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Duke’s Algonquin Pulls Out of Boston-Area Lateral, Cites Ballooning Costs
Citing rising project costs, Duke Energy subsidiary Algonquin Gas Transmission Co. last Monday withdrew its FERC application to build a lateral extension to supply natural gas to Boston and surrounding communities.
“Cost estimates for the [so-called] Hubline Phase II-Everett Extension Project have increased significantly due to new information regarding environmental and permitting conditions, the working conditions in Boston Harbor and other factors beyond Algonquin’s control,” said Steven E. Tillman, general manager of regulatory affairs at Duke Energy, in a letter to FERC.
As a result, Algonquin believes the Everett Extension is “no longer economically viable and has so advised its customers,” he wrote. However, the Duke Energy pipeline “remains committed to exploring other mutually viable alternatives to this project with its customers and interested stakeholders.”
Hubline Phase II originally was estimated to cost $110 million, but the price escalated “to a point where it just didn’t justify the project economics,” William Yardley, vice president of marketing and business development for Duke Energy Gas Transmission, told NGI.
The proposed project called for the construction of a seven-mile extension (four miles on land, and three miles in Boston Harbor) from Deer Island through East Boston and Chelsea to Everett, where it would interconnect with Algonquin’s system. The extension was intended to supply 110,000 Dth/d of additional gas to the greater Boston market and boost the reliability of the gas infrastructure in eastern Massachusetts [CP01-5-003].
Boston-area residents earlier this year raised concerns about the environmental and safety implications of the proposed lateral extension that would have run through three densely populated communities.
Asked about potential alternative projects being considered, Yardley said he “[was] not at liberty to say what they are” now. But he noted that two customers, Distrigas of Massachusetts LLC and Exelon Corp. who signed up for the Everett lateral, were “very interested” in pursuing other options.
Yardley noted the original Hubline I project, which is being built as a companion to an expansion of Maritimes & Northeast Pipeline’s system, is on track to be in service on Nov. 1. Hubline will consist of about 29 miles of 24-inch diameter pipeline, extending offshore from an interconnection near Beverly, MA, with Maritimes’ Phase III project to an interconnection with Algonquin’s existing 1-9 lateral in Weymouth, MA. The projects are expected to boost Canadian supplies to the gas-starved New England region.
As a result of Algonquin’s decision, Distrigas of Massachusetts (DOMAC), a major supplier of liquefied natural gas (LNG), last Tuesday informed FERC that it was withdrawing its application to build a send-out line that would have connected with the proposed Boston lateral extension [CP03-305].
Although small in scope, DOMAC said in its May application that the connection would have represented a “new avenue for the delivery of regasified LNG to the New England gas market,” and removed some of the physical takeaway constraints on the Algonquin facilities that serve it.
DOMAC had entered into a precedent agreement with Algonquin in May 2002 for 50,000 MMBtu/d of firm transportation services over a 20-year period through the proposed Everett lateral extension. However, Algonquin notified DOMAC earlier this month that it was terminating the project.
In addition to the send-out line, DOMAC proposed to modify the LNG plant’s control system and reconfigure its existing vaporization equipment to allow higher pressure deliveries into the Hubline Phase II facilities through the DOMAC connection. The project cost was estimated at $2.4 million.
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