Despite its claims otherwise, Northern Border Pipeline’sproposed Project 2000 expansion/extension will have a significant”negative impact” on Natural Gas Pipeline Co. of America (NGPL),both on a system-wide basis and on its deliveries to North Hayden,IN, the Kinder Morgan pipeline said.

Northern Border suggested its project wouldn’t cut intoNatural’s market given that the Lombard, IL-based pipeline hasrecently “contracted virtually all of its capacity” under atwo-year deal for 500,000 MMBtu/d with marketer Aquila Energy, anda three-year contract renewal covering 1 million MMBtu/d with itslargest shipper, Nicor Gas.

Northern Border made the comment last month in a letter to FERCstaff, which had asked the pipeline to justify its Project 2000under the Commission’s new policy statement for pipelinecertification. Among other things, the new policy requires FERC toconsider the adverse effects of new projects on existing pipelinesand their customers.

“While it is so that Natural was recently able to sell most ofits currently available capacity into the Chicago market (atdiscounted rates), the fact remains that – on Natural’s twomainline systems – significant amounts of space come out from undercontract, on a continuing basis,” NGPL told FERC [CP99-21-001].

It estimates it could have unsubscribed capacity, includingcapacity subject to right-of-first-refusal and rollover rights, onthe “north ends” of both mainlines over the next year ranging from198,433 MMBtu/d to 494,492 MMBtu/d (Amarillo mainline), and from129,008 MMBtu/d to 440,431 MMBtu/d (Gulf Coast mainline).

“There is ample existing pipeline capacity serving the Chicagoarea, and more is being built by Alliance Pipeline. Natural’scontinuing effort to sell space on its system, and its need todiscount rates, is proof of this situation.”

The Project 2000, which would expand Northern Border’s mainlinethrough new compression and extend it by 34 miles of 36-inch pipe,would enable the pipeline to deliver 548 MMcf/d of natural gas toNorth Hayden, a market currently served by Natural. Naturaldelivers about 470 MMcf/d to that part of Indiana. “The potentialnegative impact on Natural over time – in the sense of losingbusiness to a heavily subsidized new lateral – would besignificant.”

Natural also took issue with the incremental rate that NorthernBorder calculated for its project in 2001, calling it “invalid.”Northern Border estimated the incremental rate for the entireproject would be 6.87 cents/Dth per 100 miles. This “represents atype of cross-subsidization that should not be allowed. Bycombining the costs of the proposed expansion and extension tocreate a single 100-mile incremental rate for all Project 2000shippers, Northern Border significantly understates the appropriatepricing for the extension only.”

Natural insists there should be separate rates for the expansionand extension portions of the project. It estimated theextension-only rate would be about 10 cents in 2001, while theexpansion-only rate would be about 7.7 cents.

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