NGI The Weekly Gas Market Report / NGI All News Access

New Carolina Pipe Proposal Draws Fire

New Carolina Pipe Proposal Draws Fire

While the Carolinas are known for warm breezes and friendly folks, a pipeline proposed for the two states is getting a very cold shoulder from competitors.

Carolina Power &Light (CP&L) and Southern Natural Gas (Sonat) announced plans to jointly build, own and operate a 175-mile pipeline from the terminus of Sonat's system in Aiken, SC, to an interconnect with North Carolina Natural Gas in Robeson County, NC. Almost immediately, Scana Corp. and Williams' Transco voiced their objections, saying they could provide cheaper and more environmentally friendly alternatives.

Named the Palmetto Pipeline, the CP&L-Sonat 50-50 joint venture has a planned initial capacity of 200 MMcf/d to 300 MMcf/d and will be expanded to accommodate future growth. CP&L plans to subscribe for a substantial portion of the Palmetto capacity to fuel new electric generation being developed in the Carolinas, with the remainder to be used to increase regional gas availability. CP&L also is in the process of buying LDC North Carolina Natural Gas (NCNG) for $354 million (see NGI, Nov. 16, 1998). That deal is expected to be done by mid-year. Palmetto also would serve some of the gas needs of NCNG.

Scana Corp. said last week it had proposed a less costly and more environmentally friendly pipeline, but was rebuked by CP&L and Sonat. Both Scana and Transco, which operates a competing pipeline, are expected to challenge Palmetto at FERC.

"We proposed a 160-mile pipeline extension from Grover, SC, to Pembroke, NC, where [CP&L is] talking about potentially building a natural gas-fired power plant," said Scana spokesman Roger Schrum. "That, compared to the pipeline project they [announced last Wednesday], would be between 25% and 40% cheaper, less environmentally harmful, would get them the same volumes of gas and also would have been put in service significantly quicker.

"We would have been building that pipeline on existing right of way, which we already own and which is already certified for pipeline use. The project that was announced today would be a greenfield project that would require the development of new right of way and condemnation of existing property rights for a number of the counties that they're talking about."

What it comes down to is the cost of transportation service, said CP&L spokesman Mike Hughes. He said on three occasions the company met with Scana and offered an opportunity to participate in a joint venture. "Scana declined and offered to build the pipe and sell us a portion of the capacity. Based on our experience elsewhere, Scana's contention that they can offer us gas [transportation] cheaper is difficult to believe."

Hughes said a CP&L generating station in Darlington County, SC, currently moves gas supplies on Scana's South Carolina Pipeline. "What we pay them for curtail-able capacity is significantly higher than what we would expect firm capacity to cost on our pipeline."

One source said CP&L chose the Sonat project because it would have more control over the pipeline. Scana didn't offer CP&L a partnership, although Schrum said that option always was available. "We would have been more than willing to talk to them about those kinds of things," he said.

"CP&L is fairly new in the gas business and they wanted to have control of an asset bringing gas into North Carolina." Schrum said Scana intends to file comments at FERC regarding the CP&ampL-Sonat project.

In a statement, Transco General Manager Cuba Wadlington Jr. said the "project cannot and will not provide better service or cheaper rates than a Williams Gas Pipeline-Transco alternative. The proposed project will require significant capital additions to Southern Natural Gas Company's existing system as well as a brand new pipeline in South and North Carolina and will result in rates that are up to 60% higher than rates for service through a Williams Gas Pipeline-Transco alternative.

An open season for Palmetto is to start soon. Depending upon firm capacity subscription, the capital cost for Palmetto is expected to be $200 million to $250 million.

The pipeline is to be operational in April 2002. Construction is scheduled to begin in summer 2001. Although an initial pipeline corridor has been identified, the exact route has not been determined. The route likely will cross portions of Aiken, Lexington, Richland, Sumter, Lee, Darlington, Marlboro and Dillon counties in South Carolina and Robeson County, NC. An environmental analysis is under way to establish the most environmentally sound path.

As part of the project, Southern Natural will undertake a major expansion of its existing interstate system, consisting of extensive looping and additional compression at points from Mississippi to Aiken. The extent of the expansion, which is expected to cost in excess of $200 million, will depend on capacity requirements.

CP&L is considering sites in North Carolina and northeastern South Carolina for new electric generation to be fueled by the new pipeline. The company plans to build about 4,000 MW of gas-fueled generation by 2007. Some of the new electric generation will be served in conjunction with NCNG, a gas distribution company headquartered in Fayetteville, NC.

CP&L is currently building peaking generation at two existing North Carolina plant sites-in Wayne and Buncombe counties. On Feb. 18, CP&L said it is considering sites in Richmond and Rowan counties in North Carolina for possible peaking generation. CP&L also is considering sites in the Carolinas for gas-fueled combined-cycle electric plants, which would operate about 50 to 60% of the time, compared with about 11% of the time for peaking power plants. CP&L plans to make an announcement soon about the location of a combined-cycle plant. Additionally, CP&L has broken ground on a 160-MW gas-fired peaking plant in Monroe, GA, its first project outside the Carolinas.

Joe Fisher, Houston

©Copyright 1999 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.

Copyright ©2018 Natural Gas Intelligence - All Rights Reserved.
ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus