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NJ, Sponsors Seek Review of Decision on Northeast Projects

January 24, 2000
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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 request.

"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 Public Safety.

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' capacity [CP98-540].

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 markets.

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 September.

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 binding.

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 1997.

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 subscribed.

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 project....."

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 Transmission.

Susan Parker

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