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Maritimes, Algonquin Plan to Expand New England Pipes

Maritimes, Algonquin Plan to Expand New England Pipes

With energy prices rising at an alarming rate, there's no better time than the present to launch expansion projects for gas pipeline infrastructure. Maritimes & Northeast Pipeline and Algonquin Gas Transmission did just that last week, filing applications with the Federal Energy Regulatory Commission to build related pipeline extensions designed to bring Sable Island gas to the greater Boston area, including a couple new power plants.

The projects, which together cost about $270 million, would include an extension of the Maritimes system in a southeastern direction through several Massachusetts counties to the coast where it would connect with the proposed Algonquin line. Algonquin would then continue the route offshore and down the coastline through Boston Bay to Weymouth on the south side of Boston Harbor. The two projects are expected to be in service in November 2002.

"Access to new supplies of natural gas is essential to keep pace with the growing market," said Tom O'Connor, president of M&N Management, manager of Maritimes & Northeast Pipeline, which brings Atlantic Canadian gas to the Northeast from the Sable Offshore Energy Project offshore Nova Scotia. "Maritimes' expansion will provide greater energy security and reliability for all consumers in the Northeast. Additionally, as gas-fired electric generating plants are built, electricity will be produced more efficiently and cleanly."

The $140 million Maritimes project, called the Phase III expansion, would include 24 miles of 30-inch diameter pipeline and one mile of 24-inch diameter pipe, extending from Methuen, MA to Beverly, MA. About 76% of the proposed Maritimes extension route would be in or adjacent to existing right of way owned by New England Power Co, the pipeline company said.

Although Maritimes did not file any new contracts for service to support the project, it said its existing shippers support the plan because the new extension capacity will be available for use by all of them at the same recourse rates they currently pay. Maritimes also told the Commission it expects markets to develop along the line after it goes into service in a way similar to what occurred along its 100-mile Phase II project. It does not intend to roll in the cost of the Phase III project at this time but may seek to do so at a later date. The new Maritimes facilities would be capable of transporting 360,000 Dth/d.

The new Beverly delivery point would become a primary delivery point for all Maritimes shippers, and the cost of transportation would be the same (capped at $0.715/Dth) as for delivery to Maritimes' other primary delivery point at its connection with Tennessee Gas in Dracut, MA.

The $130 million Algonquin extension project, called HubLine, would include a 30-mile, 24-inch diameter offshore pipeline extending from the terminus of Maritimes Phase III to Algonquin's existing facilities in Weymouth along with ancillary facilities onshore. Additionally, a five-mile, 16-inch diameter lateral pipeline is proposed to Deer Island in Boston Harbor. Algonquin said it chose the offshore route to avoid the difficult environmental and landowner hurdles of a land route.

"The proposed route was selected to minimize impacts to the environment, landowners and the greater Boston community," said Robert Evans, president of Duke Energy Gas Transmission, parent company of Algonquin. "In the coming months, we will continue to review the route and solicit input from people interested in the project so we can construct the pipeline safely and in strict compliance with all environmental regulations."

The project has significant market support through long-term contracts for firm transportation capacity from Duke affiliate Texas Eastern (80,000 Dth/d), Sithe Power Marketing (140,000 Dth/d), Southern Energy Kendall LLC (35,000 Dth/d), Southern Connecticut Gas (20,000 Dth/d) and Providence Gas (500 Dth/d).

"Energy consumers are demanding more and more natural gas," said Evans. "Local distribution companies continue to grow their markets through conversions and service area expansions, new and more efficient gas-fired electric generating plants are being built and existing power plants are converting to gas."

Sithe and Southern plan to use their capacity to serve new power plants while CNG and Providence plan to serve simple residential, commercial and industrial demand growth within their local distribution services territories. Texas Eastern plans to use its leased capacity to provide its own shippers with firm hourly swing rights and other imbalance management services. The services and additional flexibility are expected to reduce Tetco's reliance on operational flow orders. Tetco also filed an application this week for its lease of the proposed Algonquin expansion capacity.

The projects' sponsors also included a number of studies to support their extensions. Dr. Susan Tierney of Lexicon Inc. and Wayne Oliver of Navigant Consulting performed a market/benefits study of the Phase III and HubLine projects, concluding they would provide substantial benefits to Massachusetts residents and the New England gas market as a whole. The projects represent "an example of the type of gas delivery infrastructure that the New England region needs to enable the continued development of competitive energy markets and to achieve the region's objective of improving its air resources through reduced emissions of various air pollutants," the study concluded.

Maritimes and Algonquin also found support in a recent Department of Energy (DOE) report, which concluded greater gas pipeline infrastructure in the region would help reduce demand surges and high prices for fuel oil. The DOE's Office of Natural Gas and Petroleum Import and Export Activities recently noted in its Second Quarter Report 2000 that gas demand in New England has grown by more than 67% in the last 10 years and will require continued infrastructure expansion to support further growth.

Maritimes & Northeast, a 650-mile gas pipeline traversing Atlantic Canada and the northeastern United States, is owned by affiliates of Duke Energy (37.5%), Westcoast Energy (37.5%), ExxonMobil (12.5%) and NS Power Holdings Inc. (12.5%).

Rocco Canonica

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