After being in denial for months over the weakened Mid Atlantic market for new pipeline capacity, Greenbrier Pipeline Co. LLC finally succumbed to reality last week, announcing an indefinite delay for its proposed 279-mile pipeline. Project sponsor Dominion Resources told FERC on Wednesday that it has suspended field work on Greenbrier while considering whether to shift budgeted funds to further expanding infrastructure related to the recently recommissioned Cove Point LNG import terminal in Maryland.

Dominion said it also may seek an extension of time for construction of the pipeline project, in which case it will file for FERC authorization to revise the project’s November 2005 in-service date. A decision on the extension will be made prior to March 31, 2004, Dominion told the Commission.

Piedmont Natural Gas also announced that it accepted an offer to sell its 33% stake in Greenbrier to partner Dominion for $9.2 million, which equated to Piedmont’s book value in the pipeline. Dominion now owns 100% of the project.

The pipeline would have provided 585 MMcf/d of firm transportation capacity to LDCs and power plants in the Mid Atlantic region. The $479 million pipeline is designed to originate at Dominion’s Cornwell Station in Kanawha County, WV, with interconnections to Dominion Transmission and Tennessee Gas Pipeline, and to extend through southwestern Virginia into Granville County, NC, to a connection with Transcontinental Gas Pipe Line. In April, the Federal Energy Regulatory Commission issued the proposed pipeline a certificate.

However, Dominion cannot say when it will have the FERC-required 90% of firm capacity subscribed under long-term transportation agreements.

“The need for investment in new energy infrastructure to serve the growing Mid Atlantic energy market is steady,” said Dominion CEO Thomas E. Capps. “Yet, the market is telling us the nature and priority of the needed infrastructure is evolving. Our duty to investors and customers is to be financially flexible, to monitor the market conditions and, ultimately, to deploy our investment capital where the market tells us it is most urgently needed.”

Dominion said the suspension is not expected to affect the company’s earnings growth forecasts. “The pipeline remains a viable project,” said Capps. “Our capital allocation study does not and should not send the signal that there is no long-term need for incremental growth. Both local distribution companies and long-term power generation growth in the Mid Atlantic region will require a better gas transportation network. Our pause raises only an issue of pipeline timing, not pipeline need.”

Dominion’s Joe Kienle, director of business development, said Greenbrier is still working with its local distribution company customers, Piedmont and Public Service Company of North Carolina, which both originally signed up for about 220,000 Dth/d of capacity. He said Greenbrier hopes the LDCs can handle their growth with temporary solutions until the pipeline can resume project development.

“The power market is really the primary reason for slowing this down,” said Kienle. He noted that there are a few things going on in the power market that are having a negative impact, including the financial difficulties of the players, such as Mirant and El Paso, the power supply glut, and the struggling economy.

A number of the power plants that had needed Greenbrier’s pipeline capacity have been canceled, including Dominion’s own 1,100 MW plant in Person County, NC. The Person plant was expected to take 180,000 Dth/d, or about 31% of the proposed capacity. Mirant Americas Development Corp. also canceled a power plant and the associated pipeline contract for 60,000 Dth/d of capacity. El Paso also had been planning to take 60,000 Dth/d for a power plant, and Mountain Creek LLC had planned a power plant but then canceled it.

Greenbrier sponsors said they will continue to work with regulators and interested stakeholders so they can resume field work on the project at the appropriate time.

Meanwhile, East Tennessee Natural Gas’ Patriot Extension project, another new regional pipeline, will go forward this winter. East Tennessee parent company, Duke Energy, said recently that power plant delays and cancelations, including Duke’s own proposed 620 MW power plant in Virginia and a separate 1,100 MW project planned by Cogentrix Energy, won’t affect Patriot.

Construction on the Patriot Project began in March and is expected to be completed by the end of the year. The project includes an 187-mile enhancement of the existing East Tennessee system in Tennessee and western Virginia and a new 24-inch diameter, 95-mile extension from Wythe County, VA, through Carroll, Floyd, Patrick and Henry counties, VA, ending in Rockingham County, NC. The $298 million project will add 510,000 Dth/d of incremental pipeline capacity to the Mid Atlantic marketplace.

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