Downsized Maritimes Project, Laterals Get Final Green Light
FERC tied up all the loose ends of the Maritimes & Northeast
Pipeline project in a draft order released last week, clearing the
way for the pipeline to begin delivering about 350 MMcf/d of Sable
Island gas to power plants, paper mills and new markets in Maine
and other New England states this fall.
"With final approval in hand, we will begin construction of the
mainline in the next few weeks," said Tom O'Connor, president of
M&N Management Co., managing member of Maritimes. "We continue
to move forward and remain on schedule to meet our in-service date
of Nov. 1, 1999." Pipeline officials said they have agreements with
landowners on 90% of the right of way along the 200-mile route from
Baileyville to Westbrook, ME, and successfully drilled beneath the
Androscoggin River in March.
Over several protests, including one from the town of Pittston,
ME, and another from Maritimes shipper Boston Gas, FERC approved
the amended certificate application for the project, allowing
Maritimes to lower the project's firm capacity by 18%, defer
construction of five laterals and raise its firm reservation rates
22% to $0.715/Dth.
Maritimes raised the costs of its stand-alone pipeline to about
$390 million, or $90 million more than what was projected in its
July 1998 certificate. Costs also increased $24 million on the
Joint Facilities line, which is owned jointly with Portland Natural
Gas Transmission (PNGTS) and extends 100 miles south from
Westbrook, ME, to Dracut, MA. The company said there were
unexpected increases in labor costs, engineering, overhead and
other expenses. And the Commission agreed the rate hike was
justified. The project still has substantial markets to serve, FERC
said, contrary to the claims of its protesters.
The project was downsized to reflect the loss or delay of
numerous markets in the state. Maritimes originally had 17
shippers, but the amended version of the mainline project has only
four, excluding two new pipeline lateral customers. The town of
Pittston had requested a rehearing and stay of the amended project,
saying it was speculative because it lacked enduser support and
became more of a "producer-shipper" project. But FERC rejected
"The fact that the majority or even all of the capacity of a
proposed pipeline is subscribed by marketers and/or producers does
not render a project speculative, as Pittston suggests," the order
said. Marketers or producers who signed long-term agreements
"presumably have made a positive assessment of the potential for
selling gas to end-use customers."
The order also stated that Maritimes "appropriately downsized
its facilities.. Thus we find that there is no merit to Boston Gas'
contentions that Maritimes' market is in 'free fall,' that there
has been a reduced level of support of the project, or that the
project is oversized for the current level of subscriptions."
Maritimes has "overwhelmingly demonstrated market demand for the
project as 82% of the pipeline's capacity is subscribed under
long-term firm contracts," Commissioner William L. Massey said
during FERC's meeting last Wednesday. "In short, this is a sound
project. It will provide a competitive source of new gas supplies,
and it poses very little risk to shippers other than to Mobil and
the Sable Offshore producers, who have so heavily invested in
Maritimes has firm service agreements for 358,775 Dth/d of
mainline capacity with four shippers: Salmon Resources (15
years/100,000 Dth/d), a subsidiary of Shell Canada; Canada Limited
(10 years/30,240 Dth/d), a subsidiary of Nova Scotia Resources;
Mobil Natural Gas (20 years/185,335 Dth/d); and Boston Gas (three
years/43,200 Dth/d). The customers being served by the two new
laterals evidently will be utilizing up to 270,000 Dth/d of
capacity subscribed by the other shippers.
"One aspect of Maritimes' application that is interesting to me
is its request to reduce the pipeline certificated capacity by
about 20%," said Massey. "I'm not sure what the reduction in the
capacity of this project means. It may be a reflection of the fact
that the market has not matured to the degree that Maritimes
originally anticipated... Perhaps this is an anomaly in an
otherwise robust market. Perhaps it's a timing issue. In any event,
I find it interesting and somewhat counterintuitive in the
Northeast market. I'm pleased to support this order."
FERC granted a waiver of its rules to allow the pipeline to
provide market information to its affiliate Mobil, a Sable Offshore
Energy Project producer, because of Mobil's willingness to sign an
unusual backstop agreement that shields the pipeline and the other
Maritimes shippers from the risk of unsubscribed capacity.
The Commission also granted Maritimes' request to construct and
operate two additional lateral lines to deliver about 270,000 MMBtu
of gas to the proposed Casco Bay (a Duke Energy affiliate) and
Gorham Energy power plants in Maine. The customers did not sign up
for mainline capacity, but FERC noted Casco Bay will be fed with
gas off of the mainline. The Gorham lateral will extend off the
Joint Facilities line.