While the political battleground in Florida grew bloodier witheach passing day last week, natural gas pipelines eager to servethe growing market reached a truce agreement of sorts that callsfor Duke Energy and Williams to purchase the proposed GulfstreamNatural Gas System from The Coastal Corp. and ditch their competingBuccaneer Pipeline project for the state.

Duke Energy and Williams refused to discuss the specifics of thedeal, except to say that they were purchasing 100% of Coastal’sinterest in the Gulfstream project, and that the transaction wassubject to federal regulatory approvals and the Coastal/El PasoEnergy merger being finalized. They expect the merger to be finalbefore the end of the year. The cost of building the Gulfstreamproject has been estimated at $1.6 billion.

Coastal approached both Duke and Williams with the Gulfstreamoffer after the Federal Trade Commission (FTC) conditioned itsapproval of the pending merger on Coastal divesting its assets inFlorida, said Robert B. Evans, president of Duke Energy GasTransmission. The agency ordered the asset divestiture because ElPaso already owns 50% of Florida Gas Transmission, the sole gaspipeline currently serving the Sunshine State.

“Until the merger is complete, Coastal will continue to developand market Gulfstream, will ensure that the project moves forwardas scheduled and will remain fully committed to its manystakeholders in Florida,” said Coastal Chairman and CEO David A.Arledge. At the same time, Duke and Williams said they willmaintain their Buccaneer application on file at FERC until thetransaction closes.

While Williams and Duke obviously were “very happy” about theirplans to acquire Gulfstream, Evans expressed remorse about Coastalbeing forced to exit the Florida gas market. “They would have beena good partner if we could have eventually become partners withthem,” he noted.

“We’re going to step into Gulfstream’s shoes at FERC,” saidEvans, explaining that Duke and Williams won’t be required to filea new application at the Commission. Nor, he added, do thecompanies plan any immediate changes for the pipeline project thatwould serve Central Florida.

“We have no planned changes at this time. They [the Gulfstreamsponsors] have got a good route laid out, and have moved along verywell on contracting for construction of the pipe, in getting thingsdone right away and, of course, [in negotiating] contracts with thecustomers,” he told NGI.

Gulfstream has precedent agreements with 10 large Floridautilities and power-generation facilities for the majority of the1.1 Bcf/d capacity of the proposed pipeline.

Evans acknowledged that Duke and Williams will have a betterchance in the Florida market with Gulfstream than Buccaneer. “Atthis point in time, the market appears to be ready for thispipeline. And Gulfstream has done a good job of positioningthemselves to make that happen…It gives us entrance into themarket quicker than we would have had if we’d have stayed with ourBuccaneer project.”

The opposition of Florida landowners to the Buccaneer projectdid not factor into the companies’ decision to go with Gulfstreamover Buccaneer, Evans said.

Evans said he expects FERC to certify the Gulfstream project byearly next year, and it will be in service by June 2002. The744-mile pipeline wound run under the Gulf of Mexico and comeashore at Tampa, providing 1.1 Bcf/d of new gas supplies to themiddle region of Florida.

The state forecasts that about 10,000 MWs of new gas-firedgeneration capacity will be built in Florida between now and 2010,which would boost gas demand by 1.6 Bcf/d, according to Evans.

Susan Parker

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