With 23.9 Bcf/d of new pipeline capacity planned for the United States and Canada between now and the end of 2006, there’s some reason to be concerned about a capacity glut, according to a report by Energy and Environmental Analysis Inc., an Arlington, VA-based energy consulting firm.

“While much of the proposed transmission capacity is needed, EEA believes that if all the proposed projects are built, the market will experience low transmission basis accompanied by a collapse in marginal value on most pipeline corridors…, an overbuild scenario such as the one experienced by the California market in 1992,” EEA said in its Monthly Gas Update. However, many of the projects are competing so some probably will never be built, EEA noted.

The main driver of these interstate pipeline additions is new gas-fired power generation and seasonal demand growth. New pipes are being put in the ground in every corner of the United States and Canada, but the U.S. areas seeing the most activity include the South Atlantic, the Northeast, California and Florida.

About 4.6 Bcf/d of capacity additions are planned in the Northeast through 2006 with about 2.4 Bcf/d added in 2002 alone. Another 750 MMcf/d is planned for 2003, 400 MMcf/d is expected in 2004 and 1 Bcf/d is planned for 2006. While some of the projects, such as Millennium, are struggling through the regulatory process, others are more likely to move forward. Projects likely to make it through in 2002, according to EEA, include the Maritimes and Northeast compression addition and Phase III project, Algonquin’s Hubline project in Boston, the Iroquois Eastchester Extension in New York, and Transco’s MarketLink and Cross Bay pipelines. Another big pipeline possibility is El Paso’s planned Blue Atlantic line, an offshore project from Sable Island to New York City that would be in service in 2006.

In the South Atlantic, more than 5 Bcf/d of new capacity is planned over the next four years to serve rapidly growing demand in Georgia, the Carolinas and southern Virginia. Transco and Southern Natural will add about 600 MMcf/d in 2002, but about 2 Bcf/d is planned in both 2003 and 2004. Another 600 MMcf/d is expected to be added in 2005. Project planners realize that not all of this capacity is needed so they are racing to get their projects moving. The most notable projects in the race include Transco’s 526 MMcf/d Momentum Expansion, Columbia’s 300 MMcf/d Homestead project, Dominion’s 600 MMcf/d Greenbrier line, and East Tennessee’s 500 MMcf/d Patriot Project. There also are several Sonat projects totaling 1 Bcf/d.

The well known capacity shortage in California last year prompted a similar pipeline race out West with projects totaling at least 4.5 Bcf/d through 2005. “While some argue that the proposed capacity additions to the state’s border are not justified — especially those who believe the problem lies in inadequate intrastate capacity — it is not surprising to see the number of pipeline companies proposing new capacity,” said EEA. “Producers in the Rockies are trying to find a home for their growing gas supplies. In addition, regulators are more likely to be lenient in their review process in an effort to avoid a repeat of the ‘California Energy Crisis.'”

In Florida, gas-fired generation growth prompted a major Gulf crossing pipeline race with the 1.1 Bcf/d Gulfstream project winning over several other offshore and land-based proposals. Meanwhile, the latest few expansions in Florida Gas Transmission’s series will add a total of 800 MMcf/d, and there are several proposals to build pipelines to the state from liquefied natural gas projects in the Bahamas.

“It’s not likely that all of the proposed projects will make it to market for a number of reasons,” EEA said. “Some of these projects are competing projects that are offering to serve the same demand locations with their natural gas needs. This usually means that only one of these projects will prevail to bring the additional supplies. The winners will likely be those that can secure firm commitments for their proposed capacity addition, have a cost advantage over competitors, have the most favorable environmental assessments (e.g., existing right of way helps), and can ultimately garner regulatory approvals.”

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