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Maritimes Defends Proposed Project Changes

March 8, 1999
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Maritimes Defends Proposed Project Changes

Maritimes &Northeast Pipeline sponsors defended their proposed pipeline certificate (Phase II) amendment last week against attack by some the project's own shippers and others who say it is too large and too costly for the market it will serve. Project sponsors said the calls for a stay on the project and a hearing on its size are based on a misreading of its amendment filing and a misunderstanding of its agreements with its shippers (see NGI, Feb. 22 issue).

Maritimes filed in January to amend the certificate for its Phase II project, a U.S. pipeline stretching from a connection with the Joint facilities of Portland Natural Gas Transmission and Maritimes in Westbrook, ME, to the U.S.-Canadian border. Phase II is a major section of the proposed 650-mile Maritimes project which is designed extend from Goldboro, NS, to Dracut, MA, bringing production from the Sable Island Offshore Energy Project off the coast of Nova Scotia to U.S. and Canadian markets.

The U.S. markets which produced 17 shippers at the time of Maritimes Phase II filing have dwindled for a variety of reasons leaving the pipeline with only four shippers currently. Maritimes filed to build a project with a firm capacity of 440,000 Dth/d but it currently has signed precedent agreements for only 360,000 MMBtu/d, or 82% of the expected total, and several of its originally proposed supply laterals in Maine now are not needed.

Boston Gas, which signed a three-year agreement for 43,200 Dth/d of firm transportation on Maritimes, told FERC last month it should stay the project and hold a hearing on its size because of the loss of so many shippers and some of the changes proposed to Maritimes certificate, including the request to raise its rates 61%. Boston Gas also said the pipeline sponsors should be placed at risk for the cost of any unsubscribed capacity. "The market demand that the Commission relied upon in issuing the [Maritimes] certificate is in free fall," and the risk and financial burden of the project is being shifted to Boston Gas, the company said of Maritimes recent application to amend its certificate (Dockets CP96-178-008, CP96-809-007, and CP97-238-008).

In response last week, Maritimes said Boston Gas "appears to have overlooked" some important portions of its proposed certificate amendment, namely the fact that Maritimes actually has proposed to downsize its original 440,000 Dth/d capacity to meet the market's needs. "Exhibits G and G-I to the Amendment clearly show that the average daily design capacity of Maritimes system is approximately 360,000 Dth/d and the maximum daily design capacity is approximately 400,000 Dth/d for deliveries at Dracut, MA." In addition, contrary to Boston Gas' assertions, Maritimes will be at risk for the cost of unsubscribed capacity, the pipeline company told FERC. "Maritimes has allocated a substantial amount of its annual cost-of-service, over $10 million, to its [interruptible service] and in turn Maritimes will need to flow nearly 40,000 Dth/d at the maximum MNIT [interruptible] rate to recover those dollars."

As for Boston Gas' claim that it was treated unfairly and differently than Maritimes other shippers, nothing could be further from the truth, according to Maritimes. "Boston Gas, a shipper who has signed only a three-year agreement, is receiving a free ride at the expense of Mobil who is back-stopping the Maritimes project for 20 years."

Maritimes apparently was stunned that Boston Gas claimed its own short-term agreement was the only real showing of market support for the project. Maritimes noted it also has signed precedent agreements with, Mobil Natural Gas (185,335 Dth/d), Salmon Resources (100,000 Dth/d) and Nova Scotia Resources (30,240 Dth/d). In addition, it has a backstop agreement with Mobil for 174,665 Dth/d and another back-up agreement with the Sable Island producers. The fact that one of its major shippers is an affiliate is irrelevant, Maritimes said. The capacity has been purchased. Furthermore, although markets in Maine have been somewhat slow to develop, they are developing, the company noted, citing plans for more than 2,000 MW of gas-fired power generation along its pipeline system.

The project is appropriately sized, the sponsors already are at risk and the markets it will serve are real and have signed binding agreements with the pipeline. Nothing more is required, Maritimes said, requesting FERC reject Boston Gas' call for stay and hearing and approve Maritimes amended certificate.

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