstream. FGT officials have scoffed at the others' plans to build
pipelines across the Gulf to the Florida coast, citing extremely tough
environmental regulations in Florida, greater supply diversity through
its own pipeline and its own more cost effective expansion plans.
But Coastal's Connelly said, "Gulfstream will be positioned to
serve the state's growing needs with clean-burning natural gas in a manner
that is most consistent with Florida's unique environmental sensitivities.
Coastal has nearly 40 years of experience in offshore pipeline construction
and operation that it will bring to bear to ensure that Gulfstream is managed
on all fronts using state- of-the-art technologies."
In anticipation of a FERC filing during the third quarter of this year,
Gulfstream representatives will be meeting with local and state officials,
environmental groups, various state agencies, landowners, and other stakeholders
to apprise them of the project and gain valuable input, Coastal said.
It's not the first time Coastal has planned a coastal invasion of Florida.
In the late-1980s, the company launched the Sunshine Natural Gas System,
which would have followed a similar route with most of the line in the
offshore Gulf. Then in the early 1990s, Coastal twice attempted onshore
routes to serve the Panhandle. In 1990, Coastal formed a partnership with
United Gas Pipeline to build an intrastate line called Suncoast and connect
it with United at the Florida-Alabama border. The project was shelved when
Koch Industries bought United in 1993. Coastal later planned a variation
of that project, renamed the SunShine Project, in 1993, which also was
a combination of interstate and intrastate pipelines, but that also fell
"In a general sense, for probably all three, for what ever reason,
the timing just wasn't right for those projects either for market reasons
or other factors," said Coastal spokesman Joe Martucci. "This
time I guess we feel we've got some strong market indications to go forward."