While some see FERC’s decision in the Granite State GasTransmission case last week as a major shift in its certificatepolicy, others believe the Commission’s dismissal of Texas EasternTransmission’s (Tetco) application to expand the capacity of itsLebanon Lateral reaffirmed that very policy.
“I think that FERC in this dismissal has just reiterated itspolicy for pipelines to show market support for projects,” saidJohn Barnett, a spokesman for Duke Energy, parent of Tetco. TheCommission rejected the application [CP97-626] because it declaredthat Tetco, even though it agreed to assume the full risk for theLebanon Lateral expansion, had binding commitments for only 17% ofthe proposed capacity, of which a mere 7.3% was for a term ofgreater than 10 years. This was below the 25% minimum level of firmcommitments that FERC requires for at-risk projects.
Tetco had included letters of intent from the proposed SpectrumInterstate Pipeline Corp., a Tetco affiliate, and Natural GasClearinghouse for up to 302,290 Dth/d and 25,000 Dth/d,respectively, as proof of market support in its application. Butthe Commission rejected the letters of intent because they “do notobligate the parties to enter into a service agreement.” Inaddition, they “are not specific [with respect to] volumes.”
Despite FERC’s rejection of the application, it kept the dooropen for Tetco to refile again, which the pipeline plans to do.”We’ll make whatever adjustments we need to the application, and ifthat means going out and getting some firm commitments, we will,”Barnett said.
A pipeline industry observer believes the Commission was tooharsh in this case. “Why shouldn’t a pipeline that wants to expand,that’s willing to go completely at risk, that isn’t asking foreminent domain, be denied, forbidden to expand?”
Tetco seeks to add 17,070 hp of new compression to the portionof the 114-mile Lebanon Lateral spanning from Gas City, IN, to GlenKarn, OH. This measure would boost capacity by 309,290 Dth/d to661,510 Dth/d. It proposes to lease the majority of the newcapacity to Spectrum, a new pipeline project that was announcedlast spring. Spectrum, however, has yet to file an application atFERC seeking interstate status.
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