Events over the past year at the Federal Energy RegulatoryCommission have cast a dark cloud over the fate of the $650 millionMillennium Pipeline project, but that cloud got a lot darker lastweek. NiSource’s announcement that it is buying Columbia EnergyGroup, Millennium’s lead sponsor, for $6 billion with $2.5 billionin debt assumption, may have all but killed the pipeline project.

During a conference call with reporters, NiSource CEO Gary Nealesaid although the company supported the concept of bringing moregas from Chicago to the Northeast, the Millennium Pipeline probablyisn’t the best way to handle it.

“We need to get more details on cost and some of the engineeringissues of going under Lake Erie,” he said. “We are supportive ofthe opportunity to move gas from Chicago, which is now becoming ahub for cheap gas in the United States, to the East Coast and theNortheast. But we believe that through our Crossroads [Pipeline]interconnections in Ohio and the opportunities we haveinterconnecting with a couple of the pipes that are being built outof Chicago now that something like the Millennium project makessense. But we don’t know exactly yet whether the exact route forthe Millennium pipe” is the best route to take.

NiSource subsidiary Crossroads Pipeline tested market interestin an expansion project of its own last Spring and collectedexpressions of interest in more than 600,000 Dth/d. The systemcurrently transports about 150,000 Dth/d from a connection withNGPL in Schererville, IN, to a connection with Columbia Gas atMaumee, OH. The expansion would cost between $35-$45 million tobuild. It would include a 25-mile 30-inch diameter pipelineextension to connect Crossroads with Northern Border Pipeline andNatural Gas Pipeline Company at North Hayden, IN. If completed, theexpansion would increase Crossroads’ throughput 300% from itscurrent 150,000 Dth/d level. The project still has not been filedwith FERC, but NiSource originally expected to have it in servicein November.

The Millennium project would be much larger and much moreexpensive to build. It would originate at the Canadian border inLake Erie and extend across southern New York to the New York Citymetropolitan area. It would use existing rights-of-way and utilitycorridors for 86% of its overland route and would include more than30 connections to utility customers, pipelines and gas storagefacilities.

The 442-mile Millennium Pipeline originally was scheduled forconstruction starting in 1999, with the balance of the project tobe completed in 2000. However, the project never received apreliminary determination on non-environmental grounds from FERCand still has not received final environmental clearance. Theproject also recently came under fire from New York regulators overrouting concerns. The line was expected to begin transporting 714MMcf/d of gas starting Nov. 1.

Columbia Gas Transmission Corp., a subsidiary of ColumbiaEnergy, is the project’s developer and largest interest holder. Thecompany also will operate the pipeline system. Other projectsponsors are TransCanada Pipelines, Westcoast Energy and MCN EnergyGroup.

Rocco Canonica

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