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Coastal's Wisconsin Motives Questioned

Coastal's Wisconsin Motives Questioned

Coastal says it has joined Peoples Energy to build a 130-mile pipeline from Indiana to Wisconsin because the market needs the pipe. Others, especially backers of the proposed Guardian Pipeline, say the parent of ANR Pipeline is merely trying to protect its lock on the Wisconsin market.

Coastal said last week that growing power generation and LDC demand make necessary a pipe to serve incremental growth markets in northern Illinois, northwestern Indiana and Wisconsin beginning in late 2001. Initial capacity of the Coastal-Peoples pipe would be 1.4 Bcf/d. According to the North American Electric Reliability Council, the region will need more than 8,200 megawatts of additional generating capacity by 2005.

Coastal spokesman Joe Martucci said the pipeline is not in competition with the Guardian Pipeline, which is a challenge to ANR's service territory backed by CMS Energy of Dearborn, MI; WICOR of Milwaukee, WI; and Viking Gas, a wholly owned subsidiary of Northern States Power Co. of St. Paul, MN. Two weeks ago, Guardian filed its project at the FERC. "About 60% of our projected market area would include northern Illinois, Chicago and northern Indiana," and the remaining 40% would be in southeastern Wisconsin.

The Coastal-Peoples project also would not compete with the announced Horizon Pipeline, Martucci said, which is backed by Kinder-Morgan, formerly KN Energy. "I have not heard much at all about Horizon lately," Martucci said. "I don't think that project is aimed at this particular market area that we've identified." Kinder-Morgan did not return calls for comment by press time.

Guardian backers and a Wisconsin consumer group disagree entirely.

"We've been saying all along that the Wisconsin market is historically dominated by ANR, which is a subsidiary of Coastal, so it's hard to see how a new Coastal pipeline coming into Wisconsin does anything to increase competition," said Kelly Farr, CMW spokesman. "Guardian is the only option that provides competition, choice, lower prices. Guardian opens up a host of choices at the Chicago Hub." Further, he said Coastal's proposed pipe only connects with the ANR system while Guardian accesses the Chicago hub.

"It's interesting that when Guardian was first announced that ANR went to great lengths to say that no new pipeline project was needed coming into Wisconsin, that they could simply expand and everything would be fine. Now they seem to be agreeing with Guardian that a new pipeline project is necessary. It appears to be a distraction to the competitive situation between ANR and Guardian. I'm not sure that it is in the same geographic area, but it seems to be a distraction into the marketplace."

Noting ANR's monopoly position in Wisconsin, Steve Hiniker, executive director of the Wisconsin Citizens' Utility Board, said, "All along ANR has been fighting Guardian, and they have told me personally on many occasions... 'We don't need new pipeline in Wisconsin.' That's the tactic that ANR has been taking for some time, for over a year now. Last week, lo and behold, it was revealed they changed their mind.

"Given the fact that there are no specific diagrams, routes, plans, customers in Wisconsin. And given the fact that this would be an entirely new type of development in the great lakes. We view the proposal as a sham and preposterous." The Utilities Board will fight it from a consumer advocacy standpoint, Hiniker said.

ANR has been a sharp critic of the Guardian project. "I guess I'm surprised from the standpoint it's a complete reversal of what they [ANR] had been saying just a few days before [the announcement], which was there wasn't a market need" for a new pipeline into Wisconsin, said Greg Palmer, president of Viking Gas Transmission, co-sponsor of Guardian.

"They seem to have done a complete 180-degree turn." Palmer said Guardian is ahead in the race anyway since it already has been filed at the FERC.

The Coastal-Peoples pipeline would begin at St. John, IN, where Coastal's ANR Pipeline has a compressor station, and extend north for 26 miles to Lake Michigan near the Illinois-Indiana border where a new 50,000 hp compressor station will be built. More than 90% of the route is located along existing rights-of-way. From there, the pipeline will continue north under Lake Michigan for about 104 miles, running about three to 10 miles from the western shore. Plans call for the pipeline to be installed with a minimum of three feet of cover in the lakebed and deeper in shipping channels.

Guardian proposes to transport gas from interconnections with Alliance, Northern Border, Midwestern Gas Transmission, and Natural Gas Pipeline of America at the Chicago hub near Joliet, IL, to northern Illinois and southern Wisconsin markets. The project consists of about 140 miles of 36-inch pipe extending from Joliet to the Ixonia area, with an additional 8.5 miles of 16-inch lateral pipe extending from the main Guardian line to Eagle, WI.

ANR spokesman Joe Martucci said ANR's lake route would be less expensive than a purely land-based route as the pipeline would have to go through heavily populated areas of Michigan. "The water route may seem a bit novel. If people keep an open mind... I think they will come away with a favorable impression of the project" which is expected to cost $300 million.

Additional equity partners are anticipated; however, Martucci would not comment on how many are possible or who they might be. Since the system is designed to serve the incremental needs of multiple electric and gas customers, plans call for project management to be structured with multiple owners, with no one party having a controlling interest.

Laterals are planned to serve generation and other markets along the pipeline route. The proposed under water route is intended to minimize the project's impact on landowners. Using horizontal drilling techniques developed in the Gulf of Mexico, laterals will be completed without trenching or otherwise disturbing shoreline or adjacent shallow lakebed areas. Following environmental review, the partnership plans to file with the FERC later next year.

Joe Fisher, Houston

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