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Canadian Millennium Sponsors Put Hold on Project Review

Canadian Millennium Sponsors Put Hold on Project Review

After spending more than C$60 million (US$41 million) and three years of preliminary work, the sponsors of the upstream portion of the Millennium Pipeline Project have decided to put the regulatory review process in Canada on indefinite hold.

Canada's National Energy Board is due to rule soon on the request by sponsors of the Canadian Millennium Pipeline for an indefinite suspension of proceedings. Hearings were scheduled to start Aug. 21 in London, ON.

"Considerable delays have been experienced" in the U.S. before FERC, the NEB was told by Canadian Millennium sponsors. The latest one follows a change in the eastern end of the project's route through Westchester County in New York State to avoid safety concerns related to a major power transmission line and to avoid conflicts with wealthy landowners by using established transportation corridors. The NEB has been told the switch involves only 23 miles or 5% of the 422-mile route to New York City, but it has prompted FERC to request much additional information and hold more consultations with intervenors in the case.

TransCanada acknowledges that the landowner tangle is only one among multiple issues that have tripped up Millennium, saying the project's target of approval in one year has already turned out to be 18 months too optimistic. "The numerous delays have ranged from other route deviation reviews, as well as awaiting U.S. state agencies' permits and certificates prior to issuing a Final Environmental Impact Statement. The most notable regulatory developments in the project have been the FERC's decisions not to issue a Preliminary Determination, to hold a technical conference to hear submissions as to the strength and the timing of market growth in the U.S. Northeast and to request the U.S. Army Corps of Engineers' review of the Lake Erie Crossing prior to issuing an FEIS." The Corps' review took until June 1, requiring only a slight increase in the depth of an underwater pipeline trench that Millennium says it can do with only a "negligible" effect on costs.

Unveiled in the spring of 1997 by a consortium including TransCanada PipeLines Ltd., Westcoast Energy Inc., Columbia Gas Transmission Co. and MCN Energy Inc., the US$700 million plan calls for deliveries of 700 MMcf/d along a route stretching from the Dawn trading hub in southern Ontario across Lake Erie and New York State to Long Island, starting in late 2001. TransCanada holds the transportation-service contract for all the space on the Canadian part of the proposed route. In turn, Millennium says nine prospective shippers have booked 97% of the project's capacity.

The Millennium partners say they still have "total commitment" to the international project. TransCanada says suspending the Canadian share in the regulatory review could create flexibility for accelerating the project as well as holding it up to match the pace in the U.S.

The Westcoast subsidiary participating in the partnership, St. Clair Pipelines Ltd., says "changes occasioned by these delays do not invalidate the project. Quite the contrary, recent market developments strongly corroborate the project need. The one-year forward curve [in gas commodity-futures trading] for basis differentials [price differences] between Dawn and New York is approximately US$.075 per MMBtu. This exceeds the cost of transportation between Dawn and New York. This is a significant increase in the historical basis differential and is but one example of the increasing market support and need for the project." St. Clair also points to "a significant number" of gas-fired power projects emerging in New York as another positive sign.

In Canada, landowner, native, municipal and consumer interveners in the Millennium case are asking the NEB to make the consortium give a guarantee now --- just in case the project collapses --- that their expenses will be paid before granting any postponements. Their requests appear likely to fall on sympathetic official ears.

In a lengthy letter to the Millennium group after it first asked for the delay, a plainly annoyed NEB pointed out that the case is a complicated Joint Panel Review that also involves the Canadian Environmental Assessment Agency. The energy board said, "throughout the process to date, significant resources and effort have been expended by all parties to accommodate the ever-changing timetable of the applicants." Even though it took a mediation effort with intervenors to come up with the Aug. 21 date for starting public hearings, the project sponsors evidently did not discuss their new plans with the intervenors and "the panel is disappointed." A panel member's appointment expires Dec. 31. A suspension of the Canadian review "may impose an unfair burden on other parties to the process..... the panel is concerned that an adjournment may lead intervenors to incur costs for a project that may or may not come to fruition."

Gordon Jaremko, Calgary

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