With energy prices rising at an alarming rate, there’s no bettertime than the present to launch expansion projects for gas pipelineinfrastructure. Maritimes & Northeast Pipeline and AlgonquinGas Transmission did just that last week, filing applications withthe Federal Energy Regulatory Commission to build related pipelineextensions designed to bring Sable Island gas to the greater Bostonarea, including a couple new power plants.
The projects, which together cost about $270 million, wouldinclude an extension of the Maritimes system in a southeasterndirection through several Massachusetts counties to the coast whereit would connect with the proposed Algonquin line. Algonquin wouldthen continue the route offshore and down the coastline throughBoston Bay to Weymouth on the south side of Boston Harbor. The twoprojects are expected to be in service in November 2002.
“Access to new supplies of natural gas is essential to keep pacewith the growing market,” said Tom O’Connor, president of M&NManagement, manager of Maritimes & Northeast Pipeline, whichbrings Atlantic Canadian gas to the Northeast from the SableOffshore Energy Project offshore Nova Scotia. “Maritimes’ expansionwill provide greater energy security and reliability for allconsumers in the Northeast. Additionally, as gas-fired electricgenerating plants are built, electricity will be produced moreefficiently and cleanly.”
The $140 million Maritimes project, called the Phase IIIexpansion, would include 24 miles of 30-inch diameter pipeline andone mile of 24-inch diameter pipe, extending from Methuen, MA toBeverly, MA. About 76% of the proposed Maritimes extension routewould be in or adjacent to existing right of way owned by NewEngland Power Co, the pipeline company said.
Although Maritimes did not file any new contracts for service tosupport the project, it said its existing shippers support the planbecause the new extension capacity will be available for use by allof them at the same recourse rates they currently pay. Maritimesalso told the Commission it expects markets to develop along theline after it goes into service in a way similar to what occurredalong its 100-mile Phase II project. It does not intend to roll inthe cost of the Phase III project at this time but may seek to doso at a later date. The new Maritimes facilities would be capableof transporting 360,000 Dth/d.
The new Beverly delivery point would become a primary deliverypoint for all Maritimes shippers, and the cost of transportationwould be the same (capped at $0.715/Dth) as for delivery toMaritimes’ other primary delivery point at its connection withTennessee Gas in Dracut, MA.
The $130 million Algonquin extension project, called HubLine,would include a 30-mile, 24-inch diameter offshore pipelineextending from the terminus of Maritimes Phase III to Algonquin’sexisting facilities in Weymouth along with ancillary facilitiesonshore. Additionally, a five-mile, 16-inch diameter lateralpipeline is proposed to Deer Island in Boston Harbor. Algonquinsaid it chose the offshore route to avoid the difficultenvironmental and landowner hurdles of a land route.
“The proposed route was selected to minimize impacts to theenvironment, landowners and the greater Boston community,” saidRobert Evans, president of Duke Energy Gas Transmission, parentcompany of Algonquin. “In the coming months, we will continue toreview the route and solicit input from people interested in theproject so we can construct the pipeline safely and in strictcompliance with all environmental regulations.”
The project has significant market support through long-termcontracts for firm transportation capacity from Duke affiliateTexas Eastern (80,000 Dth/d), Sithe Power Marketing (140,000Dth/d), Southern Energy Kendall LLC (35,000 Dth/d), SouthernConnecticut Gas (20,000 Dth/d) and Providence Gas (500 Dth/d).
“Energy consumers are demanding more and more natural gas,” saidEvans. “Local distribution companies continue to grow their marketsthrough conversions and service area expansions, new and moreefficient gas-fired electric generating plants are being built andexisting power plants are converting to gas.”
Sithe and Southern plan to use their capacity to serve new powerplants while CNG and Providence plan to serve simple residential,commercial and industrial demand growth within their localdistribution services territories. Texas Eastern plans to use itsleased capacity to provide its own shippers with firm hourly swingrights and other imbalance management services. The services andadditional flexibility are expected to reduce Tetco’s reliance onoperational flow orders. Tetco also filed an application this weekfor its lease of the proposed Algonquin expansion capacity.
The projects’ sponsors also included a number of studies tosupport their extensions. Dr. Susan Tierney of Lexicon Inc. andWayne Oliver of Navigant Consulting performed a market/benefitsstudy of the Phase III and HubLine projects, concluding they wouldprovide substantial benefits to Massachusetts residents and the NewEngland gas market as a whole. The projects represent “an exampleof the type of gas delivery infrastructure that the New Englandregion needs to enable the continued development of competitiveenergy markets and to achieve the region’s objective of improvingits air resources through reduced emissions of various airpollutants,” the study concluded.
Maritimes and Algonquin also found support in a recentDepartment of Energy (DOE) report, which concluded greater gaspipeline infrastructure in the region would help reduce demandsurges and high prices for fuel oil. The DOE’s Office of NaturalGas and Petroleum Import and Export Activities recently noted inits Second Quarter Report 2000 that gas demand in New England hasgrown by more than 67% in the last 10 years and will requirecontinued infrastructure expansion to support further growth.
Maritimes & Northeast, a 650-mile gas pipeline traversingAtlantic Canada and the northeastern United States, is owned byaffiliates of Duke Energy (37.5%), Westcoast Energy (37.5%),ExxonMobil (12.5%) and NS Power Holdings Inc. (12.5%).
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