Hungry for gas service in its northeastern region, NorthCarolina is dangling a $200 million carrot before the industry inthe hope of attracting new infrastructure development. Theenticement has attracted the attention of Williams GasPipeline-Transco and six others who recently filed to express theirinterest to the North Carolina Utilities Commission.

Transco, which has provided transportation service to NorthCarolina for nearly 50 years, told the commission it has submitteda proposal to the Albemarle Regional Energy Authority (AREA) for ajoint venture in developing gas transmission and distributionfacilities in five counties: Camden, Currituck, Chowan, Pasquotankand Perquimans.

The North Carolina Utilities Commission recently told thoseinterested in seeking the $200 million state bond funds to filenon-binding notices of interest with the commission. Williams saidit will make a formal presentation of its proposal to AREA leaderstoday.

Gisele Rankin, an attorney with the public staff of the NorthCarolina Utilities Commission, said Williams-Transco is one ofseven parties giving notice to the commission regarding the bondmoney. The others are North Carolina Natural Gas Corp., CarolinaPower &amp Light Co., Frontier Energy, AREA itself, the City ofElizabeth City (which, she said, is not eligible to receive any ofthe money), and Public Service Co. of North Carolina Inc. (whichonly filed to reserve its right to express interest later).

The money was approved by North Carolina voters in November in areferendum that included monies for water and sewer improvements.”We’ve got a long history of trying to expand the gasinfrastructure in the state,” Rankin said. “A third of our countieswere un-served in 1990.”

The statute that created the funding says money is to go toareas that are “un-sourced” for natural gas. Companies are eligibleto receive amounts only to the extent they offset projects’negative net present values as determined by commission studies.Rankin said hearings to determine recipients could take place inearly fall. The full $200 million likely won’t be available rightaway but will be paid out over a few years depending on the state’sbudget, Rankin said.

The Transco notice to the commission says “due to thepreliminary nature of Transco’s discussions with AREA, the exactnature and extent of Transco’s work with AREA is stillundetermined.” However, the notice also says Williams is “committedto providing every feasible assistance to AREA or other entitiesseeking to provide natural gas to northeastern North Carolina.”

“[T]his venture would create an opportunity for industrial andelectric generation facilities to locate in these counties,” saidCuba Wadlington Jr., general manager of Houston-basedWilliams-Transco. “In addition to providing an economical source ofenergy for the residents of northeast North Carolina, our proposalcould enhance the overall economic development in this area.”

Orlando Alvarado, project development representative forWilliams Gas Pipeline-Transco, said about 15% of the mainline’sthroughput is delivered in North Carolina. “So we deliver anabundant amount of gas to the state, and this is just one more wayof trying to serve market areas in the state that have not beenserved before.”

Alvarado said any bond money received would not apply toexisting or announced projects, such as its Pine Needle LNG projector its Cardinal extension project. “All this is going to be inconjunction with LDCs in the [un-served] area,” Alvarado said ofpotential bond-funded development.

North Carolina’s initiative to attract infrastructure is notunusual, Alvarado said, although “this is the first time I’ve heardof anything like this happening. I think it’s very positive thatthey’re doing this. This is definitely going to cause[infrastructure development] to happen, or at least it’s going tocause several companies to look at the viability of it. Hopefullythe outcome is that the eastern part of the state does get a gasinfrastructure.”

The fact that much of the Carolinas lack natural gas service,coupled with much activity in development of gas-fired powergeneration in the states, has made the region ripe for pipelineproposals.

Carolina Power &amp Light (CP&ampL) and Southern Natural Gas(Sonat) are planning a 175-mile pipeline from the terminus ofSonat’s system in Aiken, SC, to an interconnect with North CarolinaNatural Gas in Robeson County, NC. Almost immediately after theproject’s announcement, Scana Corp. and Transco voiced theirobjections, saying they could provide a cheaper and moreenvironmentally friendly alternative.

The CP&ampL-Sonat joint venture is called the Palmetto Pipelineand has a planned initial capacity of 200 MMcf/d to 300 MMcf/d andcan be expanded to accommodate future growth. CP&ampL plans for asubstantial portion of the capacity to fuel new electric generationbeing developed in the Carolinas, with the remainder used toincrease regional gas availability. CP&ampL also is in the processof buying LDC North Carolina Natural Gas for $354 million.

Scana’s competing project is a 160-mile extension from Grover,SC, to Pembroke, NC, where CP&ampL is potentially going to build agas-fired power plant. Scana projects savings over the Palmettoproject of between 25% and 40%. In February Scana said it would buyPublic Service Company of North Carolina for $900 million,including assumption of about $250 million in PSNC debt.

In December Frontier Energy began flowing gas in Surry, Wilkesand Yadkin counties (see NGI Dec. 21, 1998). Frontier interconnectswith Transco near Salisbury, NC and is a partnership of SempraEnergy Utility Ventures and Frontier Utilities of North Carolina,which is principally owned by ARB Inc. of Lake Forest, CA, andother partners.

Joe Fisher, Houston

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