Faced with conflicting reports about the need for new pipelinecapacity to serve the Northeast quadrant of the country, theFederal Energy Regulatory Commission last week called for aninquiry into the area’s projected demand for natural gas over thenext 20 years.
The Commission has selected a public conference as the forum toconduct its inquiry, which will focus on anticipated gas demand andthe need for new capacity in the region east of the MississippiRiver and north of Tennessee and North Carolina. It has scheduledthe conference for June 7th, and is seeking input from the entireenergy industry.
FERC indicated it was undertaking the effort in an attempt tomake some sense out of the conflicting and disparate projectionsfor gas consumption and capacity requirements in the targetedregion. The results could provide “valuable insight into thedevelopment of a rational certificate’s policy” to deal with theflurry of Northeast-bound pipeline projects that still are pendingbefore the Commission, Commissioner Linda Breathitt said.
FERC has been the target of substantial criticism in recentweeks due to its decision to defer action on preliminarydeterminations for two major Northeast projects – Independence andMillennium – until next fall. The Commission cited questions aboutthe “need” for the projects and unprecedented landowner oppositionas the reasons for its action.
“…[T]here are numerous, varying projections concerning thegrowth of natural gas markets in the eastern United States. Theseprojections, however, do not shed light on the impact thispotential growth will have on existing pipelines. Thus, theCommission believes that it is important to examine theseprojections and to understand more about the assumptions, datasources and perspectives upon which these growth forecasts arebased,” FERC said in last week’s notice of public conference[PL99-2].
Specifically, FERC said it wants to know when the rise in gasdemand is expected to occur. “Will growth occur at varying ratesover the next five, ten or twenty years? Will the projected demandoccur during a certain time of the year, e.g. during the winterwhen pipeline use is at its peak (mainly due to heating); off-peakperiods when capacity is more readily available (due to a switch toair conditioning); or year round.”
In addition, FERC said it hopes to find out more about the typeof growth that’s expected. “…[T]he Commission is interested indetermining if the contemplated growth will serve electricgeneration facilities, residential customers, industrial concerns,other consumers or some combination thereof,” according to thenotice.
As a secondary issue, it noted it also intends to explore theeffect of projected demand growth on existing pipeline capacity inthe Northeast. “For example, where, when and how much existingcapacity is currently available? If the projected growth takesplace as forecast, where will excess capacity exist in the future?How often will existing facilities be constrained? Are existingpipeline systems being effectively used? Is it possible to increasethe utilization of existing systems?” are some of the questionsthat it posed. Industry has been asked to file written responses atFERC within 15 days after the conference. Requests to speak at theconference should be submitted by May 10th.
“I view this as fundamentally a data-collection exercise,” notedChairman James Hoecker. “Although we have lots of gas policy issueson the table, I don’t view this necessarily as a broad explorationof policy.”
FERC’s focus will be on “ascertaining what is probable and whatis unlikely in terms of demand growth in the Northeast quadrant,”which encompasses the Northeast, Midwest and part of theMid-Atlantic, he said. Although “this is not the whole enchilada, Ithink it will supply a useful [snapshot]” of the projected demandoutlook.
Breathitt said she supported the inquiry, but would havepreferred the scope to have been expanded beyond the Northeastquadrant. She believes it should have included all markets east ofthe Mississippi River, according to her staff. Limiting the scope”fails to recognize the fact that other regions of the country arealso expected to experience substantial growth in demand fornatural gas,” Breathitt said.
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