DEGT Plans Expansion of East Tennessee System
In the second announcement this month about expanding pipeline capacity
for the growing and hungry gas-fired power generation market in the Southeast
and Mid-Atlantic regions, Duke Energy Gas Transmission said it plans to
extend its East Tennessee Natural Gas System with a 95-mile extension from
Virginia into North Carolina.
The 24-inch pipeline, which would be completed in 2002, would be coupled
with DEGT's East Tennessee system mainline enhancements to initially transport
200 MMcf/d of natural gas beginning in the fall of 2002. The extension
would be expandable, in increments, to 600 MMcf/d.
Earlier this month, Dominion Transmission unveiled plans to build a
new pipeline to serve portions of the same region (see NGI,
Oct. 9), which would serve new power plants in Virginia and North Carolina
beginning in 2005. There was no reaction about DEGT's competitive proposal.
DEGT's Patriot extension would bring natural gas service to portions
of southwest Virginia for the first time, and introduce a competitive supply
of natural gas to North Carolina from Appalachian and Gulf Coast producers.
The extension would be the centerpiece of a $215 million project by
Duke Energy's Houston-based division, which is responsible for the company's
interstate natural gas pipeline operations. Originating in the East Tennessee
system in Wythe County, VA, the Patriot extension would cross Carroll,
Patrick and Henry counties in Virginia, then terminate in Rockingham County,
According to Duke, the Patriot Extension would help meet the annual
4% natural gas growth in the region currently being driven by strong demand
for natural gas-fired electric generation.
"Our discussions with potential Virginia and North Carolina customers
showed a strong need for additional natural gas supplies, supply diversity,
transportation and competition in the region," said DEGT President
Robert B. Evans. DEGT is building new relationships with storage providers
and local producers who would provide "significantly increased natural
gas supplies" into the East Tennessee system from the Appalachian
area, Evans said.
"While most of the Appalachian production has traditionally gone
to the Northeast, local producers now are seeing value in the southeast
market and are planning infrastructure additions accordingly," he
said. "This enhanced supply and extended market reach strategy was
contemplated when we purchased East Tennessee less than a year ago."
The purchase was announced in mid-1999 (see NGI, July
Dominion's Greenbrier Pipeline project also targets the mid-Atlantic
region. Its greenfield pipeline would transport up to 600,000 Dth/d of
Appalachian, Canadian and Gulf Coast gas production to the region. It would
extend about 200 miles from Dominion's Cornwell Station near Charleston,
WV, connecting with the Transcontinental Gas Pipe Line in Rockingham, NC.
Whether FERC would give the go-ahead to both projects is questionable,
but DEGT's Tom O'Connor, senior vice president for marketing, said that
there are significant differences between the two proposals, which would
give Duke Energy the edge.
Citing the "supply diversity" that DEGT is proposing, O'Connor
said that the expansion would bring supplies from the Gulf Coast through
the Appalachian region into the Carolina markets. He also said that the
size of DEGT's expansion was better suited to the area.
"This is the right size of capacity to enter the market,"
said O'Connor, citing DEGT's proposed initial capacity of 200 MMcf/d versus
Dominion's proposed 600,000 Dth/d. DEGT's pipeline expansion also would
be completed nearly three years before Dominion's, according to the proposals.
Dominion's proposal calls for initial service to begin in 2005, but O'Connor
said that DEGT's expansion would be completed and ready in 2002.
"We have several favorable differences, and Duke Energy's credibility
brings something to the table, too," O'Connor said. "This project
is consistent with the growth that we planned when we bought the East Tennessee
system, and we knew that going in."
DEGT purchased the East Tennessee pipeline system from El Paso Energy
for $386.3 million in stock in January, extending the reach of its 9,220-mile
Texas Eastern Transmission Corp. (Tetco) pipeline. O'Connor said the long-term
plan was always to expand the East Tennessee mainline between the Patriot
extension and Tetco to give Patriot extension customers an additional natural
gas supply option.
DEGT's Evans said that the extension would "result in a 30% increase
in East Tennessee's peak-day delivery capability by 2002."
Formal shipper meetings are scheduled by DEGT in the next two months,
concluding with a binding open season for capacity in the Patriot extension.
Following the open season, DEGT would make its filing with the Federal
Energy Regulatory Commission by the end of the first quarter 2001.
East Tennessee Natural Gas owns and operates two mainline systems in
central Tennessee that converge near Knoxville and extend to a point near
Roanoke, VA. The system has a current design capacity of more than 700
MMcf/d and provides services to 40 local distribution companies and 16
industrial companies in the region.
DEGT manages 12,000 miles of natural gas pipelines, including East Tennessee,
Tetco, Algonquin Gas Transmission, and with other partners, Maritimes &
Carolyn Davis, Houston