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INGAA, EEI Back Conference on Northeast Gas Demand

March 22, 1999
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INGAA, EEI Back Conference on Northeast Gas Demand

The leaders of a major pipeline association and a key electric utility group jointly have expressed their support for FERC to convene a conference "in the near future" to assess post-2000 natural gas demand in the Northeast and the need for new pipeline capacity to serve customers, particularly power generators, in that market. Meanwhile, a new study sees no need for new capacity to the Northeast until 2004 (See related story this issue).

The request comes in the wake of the Commission majority's action two weeks ago to forego preliminary determinations (PDs) for four controversial pipeline projects intended to carry western Canadian gas from the U.S. Midwest market to the Northeast. With that move, FERC, in effect, placed the projects on the back-burner until early next fall, when it's expected to decide the certification issue. The Commission indicated a key factor in its decision to bypass the PDs centered on the question of "need" and the lack of firm contracts with potential customers of the proposed projects - Independence, Millennium, MarketLink and SupplyLink. Pipeline sources privately were steaming, saying FERC's move would seriously jeopardize the construction of new capacity to a market that's widely expected to experience high growth in gas demand in the post-2000 period. "This is a very serious issue," remarked one source.

Given forecasts that gas consumption by electric generators in New England is expected to more than double by 2005, "we believe it is imperative that the Commission assess whether there is adequate pipeline capacity in place to meet this rapidly growing demand," wrote Jerald V. Halvorsen, president of the Interstate Natural Gas Association of America (INGAA), and Thomas R. Kuhn, president of the Edison Electric Institute (EEI), in a March 15th letter to FERC Chairman James Hoecker. Halvorsen said Hoecker indicated following the last Commission meeting that he was considering calling a conference to explore these issues. However, Hoecker's office said last week that he hadn't made a decision yet.

"What this hearing will do, I think, is paint a picture that you really have a demand there [in the Northeast] that's growing pretty quickly, and almost all of the projects that are projected to go in there are going to be able to find a market," Halvorsen said in an interview with NGI. "We're not necessarily alarmed [by FERC's PD action], but we're just saying the whole concept of stepping back and taking a look at the big picture is something we ought to do."

Halvorsen said he and Kuhn support a "generic-type" hearing where FERC would "call in the electrics and the industrials, some of the political leaders and some of the ISO people to try to get an updated picture on what the demand really is [in the Northeast]. Then I think the Commission will be better able to say we're weighing all these landowner concerns on one hand, but we also have these demand considerations on the other hand. So if anything, it should help to kind of balance everything out" in the end.

Kuhn told NGI he believes the time is "ripe" for FERC to investigate these issues in a conference, which he said should be held in the "next couple of months." EEI believes "at this point in time probably additional pipeline capacity is going to be needed," but "I think that we need to get people on the same page with respect to the timeframe and amounts" of capacity. He refused to "prejudge" the level of capacity that will be needed. "I think that's exactly why we need a conference to discuss those issues, to get all the views on the table."

A new study by Energy ERA, a Calgary, AB-based consulting firm, concludes that the need for additional pipeline capacity to the U.S. Northeast isn't immediate. It said the "planned and underway capacity additions from eastern Canada and the Gulf Coast [will be] sufficient to fill Northeast gas demand for the next few years," and added that "economics do not support a major Midwest-to-Northeast pipeline before at least 2004."

The Energy Information Administration's Annual Energy Outlook for 1999 seems to bear this out, projecting a steady rise in gas consumption by electric generators on the East Coast (New England and Mid-Atlantic) during the post-2000 period - with the most significant increases beginning in the 2003-2005 period. It estimates gas demand for power generation on the East Coast will jump 136% from 0.535 quadrillion Btus per year in 2000 to 1.26 quads in 2005.

Susan Parker

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ISSN © 2577-9877 | ISSN © 1532-1266
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