As FERC last week was delivering bad news to the Northeast-boundIndependence Pipeline and associated SupplyLink and MarketLinkprojects, the Commission staff was delivering a report to CapitolHill that concluded new pipeline capacity may be needed for theregion within the next three to five years. It didn’t specify howmuch capacity though (See related story).

It believes additional capacity may be required as early as the2003 to 2005 time frame, at which point staff estimates dailyutilization rates for pipelines in the Northeast are expected toincrease to 77.6%. The report said load factors greater than 78% onan annual basis for pipelines in the Northeast quadrant indicate acapacity constraint. The function of Northeast pipelines isdifferent than long-line pipelines from the Gulf or Canada, and asa result the utilization rates are typically much lower (75-78%) inorder to service peak-day loads, according to staff. Based on gasdemand projections by the Energy Information Administration (EIA),FERC staff sees daily utilization rates possibly shooting up to97.3% by 2015 without new capacity into the market.

“Staff believes consideration of reliability, changing customerdemand profiles, a more dynamic and liquid natural gas market, andthe long lead times and high capital costs associated with pipelineconstruction require the use of the peak-growth scenario” for gasdemand and pipeline utilization rates in the Northeast during the2003-2005 period. It converted EIA’s projections for annual gasdemand to a daily demand of 11-12 Bcf/d for the region.

The House Appropriations Committee ordered FERC to do theanalysis, citing concerns with the “proposed MarketLink expansionproject in northern New Jersey.” It directed the Commission toprovide a 20-year outlook for the number of new pipelines thatwould be needed to address future capacity in the state.

Staff told the committee that it was virtually impossible tolimit the scope of the analysis to New Jersey alone. “Given thefact that natural gas markets and the interconnected web ofpipelines serving those markets do not correspond to politicalboundaries….”

Rather, the Commission staff opted to limit the study to the NewEngland states of Maine, New Hampshire, Vermont, Massachusetts,Connecticut and Rhode Island; and the Mid-Atlantic states of NewYork, New Jersey and Pennsylvania. The EIA has estimated currentpipe capacity in the Northeast at 15.3 Bcf/d, and storagewithdrawal capacity at about 3.3 Bcf/d.

Staff warned the lawmakers of the dire consequences of beingcaught with inadequate pipeline capacity. “The costs to consumersand society associated with a lack of capacity to meet demandcannot be rectified in a short period of time due to the long-leadtimes associated with pipeline construction.”

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