The game clearly is not over for the $180 million Islander East pipeline project despite the expectations of many in the gas industry. Commerce Secretary Donald Evans has overruled the Coastal Zone Management Act (CZMA) consistency determination by the State of Connecticut, removing a major roadblock to the 50-mile, 260 MMcf/d pipeline.

“Islander East is found to be consistent with the objectives of the [CZMA],” said Evans. “It furthers the national interest in a significant and substantial manner; the national interest furthered by the project outweighs the project’s adverse coastal effects (considered separately or cumulatively); and there is no reasonable alternative available for the project. Therefore, federal agencies may issue licenses or permits for Islander East’s project.”

FERC issued a final certificate to Islander East in September 2002, but it has been blocked for more than a year by Connecticut, which ruled that the project would be detrimental to its coastal zone resources.

The pipeline, which is sponsored by KeySpan and Duke Energy, would extend from a connection with Algonquin Gas Transmission in New Haven, CT, across Long Island Sound to Suffolk County (Long Island) near Yaphank, NY, ultimately delivering up to 400,000 Dth/d. Additionally, Algonquin would loop about 13.7 miles of existing pipeline in Connecticut and add a new compressor station in Cheshire, CT.

The Commerce ruling on the project came in stark contrast to an earlier decision by the department to uphold the State of New York’s objections to the 442-mile, 700 MMcf/d Millennium Pipeline project (see Daily GPI, Dec. 17). In the Millennium case, Evans favored rerouting the pipeline to cross the Hudson River north of the environmentally sensitive Haverstraw Bay and avoid New York City’s water supply.

Islander East would bring much-needed gas supply to customers on Long Island from its connection with Algonquian. Natural gas prices in New York this winter reached record highs or more than $70/MMBtu. Prices at the Algonquin citygate soared to an average of $64.22 on Jan. 14 and prices at Iroquois Zone 2 averaged $55.38 and hit a new spot market record high of $76/MMBtu. Transco Zone 6-New York averaged $44.81 and reached a high of $72.

Evans said that through the use of a relatively small area of Connecticut’s coastal resources in Long Island Sound, the pipeline would “enable regional growth and expanded electric generation capacity, providing benefits to hundreds of thousands of people.” He said the project would “enhance reliability of energy supplies to Long Island consumers by adding a second pipeline serving eastern Long Island, providing greater access to gas supply sources in Canada and promoting price competition.”

Evans also noted that the project furthers the national interest by “developing the coastal zone and its resources” rather than damaging the coastal zone. It’s construction adds a resource to the coastal zone that previously was not available, he noted.

The Commerce ruling is a positive sign for the gas pipeline industry, which has staunchly objected to states’ ability to use the CZMA process to block important interstate pipelines that already passed federal environmental reviews and received final federal authorizations.

“While we are heartened by this decision, [the Interstate Natural Gas Association of America (INGAA)] still believes that there are serious systemic problems with the coastal zone management process that need to be addressed by legislation and regulation so that this federal statute cannot be wielded as a sword by parochial interests opposed to energy infrastructure projects that bring regional benefits,” said INGAA President Donald F. Santa.

“Even with the project sponsors’ victory, the point remains that it has taken more than months after FERC issued a certificate of public convenience and necessity to litigate this matter,” Santa noted. “This delay in the date that the Islander East pipeline ultimately enters service comes with an unmistakable price, because the economic benefits from more plentiful natural gas supplies for homeowners, businesses and generating electricity will be postponed that much longer.”

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