Two pipeline projects that were to provide takeaway capacityfrom the Chicago hub to the southern Wisconsin market have beenrebuffed by LDC customers there, causing the sponsors to cancel oneand place the other on indefinite hold.
Biting the dust was the watered-down 1 Bcf/d Voyageur Pipelineproject, which was sponsored by TransCanada Pipelines and NicorInc. “We just couldn’t get enough contracts to make it financiallyviable,” said Carl Alston, a spokesman for Nicor, parent of NicorGas. “Even though we had strong [initial] market indications ofsupport for the project, customers…were not willing to commit tothe contracts that were needed” to make it work, he noted.
Likewise, the competing 650 MMcf/d Illinois-Wisconsin ExpressProject, which is being financed by a coalition of companies, hasbeen relegated to a kind of limbo – put on hold – reportedly untilan unnamed Wisconsin utility can commit to the project that wouldtarget a region in the state, which primarily is served byWisconsin Gas and the gas operations of Wisconsin Electric Power.”The utility, I guess, is trying to strike their deal with theirgas suppliers, and they just have not been able to come back andgive firm commitments on what volumes they need and the type ofservice,” said Paula Delaney, a spokeswoman for one of thecoalition members, El Paso Energy. The duration of the hold is”pretty dependent” on that Wisconsin utility, she added.
In the meantime, the coalition between El Paso, Enron, PeoplesEnergy and Northern Border Pipeline still exists, she noted. “Butas long as it’s on hold each of the companies has kind of got theright to go out to see if they can generate their own opportunitieson that [market].”
The sidelining of the two pipeline projects – whetherpermanently or temporarily -begs the question: what’s going on inWisconsin? “Apparently each of the projects haven’t beenattractive to enough customers along the route to make it reallywork,” a Wisconsin utility source told NGI. “For whatever reason,they [the potential LDC customers] have been unable to make thekind of long-term commitments that the pipes need to backthemselves. And some of it has to do with the services that are[being] offered, the price of the services.”
Specifically, he thinks the Voyageur project lacked appeal tothe Wisconsin customers, while the Express Project left somethingto be desired for northern Illinois customers. He doubted thatopposition from ANR Pipeline, the sole existing pipeline betweennorthern Illinois and southern Wisconsin, entered into the picturemuch. ANR “has been pushing hard to make sure none of theseprojects get built,” but he didn’t think ANR was “enough of afactor” or had “enough moxy” to defeat competing projects,especially ones supported by LDC customers.
The inability of customers to commit so far doesn’t mean thatthey don’t want a new pipeline project along the Joliet-to-southernWisconsin route, the utility representative said. However, “theywant to commit to the project that is most likely to be builtbecause they don’t want to make a commitment and then have it allget snagged up in regulatory approvals.”
Despite all the uncertainty, he believes “a new steel pipeline”still is in the cards for northern Illinois and southern Wisconsin.”Sooner or later somebody’s going to get it right, and they’regoing to get everybody signed up and bingo they’re going to go. ButI have no idea who’s going to own it. I have no idea when they’regoing to get it together and get the customers signed up. So far,it’s been an excruciatingly slow process.” He said he wouldn’t besurprised to see a third pipeline proposal surface “because youwould think that if any of the existing ones were front-runnersthey’d be much further down the road” now.
The company that builds the pipeline is “going to have to golike gangbusters to get in service” by the time the AlliancePipeline starts operation, which would be either in late 2000 orlate 2001. “They have a long way to go to get there” becauseacquiring a right-of-way through congested urban areas in northernIllinois will prove to be a “long, contentious” issue.
In the end, the differing routes of the competing projects won’tmean a thing to southern Wisconsin shippers, he noted. “It’s goingto be the services [and prices] that are offered on there that’sgoing to distinguish one project from another.”
The scaled-down Voyageur project had other problems also. “Ithink that they [Voyageur sponsors] weren’t serious about going toWisconsin. I think that even though it was labeled as aJoliet-to-Wisconsin pipeline, the sponsors of that project weremostly interested in moving gas to northern Illinois,” theWisconsin source said. “…[T]heir generic proposal…had kind ofwhat I call a goofy two-part rate for a 120-mile pipeline,” whichwas “tilted against the Wisconsin customers to benefit Illinoiscustomers. You had to kind of conclude that they were building itfor their own systems.” He questioned “how serious they [theVoyageur sponsors] were when they started it. It takes a lot ofgumption to build one of these things. And I’m not sure they hadthe staying power.”
The Viking Voyageur project – as it was originally called – wasconceived as a 773-mile, 1.4 Bcf/d Manitoba-to-Chicago line in1997, but it lost out to the competing Alliance Pipeline and theNorthern Border expansion projects in the western Canada-to-U.S.Midwest race. In an attempt to keep their foot in the door,partners TransCanada and Nicor floated plans last July for adownsized Voyageur project, which would go in the oppositedirection with a 1 Bcf/d, 150-mile line from the Chicago hub northtoward Milwaukee, WI – an area bypassed by the big incomingpipelines.
That placed the reconfigured TransCanada/Nicor project incompetition with the Illinois-Wisconsin Express pipeline project,which would have traversed a similar path. But Nicor’s Alston saidcompetition between the pipeline projects played only a minor rolein TransCanada’s and Nicor’s decision to abort the Voyageurproject. The “key” reason the sponsors canceled Voyageur was lackof commitments from LDC customers, he said.
Nicor and TransCanada held an open season for their revisedVoyageur project in August-September and made the decision inmid-October to abandon the project. They still intend, however, tokeep a close eye on the northern Illinois-southern Wisconsinmarket. “Both companies are going to keep looking at that marketjust to see what the developments are” as part of the “regularcourse of daily work,” Alston said, but they have no otherparticular project in mind right now.
The canceled Voyageur project and the on-hold Illinois-Wisconsinproject were intended to offer southern Wisconsin customersalternatives to ANR, which has had a lock on the Chicagohub-to-southern Wisconsin transportation route for years. But ANRdid not take the threat to its territory lying down. It is in theprocess of adding about 116 MMcf/d of capacity to its system insouthern Wisconsin, a project which was approved by FERC inSeptember and is expected to be in service in early 1999. Neitherthe scaled-down Voyageur nor the Express Project ever filed aproposal at FERC.
The expanded ANR capacity will provide the growing Wisconsinmarket with the means to access the cheaper Canadian gas suppliesexpected to be available, said ANR spokesman Joseph Martucci.Demand growth in southern part of Wisconsin is being fueled by theaddition of new gas-fired power generation plants and theconversion of existing power plants to natural gas.
ANR also is weighing the possibility of a further expansion ofits system following the “positive response” it received fromcustomers in an open season that ended Aug. 31. That’s “activelyunder consideration,” Martucci told NGI last week.
“I don’t have any firm numbers yet. We’re still working withcustomers to determine what level of interest they have, and towork out precedent agreements.” When that is completed, Martuccisaid ANR likely would file another proposal at FERC. If thepipeline decides on the additional expansion, it would be forservice in 2000 and beyond.
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