Northern Border Pipeline has amended its Project 2000 extensionagain, but this time it’s goal is to comply with the “no subsidy”requirement of FERC’s new policy statement on new pipelineconstruction..

Although the policy statement generally eliminated a presumptionin favor of rolled-in ratemaking for new natural gas pipelineprojects, Northern Border contends rolled-in pricing would beappropriate for the amended Project 2000 since it wouldn’t resultin any increase to the rates of the pipeline’s existing shippers.

Northern Border estimated firm transportation rates in 2000after rolling in the reconfigured facility costs would be 4.40cents per 100 Dth-miles, which it said would be about 0.02 centsper 100 Dth-miles less than what the rates would be without theproposed facilities. And in 2002, the firm rate for service afterrolling in the proposed extension’s costs would be the same as therate without the proposed facilities — 4.30 cents per 100Dth-miles, Northern Border noted.

“The year 2002 transportation cost comparison shows no change inthe rate per 100 Dekatherm-miles and the year 2000 transportationcost comparison shows a slight decrease in the rate perDekatherm-miles. As demonstrated, Project 2000 is financiallyviable without ‘subsidy’ from existing customers,” the pipelinetold FERC [CP99-21-001].

In its latest amendment, Northern Border is seeking to downgradethe diameter of the proposed 34-mile lateral from 36 inches to 30inches, which would extend from Manhattan, IL, to North Hayden, IN.With the completion of the lateral, Northern Border’s system wouldextend from the U.S.-Canadian border in Montana to the localdistribution system of Northern Indiana Public Service Co.(NIPSCO). The amended project, whose design capacity would remainat 544 MMcf/d, would make competitive Canadian gas suppliesavailable to the Indiana market. This amendment and the one filedlast March, which proposed reducing the amount of the project’scompression, have cut the project’s original pricetag of $190million to about $94 million.

“Although less than 35 miles in length, Project 2000’s extensioninto North Hayden represents a significant addition to the nationalgrid. By connecting Northern Border’s existing mainline to theNIPSCO distribution system, Project 2000 integrates the northernIndiana markets with the Chicago hub and exponentially increasesthe number of possible delivery iterations available to shippersaccessible to Northern Border,” it said.

Northern Border’s project has been hotly contested by twocompeting pipelines — Natural Gas Pipeline Co. of America (NGPL)and ANR Pipeline. “Although Natural concedes the success of itsrecent capacity auctions — where virtually all firm capacity wassubscribed — it nonetheless complains that approval of NorthernBorder’s Project 2000, and specifically the introduction of acompeting line into North Hayden, IN, poses a ‘potential, negativeimpact on Natural over time’ — in the sense of losing business toa heavily subsidized new lateral,” Northern Border said. “Thedemonstration herein that Project 2000 can be constructed without’subsidy’ effectively disposes of Natural’s speculative concernsabout the impact on its market,” it noted. ANR Pipeline, which is asmall-volume shipper on Northern Border, “has offered even lessspecific claims of potential competitive harm.”

Historically, Northern Border reminded FERC that it has taken a”jaundiced view of unsupported ‘uncompetitive’ claims asserted byincumbent pipelines looking to protect an existing market.” And thenew policy statement, “while recognizing the need to consider theinterests of competing pipelines, does nothing to lend legitimacyto Natural’s [or ANR’s] undocumented allegations,” the Midwestpipeline said.

Natural has “advanced claims of market loss” that cannot be”quantified or tied” to the impact of the proposed Project 2000,Northern Border noted. As a result, “it follows that any attempt togauge ‘captive customer’ impact would be speculative.”

Northern Border said Project 2000 was fully subscribed underlong-term binding agreements that would be converted to firmservice agreements upon FERC certification of the project. It saidit was difficult to assess how much of the subscribed capacity wasassociated with existing load vs. projected new load. “What isevident, however, is that a group of sophisticated and unaffiliatedshippers, representing a cross-section of the gas industry, haveevidenced their need for additional capacity into Hayden bycommitting to 10-year agreements at a rate that is not subsidizedby existing customers.” Two of the project’s biggest shippersinclude NIPSCO (165,000 Mcf/d) and Bethlehem Steel (30,000 Mcf/d).

“There is simply no basis for the Commission to ‘second-guess’the market’s call for Project 2000. Existing customers’ rates willbe unchanged; affiliate contracts are not being relied upon asevidence of market demand; and, because all of the planned capacityis subscribed, the project introduces no cost shifting orrisk-allocation issues. Project 2000, therefore, satisfies the’need’ showing required of certificate applicants under the newpolicy statement,” Northern Border said.

In addition to meeting market need, the amended Project 2000would satisfy landowner concerns, according to Northern Border. Theproject “makes maximum use of existing utility right-of-way,thereby minimizing landowner impact.” It estimated about 85% of theproposed extension lies within existing rights-of-way, while thebalance of the planned route is adjacent to existing pipelinecorridors.

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