The battle for a new pipeline to serve Long Island, NY, heatedup this week as two companies announced significant market supportfor both of their projects. Tennessee Gas Pipeline announced thatits Connecticut-Long Island (CT-LI) Lateral Project attractedrequests for 1.6 Bcf/d of firm transportation capacity, while DukeEnergy Gas Transmission said its Islander East pipeline drew 1.2Bcf/d in shipper requests.

“But noms are cheap,” said Pat Whitty, managing director ofIslander East, which is a joint venture between Duke and KeySpan.”Noms can be got from just about anybody. They are non-binding. Ithink in the old days pipes used to put out press releases on theirnominations, but they really are meaningless until you get peopleto sign up.”

Whitty said Islander East would be built specifically for two orthree customers in contrast to the 14 companies that put inrequests during its open season. “Some of these other people arejust people that you get every time you have an open season,” hesaid. “They don’t want to miss out on an opportunity so they put itin because it is nonbinding. The second I send them a firm serviceagreement or a precedent agreement that will quickly weed themout.”

Nevertheless, Whitty said he was pleased that the project drewthe interest of so many, including LDCs, power generators andmarketers. “But I think the real market as we see it is the LDCload growth, specifically KeySpan there on Long Island, along withprobably one or two power generators. I think there’s only enoughroom for that type of project. We’re sized at 250 MMcf/d and that’sprobably appropriate. If we see that more than 250 MMcf/d needs tobe done out of the 1.2 Bcf/d that we got, we can easily size it at400 MMcf/d. That’s one of the advantages that Islander East hasover Tennessee. [Ours] is a much smaller project. It is a 40-milepipeline to connect Algonquin into the KeySpan facilities on LongIsland. If we need to do more than 250 MMcf/d we just addcompression. It’s easily expandable.”

Tennessee’s project comes off of its 300 leg, which is farthernorth than Islander East’s tie in at Algonquin. “They need morelike 400 MMcf/d to 450 MMcf/d to make their’s happen at a marketrate equal to Islander East,” said Whitty. “That’s one bigadvantage that we have.” With a capital cost of $160 million,Islander East plans to charge a max rate of 27 cents/Dth, he said.

“We’ve also partnered up with KeySpan, the local utility. Rightnow [we have the advantage]. The KeySpan load is the primarydriver.” Nevertheless, Whitty admitted KeySpan still has not signeda contract for any firm space on Islander East. “But I think thefact that they are a partner in the project speaks volumes.” Heexpects KeySpan to take a significant portion of the capacity. Theremainder probably will be taken by power plants.

There are multiple power plants being considered for LongIsland. But two may be further along than the others. AmericanNational Power is considering building a 500 MW facility atBrookhaven, and AES is planning a plant at Calverton. PPL isplanning several peaking plants near Smithtown. Florida Power andLight also is looking into power plant construction, as is Calpine.

“Anybody who is a power player is looking to build a plant onLong Island,” said Whitty. Most of the plants are expected to beonline in 2004. Both Islander East and Tennessee’s Connecticut-LongIsland pipe plan to be in service by November 2003. “The bigquestion is how much new power can the Island support,” Whittynoted. “A lot of people think that one 500 MW combined cycle plantwould be all it could support. Others think maybe 1,000 MW aredoable. An amount that is somewhere in between probably will bebuilt on the Island. I feel very confident we are going to bebuilding this pipe.”

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