The only non-affiliated shipper that has signed up for firmtransportation service on the Maritimes &amp Northeast Pipelineproject clearly is regretting it now. Boston Gas told FERC lastweek a request by Maritimes in January to amend its pipelinecertificate, eliminate about 140 miles of laterals in Maine andraise its mainline rates 61% because of the loss of numerous shows a lapse in rationality.

Rather than raising its rates to such a degree that the projectbecomes uneconomic for its shippers, the sponsors should downsizethe pipeline and should be placed at risk for the cost ofunsubscribed capacity, Boston Gas told the Commission. Maritimesshould not be allowed to make the same mistake twice. The pipelinealready admitted a previous rate increase on its proposed U.S.laterals made service uneconomic for potential end users in Maine,the utility added.

Maritimes informed the Commission in January that “marketchanges” in Canada, Maine and Massachusetts forced it to proposephasing in or deferring about 140 miles of U.S. pipeline laterals.Maritimes said it was caught off guard by markets in easternCanada, which matured more rapidly than originally anticipated. Butit also said its lateral line rate hikes-which more than doubledtransportation costs-were partly to blame for the loss of most ofits Maine markets.

“The market demand that the Commission relied upon in issuingthe [Maritimes] certificate is in free fall,” and the risk andfinancial burden of the project is being shifted to Boston Gas, thecompany said of Maritimes recent application to amend itscertificate (Dockets CP96-178-008, CP96-809-007, and CP97-238-008).

“At the time the Commission made its determination regarding themarket support for the project, there were 17 shippers that hadexecuted precedent agreements for long-term firm service onMaritimes’ system. These shippers included significant numbers ofentities that were not affiliated with Maritimes or with the SableIsland Project Partners. In stark contrast, Maritimescurrent…application shows it has obtained firm service agreementsfrom only four shippers and only one of those, Boston Gas, is notaffiliated with Maritimes or any of the Sable Island Partners.”

The pipeline still has signed precedent agreements for 360,000MMBtu/d, or 82% of the expected full capacity, including agreementswith Boston Gas (43,200 Dth/d), Mobil Natural Gas (185,335 Dth/d),Salmon Resources (100,000 Dth/d) and another company (30,240Dth/d). It also has a backstop agreement with Mobil for anadditional 174,665 Dth/d. However, Boston Gas said the level ofmarket support is inadequate and the project should be downsized.

In its motion to intervene, protest, request for expeditedevidentiary hearing and request for stay, the Boston-based gasdistributor requested that the Commission stay the authoritygranted to Maritimes in its July 1998 certificate and prohibit thepipeline from building the project until its size has beenre-evaluated in an evidentiary hearing.

In the hearing, Maritimes also should be required to demonstratethat the majority of the gas will not be delivered to Canadianmarkets, Boston Gas said. There is a “high probability” Canadianmarkets will soak up much of the Sable Island production, and as aresult most of the proposed downstream pipeline project will not beutilized.

The utility warned the Commission that Maritimes also hassignificantly altered its backstop agreement with affiliate Mobil,placing less risk of unsubscribed capacity on its affiliate.Because the backstop agreement was a major factor in FERC’sapproval of the project, the commission should reevaluate theproject now that the backstop agreement has been changed, theutility said.

Other troubling aspects of the project that have come to light,Boston Gas said, include the negotiated rate caps and revenuesharing provisions the pipeline granted its affiliates. Boston Gassaid it was not offered the same terms of service, whichconstitutes a violation of FERC’s affiliate rules.

Rocco Canonica

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