An official with Transcontinental Gas Pipe Line told a Senatecommittee last week that pipeline deliverability to the Northeastregion was extremely “taxed” this winter, resulting in highdelivered gas prices to the New York market during January andFebruary. This, he said, underscores the need for more pipelinecapacity to the region.

Although this was a relatively mild winter overall, “a review ofoperational and pricing data from this winter shows that theexisting pipeline infrastructure was clearly challenged to meet gasdemand in the Northeast,” said Gary D. Lauderdale, Transco’s seniorvice president and general manager, during a Senate hearing intothe heating-oil price spikes last Thursday.

Transco was able to meet its firm contractual commitments thiswinter in the Northeast, but it wasn’t able to supply gas tointerruptible customers, many of whom were forced to switch to fueloil, he told the Senate Energy and Natural Resources Committee.Several other pipelines serving the Northeast had to restrict theirdeliveries of gas for “limited periods of time.” Lauderdale saidTransco proposed a 700,000 Dth/d expansion of its existing line inPennsylvania and New Jersey to serve the growing demand in theregion, but the project (MarketLink) has been caught in an”extremely slow regulatory approval process.”

The “scarcity of pipeline capacity” into the region wasreflected in the higher increases in delivered gas prices in theNortheast during January. While the average delivered gas price onTransco’s system for Zone 6 (non-New York) rose 106% in January to$4.89 from $2.37 a year ago, the increase on Transco’s system intoNew York in January rose 129% to $5.87 from $2.56 a year ago, henoted. The price increases in February were even “more dramatic.”

“In January and February 2000, customers in the Northeastexperienced record high daily gas prices of $15.34 for deliveriesinto New York and $12.31 for other Zone 6 deliveries,” Lauderdaletestified. In comparison, the average delivered gas prices at theHenry Hub rose only 29% to $2.39 in January from $1.84 a year ago,and in February prices increased 55% to $2.75 from $1.77 inFebruary 1999.

“If the existing pipeline infrastructure is currently taxed,what will happen when the projected growth in natural gas demandoccurs?” he asked. The Energy Information Administration (EIA)projects that gas demand in New England, Mid-Atlantic states andSouth Atlantic states will rise by a total of 3.3 Bcf/d by 2005.Lauderdale said Transco proposed MarketLink, which would runthrough Pennsylvania and New Jersey, to meet this expected surge indemand. While FERC has approved MarketLink, it’s holding theproject’s certificate hostage until the upstream Independence andSupplyLink can demonstrate market support for their respectiveprojects. Transco’s MarketLink expansion project has been pendingat FERC since May 1998.

Any further delays in the projects “could further exacerbate theincreases in natural gas prices witnessed this winter especially ifthe Northeast region experiences more typical colder winter weatherin 2001 and beyond and/or the area experiences the growth in demandthat is projected to occur,” Lauderdale warned.

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