The Federal Energy Regulatory Commission yesterday awardedNorthern Border Pipeline a certificate to build its Project 2000extension into northern Indiana, which would provide customersthere access to less expensive Canadian gas supplies for the firsttime.

The project would extend Northern Border’s pipeline fromManhattan, IL, to North Hayden, IN, where it would interconnectwith Northern Indiana Public Service Co. (NIPSCO), and would boostcompression on two segments of its existing system. It would raisethe design capacity to 1.48 Bcf between Ventura, IA, and Harper,and to 844 MMcf/d between Harper and Manhattan.

When the 34-mile extension is completed, Northern Border’ssystem will span from the U.S.-Canadian border in Montana toNIPSCO’s distribution system. The extension will have a capacity of544 MMcf/d, and would serve five shippers under 10-year contracts,including El Paso Energy Marketing Co., Bethlehem Steel Corp.,NIPSCO, Peoples Energy Services Corp. and Peoples Gas Light andCoke Co.

Northern Border has twice amended the project, which it filedwith FERC in October 1998. The pipe was reduced to 30 inches indiameter from 36 inches and some cooling equipment was eliminated.This cut the cost to $94 million from $189 million.

Natural Gas Pipeline Co. of America and ANR Pipeline hotlycontested Northern Border’s Project 2000, saying that it didn’tcomply with the Commission’s policy statement on new pipelineconstruction. The policy requires FERC to weigh the benefits of aproposed project against the potential adverse effects on captivecustomers, landowners and pipeline competitors.

Natural argued it would be unable to deliver gas to northernIndiana because Northern Border would make deliveries at a higherpressure. “…..[I]t is Natural’s responsibility to meet the typeof competitive challenge presented by Northern Border, perhaps byincreasing the line pressure, particularly at North Hayden, on itssystem,” the order suggested [CP-21]. “Additionally, to the extentNatural’s competitive position will be adversely affected, we thinkthe benefits of this project outweigh such effect.”

Both Natural and ANR insisted Northern Border’s existingshippers would be forced to subsidize part of Project 2000. But theCommission said “no shipper would be harmed,” and, in fact,system-wide rates would decrease once the costs of the project arerolled in.

Moreover, FERC said Northern Border has more than justified theneed for the project by submitting precedent agreements for all ofits new capacity. “No one has alleged nor do we find that existingshippers’ service will be in any way degraded by the new project.Indeed, it is likely that existing shippers’ service options willbe enhanced by the new project.”

The Commission further said the benefits of Project 2000outweighed landowners’ concerns. “The benefits of the projectinclude, among others, the…..demonstration of a market demand,the introduction of Canadian supplies into the northern Indianamarket, the integration of the Chicago and northern Indianamarkets, and opportunities for existing shippers to enter a newmarket,” the order noted.

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