Proponents and opponents of the controversial multi-state gaspipeline project — Independence Pipeline, SupplyLink andMarketLink — agree on one point: none are satisfied with theinterim order that put the projects on hold until they can produceenough contracts to justify market need. Both sides seek rehearing.

The New Jersey Attorney General’s Office called on FERC to”reconsider and reverse” its decision on MarketLink, a pipelineexpansion that would run through the northern part of the state. Itwants the Commission to address on rehearing the issue of whetherit is safe to site the project in the densely populated GardenState. In the mid-December interim order, FERC failed to tackle thesafety issue, saying it was out of its jurisdiction.

The question of pipeline safety, which New Jersey contends iswithin FERC’s jurisdiction, “is not an academic debate to thepeople of New Jersey,” many of whom still recall the explosion ofTexas Eastern’s line in early 1994, wrote Deputy Attorney GeneralJames S. Martin in the state’s rehearing request.

“The image of that fireball in Edison, NJ, and of the 1,500people whose homes were destroyed was seared into the memory ofvirtually every one of the seven million citizens of this state.These citizens demand that their government not impose this massivepipeline upon them unless and until they can be assured that thesiting, routing, operation and maintenance of the proposed pipelinewill be safe — not just a little bit safe, not just minimallysafe, but really safe, maximally safe,” he said.

Joining New Jersey in its rehearing request was the New JerseyBoard of Public Utilities and the New Jersey Department of Law andPublic Safety.

New Jersey contends the 1968 Pipeline Safety Act gives FERC theresponsibility to consider all factors affecting public interest,including safety considerations. The state also cited a 1979 Senatereport that noted “FERC will retain its authority to impose safetyconditions exceeding DOT’s standards” only in “exceptional cases.”The proposed MarketLink expansion is an “exceptional case,”according to New Jersey.

In its rehearing request, Transcontinental Gas Pipe Line —whose MarketLink project is the only one that is substantiallysubscribed (95%) — objected to FERC holding its certificatehostage until Independence and SupplyLink can deliver long-termcontracts with non-affiliated shippers for at least 35% of theirprojects’ capacity [CP98-540].

Although it is often linked to Independence and SupplyLink,Transco stressed that MarketLink could successfully operate withoutthe two upstream projects. As a back-up, it said it could turn toother expansion projects currently proposed and under developmentto bring in Canadian and Midwest gas to the New Jersey and New Yorkmarkets.

Independence contested Commission’s decision to relegate itscertificate to limbo until it can supply contracts withnon-affiliate shippers for 35% of the proposed capacity. Beforeconstruction can start, FERC has required Independence to executecontracts for 68.6% of its summer capacity and 62.8% of its wintercapacity.

This is an “unjustified and unsupported departure” from FERC’sprior pricing policy, which required pipes to submit long-termcontracts for only 25% of the capacity of their new projects asproof of market support, according to Independence [CP97-315]. TheIndependence project is subject to the pricing policy that was ineffect prior to the new policy statement, which was issued lastSeptember.

In the mid-December interim order, the Commission refused toaccept Independence’s contract with affiliate DirectLink, which wasfor 55% of the capacity of the proposed line, as proof of theproject’s market demand. It also discounted the pipeline’scontracts with Enron Capital and Trade Resources and Eastern EnergyMarketing Inc. because they had “market out” clauses and,therefore, were not binding.

Independence contends the Commission is holding it to a higherstandard than other pipeline projects by demanding that it providecontracts for 35% of its proposed capacity and that they be withnon-affiliate shippers. FERC’s refusal to consider the DirectLinkcontract as a showing of market demand for Independence goesagainst precedent, it said. “…..[I]n the past, the Commission hasgiven equal weight to precedent agreements between an applicant andits affiliate and unrelated third parties.”

Independence said it wants to know why FERC didn’t indicateearlier that there was a problem with the DirectLink precedentagreement, which was filed in September 1997. “Had the Commissionbelieved that the precedent agreement did not meet its test formarket support, it could have indicated as much then or when [it]decided not to issue a preliminary determination in this case.”

The Commission said it imposed sterner conditions onIndependence and the associated projects because of the magnitudeof the undertaking and potential for disruption to the environment,and due to the fact that Independence was way off the mark when itpredicted its line would be fully subscribed.

But Independence pointed out FERC’s very own environmentalimpact statement on the joint projects said they “would result inlimited adverse impact,” provided mitigation measures were used.

As for Independence’s initial prediction, Independence countered”this hardly justifies imposing the 35% requirement. [The]prediction that it would be fully subscribed was only a predictionand was characterized as such.”

Independence and Transco also objected to FERC prohibiting thestart of construction on any section of the three projects untilall properties are surveyed, environmental surveys are completedand all consultations with resource agencies are finalized. The twocontend this departs from Commission precedent, which it saidpermits pipes to start construction on parts of pipeline projectsthat have been surveyed.

FERC said it imposed the restriction because significantportions of affected properties in Ohio and Pennsylvania still havenot been surveyed. Due to the surveying restriction, FERC’srequirement that construction of Independence be finished in twoyears after issuance of the certificate is impossible, according toIndependence. It believes it would be “more reasonable” for theCommission to require the greenfield pipeline to be built and inservice two years from the time that it gives the go-ahead forIndependence to begin construction.

Sen. Frank Lautenberg (D-NJ) also urged FERC to reconsider itsmid-December decision on Transco’s MarketLink expansion, but formuch different reasons. Although the interim order “imposed avariety of conditions” on the Transco project, “there are many inNew Jersey who believe the FERC decision did not adequately addressa number of vital issues,” he wrote to the Commission. “Inparticular, there is great concern over FERC’s apparent acceptanceof the applicant’s information regarding the need for their productin New Jersey. Many believe that this pipeline is a speculativeventure and that true market demand in this state, as elsewhere,has not been demonstrated,” he said.

Aside from Lautenberg, other congressional lawmakers – such asSen. Arlen Specter (R-PA), and Rep. Ralph Regula (R-OH) — andstate representatives wrote on behalf of theirconstituents-landowners and/or asked to remain or to be added tothe restricted service to keep abreast of the FERC proceedings onMarketLink, as well as Independence and SupplyLink. A long list oflandowners affected by the multi-state project also called on theCommission to reconsider its interim decision.

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