The Federal Energy Regulatory Commission should be making a decision soon on competing projects to send more gas into the New York City/Long Island market, and the sponsors of both projects are optimistic their pipeline will be selected.

Iroquois Gas Transmission is pinning its hopes for its Eastern Long Island Extension (ELI) on a favorable environmental review — and a not so favorable one for Islander East (see Daily GPI, Aug. 23). While Islander East, sponsored by Duke Energy Gas Transmission (DEGT) and KeySpan Energy, points to the reliability inherent in a second crossing under Long Island Sound.

Even though the two underwater projects from Connecticut to Long Island have different customers signed on, “it’s the same market; there are different names on the contracts, but it’s just using different means to get to it,” said Herb Rakebrand, Iroquois vice president of marketing. Both pipeline projects are proposing direct lines into new power plants on the island.”Only one’s going to get built. If they are going to build, we won’t build,” Rakebrand said, adding that he puts a great deal of weight on FERC’s stated preference for a “system alternative” based on Iroquois’s ELI extension project.

In issuing a preliminary environmental endorsement of Islander East, the Commission staff remarked that ELI’s project is environmentally superior because “it has a shorter Long Island Sound crossing, avoids more shellfish leases, and would only have air quality and noise impacts onshore in Connecticut.”

But that endorsement was balanced with the caveat — “we also recognize that there are other policy-related considerations and/or factors that may make [the ELI] alternative less desirable,” according to the final environmental impact statement (FEIS) on Islander East. Staff declined to identify the “number of major considerations,” the Commission would have to weigh before it could make a recommendation.

ELI would carry about 175 MMcf/d, while Islander East is planning a 260 MMcf/d pipeline, expandable to 400 MMcf/d. FERC’s policy has varied over the years from approving competing pipelines, to forcing projects to consolidate, to moving only a single project forward.

In this case the Commission is contending with a temporary moratorium on new lines under Long Island Sound issued recently by the state of Connecticut. While legal experts point to an over-riding federal jurisdiction, the Commission is likely aware there is considerable public sentiment behind Connecticut’s action. This spring the Connecticut governor set up a task force, which includes a FERC representative, to examine the various gas and electric transmission projects proposed to cross the Sound from Connecticut.

The sponsors of both projects are reading success into the FERC pronouncement and expecting a decision in September. “Our East Long Island project will make a tremendous difference to the marketplace,” Rakebrand said.

But, DEGT also is “optimistic about getting a certificate next month,” based on issues beyond the environmental recommendations, Greg Rizzo, senior vice president, told NGI. “If you look at the project as a whole, which the Commission should do when they issue a certificate, [Islander East] has firm markets signed up,” and can go forward more expeditiously. “The second huge thing is reliability; having a second crossing for Long Island is very big for reliability for the region.”

Iroquois’ ELI project follows on an upstream expansion currently under construction that will increase Iroquois deliveries onto Long Island by 230 MMcf/d and its Eastchester extension also being built to carry about 300 MMcf/d from its delivery point on Long Island into the Bronx, just north of Manhattan — the first new pipeline into the heart of New York City in 40 years. Iroquois also is developing a plan for additional compression that will increase deliveries by 85 MMcf/d and is awaiting a decision by the Connecticut Siting Council.

Rakebrand noted another milestone for Iroquois this summer “in the midst of all that’s going on in the energy industry,” both Moody’s Investor’s Service and Standard & Poor’s reaffirmed the company’s A3 and BBB+ ratings respectively, and its $170 million bond issue to finance Eastchester and other projects was oversubscribed.

Whether Iroquois’ ELI or Duke’s Islander East is approved, “there will be a consolidation or shake-out of customers,” Rakebrand said. And either way KeySpan, which is a part owner of Iroquois, a venture partner in Islander East, and the main gas transportation system on Long Island, stands to benefit.

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