NJ, Sponsors Seek Review of Decision on Northeast Projects
Critics of the controversial multi-state gas pipeline project
--- Independence Pipeline and the associated SupplyLink and
MarketLink expansions --- insist FERC treated the projects with kid
gloves in its interim order last month, while the project sponsors
argue the Commission held their projects to unprecedented higher
standards that may be impossible to meet.
Both sides are seeking rehearing of the decision, which
conditionally approved the projects but withheld certificates until
greater market support is shown.
The New Jersey Attorney General's Office called on FERC last
week to "reconsider and reverse" its decision on the hotly
contested MarketLink project, a pipeline expansion that would run
through the northern part of the state. It wants the Commission to
address on rehearing the issue of whether it is safe to site the
project in the densely-populated Garden State. In the mid-December
interim order, FERC failed to tackle the safety issue, saying it
was out of its jurisdiction.
The question of pipeline safety, which New Jersey contends is
within FERC's jurisdiction, "is not an academic debate to the
people of New Jersey," many of whom still vividly recall the
explosion of Texas Eastern Transmission's line in early 1994, wrote
Deputy Attorney General James Martin in the state's rehearing
"The image of that fireball in Edison, NJ, and of the 1,500
people whose homes were destroyed was seared into the memory of
virtually every one of the seven million citizens of this state.
These citizens demand that their government not impose this massive
pipeline upon them unless and until they can be assured that the
siting, routing, operation and maintenance of the proposed pipeline
will be safe --- not just a little bit safe, not just minimally
safe, but really safe, maximally safe," he told the Commission.
Joining New Jersey in its rehearing request was the New Jersey
Board of Public Utilities and the New Jersey Department of Law and
New Jersey contends the 1968 Pipeline Safety Act gives FERC the
responsibility to consider all factors affecting public interest,
including safety considerations. The state also cited a 1979 Senate
report that noted "FERC will retain its authority to impose safety
conditions exceeding DOT's standards" only in "exceptional cases."
The proposed MarketLink expansion is an "exceptional case,"
according to New Jersey.
In its rehearing bid, Transcontinental Gas Pipe Line --- whose
MarketLink project is the only one that is substantially subscribed
(95%) --- objected to FERC holding its certificate hostage until
Independence and SupplyLink can deliver long-term contracts with
non-affiliated shippers for at least 35% of their projects'
Although it is often linked to Independence and SupplyLink,
Transco stressed that MarketLink could successfully operate without
the two upstream projects. As a back-up, it said it could turn to
other expansion projects currently proposed and under development
to bring in Canadian and Midwest gas to the New Jersey and New York
Independence contested the Commission's decision relegating its
certificate to limbo until it can supply non-affiliate contracts
for at least 35% of project capacity. Before construction can
start, FERC has required Independence to execute contracts for
68.6% of its summer capacity and 62.8% of its winter capacity.
This is an "unjustified and unsupported departure" from FERC's
prior pricing policy, which required pipes to submit long-term
contracts for only 25% of the capacity of their new projects as
proof of market support, according to Independence [CP97-315]. The
Independence project is subject to the pricing policy that was in
effect prior to the new policy statement, which was issued last
In the interim order, the Commission refused to accept
Independence's contract with affiliate DirectLink, which was for
55% of the capacity of the proposed line, as proof of the project's
market demand. It also discounted the pipeline's contracts with
Enron Capital and Trade Resources and Eastern Energy Marketing Inc.
because they had "market out" clauses and, therefore, were not
Independence contends the Commission is holding it to a higher
standard than other pipeline projects. ".....[I]n the past, the
Commission has given equal weight to precedent agreements between
an applicant and its affiliate and unrelated third parties."
Independence wants to know why FERC didn't inform it earlier of
the problem with the DirectLink precedent agreement so it could
remedy it. The contract was filed at the Commission in September
The Commission said it imposed sterner conditions on
Independence and the associated projects because of the magnitude
of the undertaking and the potential for disruption to the
environment, and due to the fact that Independence was way off the
mark when it predicted that its proposed line would be fully
But Independence pointed out that FERC's very own environmental
impact statement on the joint projects said they "would result in
limited adverse impact" if mitigation measures were employed. As
for Independence's initial prediction, Independence countered "this
hardly justifies imposing the 35% requirement. [The] prediction
that it would be fully subscribed was only a prediction and was
characterized as such."
Independence and Transco also objected to FERC prohibiting the
start of construction on any section of the three projects until
all properties are surveyed, environmental surveys are completed
and all consultations with resource agencies are finalized. The two
contend this also departs from Commission precedent, which they
said permits pipes to start construction on parts of pipeline
projects that have been surveyed.
FERC said it imposed the restriction because significant
portions of affected properties in Ohio and Pennsylvania still have
not been surveyed. Again, Transco said its project is being
hamstrung by Independence and SupplyLink. "Transco has completed
all of the environmental survey work for the MarketLink
Due to the surveying restriction, FERC's requirement that
construction of Independence be finished within two years of
issuance of a certificate is impossible to meet, according to
Independence. It believes it would be "more reasonable" if the
Commission would require the greenfield pipeline to be built and in
service two years after giving the go-ahead for construction.
Sen. Frank Lautenberg (D-NJ) also urged FERC to reconsider its
decision on the MarketLink expansion, but for much different
reasons than those of Transco. Although the interim order "imposed
a variety of conditions" on the Transco project, "there are many in
New Jersey who believe the FERC decision did not adequately address
a number of vital issues," he wrote to the Commission.
"In particular, there is great concern over FERC's apparent
acceptance of the applicant's information regarding the need for
their product in New Jersey. Many believe that this pipeline is a
speculative venture and that true market demand in this state, as
elsewhere, has not been demonstrated," he said.
The Ohio Pennsylvania Landowners Association (OPLA) wants FERC
to impose a Feb. 15 deadline by which Independence and ANR
Pipeline's SupplyLink expansion must submit the long-term contracts
for 35% of their projects' capacity.
Moreover, "we request that a verification, documentation and
substantiation of all contracts be conducted by the FERC staff and
that copies of all documents be forwarded to the secretary of the
OPLA," the landowner association said. The OPLA also seeks a delay
in the certification of Independence and SupplyLink, as well as the
MarketLink project, until an "impartial and independent"
supplemental final environmental impact statement on the projects
can be prepared, as was initially requested by Texas Eastern