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Gas-Hungry NC Waving $200M Enticement

Gas-Hungry NC Waving $200M Enticement

Hungry for gas service in its northeastern region, North Carolina is dangling a $200 million carrot before the industry in the hope of attracting new infrastructure development. The enticement has attracted the attention of Williams Gas Pipeline-Transco and six others who recently filed to express their interest to the North Carolina Utilities Commission.

Transco, which has provided transportation service to North Carolina for nearly 50 years, told the commission it has submitted a proposal to the Albemarle Regional Energy Authority (AREA) for a joint venture in developing gas transmission and distribution facilities in five counties: Camden, Currituck, Chowan, Pasquotank and Perquimans.

The North Carolina Utilities Commission recently told those interested in seeking the $200 million state bond funds to file non-binding notices of interest with the commission. Williams said it will make a formal presentation of its proposal to AREA leaders today.

Gisele Rankin, an attorney with the public staff of the North Carolina Utilities Commission, said Williams-Transco is one of seven parties giving notice to the commission regarding the bond money. The others are North Carolina Natural Gas Corp., Carolina Power &amp Light Co., Frontier Energy, AREA itself, the City of Elizabeth City (which, she said, is not eligible to receive any of the money), and Public Service Co. of North Carolina Inc. (which only filed to reserve its right to express interest later).

The money was approved by North Carolina voters in November in a referendum that included monies for water and sewer improvements. "We've got a long history of trying to expand the gas infrastructure in the state," Rankin said. "A third of our counties were un-served in 1990."

The statute that created the funding says money is to go to areas that are "un-sourced" for natural gas. Companies are eligible to receive amounts only to the extent they offset projects' negative net present values as determined by commission studies. Rankin said hearings to determine recipients could take place in early fall. The full $200 million likely won't be available right away but will be paid out over a few years depending on the state's budget, Rankin said.

The Transco notice to the commission says "due to the preliminary nature of Transco's discussions with AREA, the exact nature and extent of Transco's work with AREA is still undetermined." However, the notice also says Williams is "committed to providing every feasible assistance to AREA or other entities seeking to provide natural gas to northeastern North Carolina."

"[T]his venture would create an opportunity for industrial and electric generation facilities to locate in these counties," said Cuba Wadlington Jr., general manager of Houston-based Williams-Transco. "In addition to providing an economical source of energy for the residents of northeast North Carolina, our proposal could enhance the overall economic development in this area."

Orlando Alvarado, project development representative for Williams Gas Pipeline-Transco, said about 15% of the mainline's throughput is delivered in North Carolina. "So we deliver an abundant amount of gas to the state, and this is just one more way of trying to serve market areas in the state that have not been served before."

Alvarado said any bond money received would not apply to existing or announced projects, such as its Pine Needle LNG project or its Cardinal extension project. "All this is going to be in conjunction with LDCs in the [un-served] area," Alvarado said of potential bond-funded development.

North Carolina's initiative to attract infrastructure is not unusual, Alvarado said, although "this is the first time I've heard of anything like this happening. I think it's very positive that they're doing this. This is definitely going to cause [infrastructure development] to happen, or at least it's going to cause several companies to look at the viability of it. Hopefully the outcome is that the eastern part of the state does get a gas infrastructure."

The fact that much of the Carolinas lack natural gas service, coupled with much activity in development of gas-fired power generation in the states, has made the region ripe for pipeline proposals.

Carolina Power &amp Light (CP&ampL) and Southern Natural Gas (Sonat) are planning 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 after the project's announcement, Scana Corp. and Transco voiced their objections, saying they could provide a cheaper and more environmentally friendly alternative.

The CP&ampL-Sonat joint venture is called the Palmetto Pipeline and has a planned initial capacity of 200 MMcf/d to 300 MMcf/d and can be expanded to accommodate future growth. CP&ampL plans for a substantial portion of the capacity to fuel new electric generation being developed in the Carolinas, with the remainder used to increase regional gas availability. CP&ampL also is in the process of buying LDC North Carolina Natural Gas for $354 million.

Scana's competing project is a 160-mile extension from Grover, SC, to Pembroke, NC, where CP&ampL is potentially going to build a gas-fired power plant. Scana projects savings over the Palmetto project of between 25% and 40%. In February Scana said it would buy Public Service Company of North Carolina for $900 million, including assumption of about $250 million in PSNC debt.

In December Frontier Energy began flowing gas in Surry, Wilkes and Yadkin counties (see NGI Dec. 21, 1998). Frontier interconnects with Transco near Salisbury, NC and is a partnership of Sempra Energy Utility Ventures and Frontier Utilities of North Carolina, which is principally owned by ARB Inc. of Lake Forest, CA, and other partners.

Joe Fisher, Houston

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