Natural gas pipeline capacity appears “adequate” to meet mostpeak-day demands as the nation heads into the 2000-2001 winterheating season, assuming the weather is normal. But there are someareas where capacity constraints and bottleneck problems could cropup – most notably in the Northeast region, according to a newreport by the Energy Information Administration (EIA).

Overall, gas pipelines in the Northeast last year had thehighest utilization rate (77%) compared to pipelines in all otherregions of the Lower 48 States, Canada and Mexico, whichunderscores the region’s high vulnerability to capacityconstraints. This compares to an average usage rate of 66% for allpipelines in the Lower 48 in 1999, the EIA noted.

Capacity constraint problems persist in the Northeast eventhough 15 expansion projects totaling 2.3 Bcf/d of additionaldeliverability were placed into service in 1999-2000 – more than inany other region in the nation, the report said.

Specifically, the Department of Energy (DOE) agency singled outNew York City, Boston and the Leidy hub in Pennsylvania aspotential deliverability hotspots for this winter. In New YorkCity, “several constraint points have developed in recent years,”and while new pipe projects – such as the Cross Bay Pipeline —have been proposed to relieve the situation, they aren’t expectedto be in service until 2002 at the earliest.

Other major projects — the 1 Bcf/d Independence Pipeline, 714MMcf/d Millennium Pipeline and the proposed 160 MMcf/d Eastchesterexpansion of Iroquois Gas Transmission System — should provideadded capacity into the New York City market within the sametimeframe, but “incremental growth in demand also might be met byless extensive expansions on the existing portions of theTranscontinental Gas Pipe Line and Texas Eastern [Transmission]system serving the region,” said the EIA report, which was releasedthis week.

The Leidy hub “could become a potential constraint point forpipeline gas flowing to the East Coast, particularly the northernNew Jersey, New York City area,” according to the EIA. “Currentpipeline capacity in the area appears sufficient, but growingdemand for gas trading and transport capacity probably will requiresome expansion of existing pipelines in the area.” It believes theIndependence project and Transco’s MarketLink expansion — whichhave run into a wall of opposition from landowners and the state ofNew Jersey — would provide “significant development of capacityin the area.”

In the Boston market, “where pipeline capacity is alreadyheavily utilized, demand has been growing and is expected to growrapidly over the next several years, especially from developers ofgas-fired power generation plants,” the agency noted. Some of thisgrowth is already being met by the Portland Natural GasTransmission System/Maritimes & Northeast pipeline system, andthe recently completed Tennessee Gas Pipeline Eastern Expressexpansion of 288 MMcf/d. For the future, Algonquin Pipeline hasproposed its HubLine project to bring up to 600 MMcf/d to theBoston area from interconnections with a proposed extension of theMaritimes & Northeast system. The project was targeted to be inoperation in 2000-2001, but this has been pushed back.

The EIA said it also foresees capacity problems cropping up inthe western region, specifically in California. “Utilization levelson the major transmission pipelines serving the state have beenwell above 90% in recent months and could reach their limit ifdemand levels continue to increase.” Also, the “service needs inthe southern Nevada area continue to remain at a very high level,suggesting the need for system expansion in that area as well.”

In the 1999-2000 period, however, the western region had theleast amount of new pipeline development, completing only fiveprojects totaling 397 MMcf/d of additional capacity. But that couldchange.

According to the EIA, “there is growing interest in directingsome of the expanding Power River Basin production to theCalifornia/Nevada marketplace.” Although there hasn’t been any”significant expansion” of any of the pipeline systems that shipRocky Mountain, San Juan and Permian Basin gas to the westernstates, “there are signs that during peak-demand periods additionalpipeline capacity will soon be needed to handle growing demandswings for natural gas in the region.”

The Central Region (Wyoming, Montana, Colorado et al) is facedwith the problem of excess gas production and limited receipt orexit pipeline capacity, the EIA said. “Expanding coal-bed methaneproduction in the region has outpaced the development of long-haulcapacity to carry the gas to end-use markets. New gathering andheader systems have been built this past year to move the gas fromthe field to the mainline, but not enough matching interstatepipeline capacity has been installed.” But this is about turnaround, the EIA noted, as a number of pipelines — TrailblazerPipeline, Colorado Interstate Gas and Williams Gas Pipeline-Central— have proposed projects in the past several months to expand thearea’s interstate systems.

In the past year in the Central Region, Wyoming InterstatePipeline, a principal transporter in the area, increased itspipeline capacity by 36% (275 MMcf/d), and plans an additionalexpansion of 675 MMcf/d to be completed in 2001.

The EIA doesn’t anticipate any major capacity problems occurringin the Midwest, Southeast or Southwest regions. Markets in theMidwest “should have little or no problems [receiving] natural gassupplies” this winter. In fact, the DOE agency believes there couldbe “some short-term excess capacity” in the region this winter withthe startup of the 1.3 Bcf/d Alliance Pipeline. That’s because theinterconnecting projects that were to take some of the Alliance gasfrom the Midwest to Canadian and U.S. Northeast markets either havebeen delayed briefly or simply aren’t in place.

The Southeast states of Florida, North Carolina and SouthCarolina have seen “significant growth in natural gas demand overthe past decade, but sufficient additional pipeline capacity hasbeen installed to match the increase in demand.” The EIA estimatedthat about 1.9 Bcf/d of capacity was added in the Southeast in1999-2000, primarily to improve deliverability within the region.

In the Southwest region, “there are no apparent interstatecapacity constraint problems, although some local bottleneckproblems on gathering or intrastate systems in the region couldlimit service to the interstate systems” during severe weather, theEIA said. “The growing market for natural gas in the region’selectric generation sector may bring about some localized servicelimitations in the near term, but the growth in natural gaspipeline capacity in the region is keeping pace with this growingdemand.”

By the close of this year, the EIA estimates that $4.6 billionwill have been spent on new pipeline and system expansions sinceJanuary 1999. About 70% of the expenditures will have gone for newpipeline development and major extensions/laterals to existingsystems, while the remainder will have been devoted to expansions(looping, added compression), it said. While in 1999 the biggestexpenditure ($1.1 billion) was on projects that terminated in theNortheast region, this year it will be on projects that terminatein the Midwest ($1.9 billion), the EIA noted.

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