FERC yesterday cleared the way for Transcontinental Gas PipeLine (Transco) to begin building two phases of its controversialMarketLink project that would expand its existing transportationsystem in western Pennsylvania and northern New Jersey, but itbarred the pipeline from proceeding with a third phase until it canback up that part of the project with executed contracts.

Specifically, the Commission authorized Transco to construct166,000 Dth/d of capacity to serve five shippers by Nov. 1, 2001(Phase I), and 130,000 Dth/d of capacity to serve two shippers byNov. 1, 2002 (Phase II). But it said Transco could not proceed withthe remainder of its 700,000 Dth/d MarketLink expansion until itsubmitted executed contracts fully subscribing that capacity. Ineffect, FERC authorized Transco to construct less than half of theoriginal MarketLink project.

It directed Transco to file the executed contracts within fourmonths of the order. If Transco should fail to meet the deadline,the certificate authority it was awarded last April to build theremaining facilities would expire.

In limiting its approval to only two phases, FERC said in theorder that while “the market for Phases I and II is amplydemonstrated by executed contracts for all of that capacity, thereis no longer evidence in the record to support a finding of needfor the remaining facilities.”

The Commission issued a certificate to Transco on April 26 tobuild the entire 700,000 MarketLink expansion project.Subsequently, however, several major shippers (Dynegy Marketing andTrade, Enron North America and Engage Energy) backed out of theproject or requested service extensions, which caused Transco inSeptember to seek an amendment to its certificate that would allowit to phase in the project [CP98-540].

In its September petition, Transco indicated it intended to askFERC in the future for the authority to build other phases as themarket demand for the remainder of the MarketLink project evolved.But the Commission Wednesday put the brakes on the pipeline’s plansfor a series of phases, saying Transco would have to build theentire MarketLink project in three phases.

If Transco meets the four-month deadline imposed by FERC forcontracts, the pipeline will not need any additional certificateauthorization to build Phase III. That phase of the project wouldhave to be sized at about 400,000 Dth/d in order for MarketLink toreach 700,000 Dth/d. If Transco misses the cut-off date, it wouldhave to apply for a new certificate to build additional facilities,according to the order.

Transco was dealt yet another blow when FERC refused its requestto extend the completion date for MarketLink to Nov. 1, 2004.Instead, the Commission allowed the pipeline only two years fromthe date of the order to complete construction. That’s “more thansufficient time,” the order said.

On the plus side for Transco, the Commission rejected the stateof New Jersey’s request to stay the MarketLink project while theamendment is pending in order to protect landowners and theenvironment. “We find that New Jersey has not demonstrated that itwill suffer irreparable harm absent a stay if Transco conductssurveys and acquires rights of ways for the MarketLink facilities,”many of which Transco has already completed, the order noted.

Phase I calls for the construction of about 22.2 miles of36-to-42 inch diameter looping in western Pennsylvania and NewJersey; a new 15,000 horsepower compressor unit in Columbia County,PA; a new 15,000 hp compressor unit in Mercer County, NJ; andassociated facilities. Phase II entails the construction of about30.3 miles of 12-to-42 inch diameter looping in Pennsylvania andNew Jersey.

Phase I shippers that have executed 10-year binding contractsinclude Aquila Energy Marketing (25,000 Dth/d), Consolidated Energy(30,000 Dth/d), Consolidated Edison (10,000 Dth/d), St. LawrenceCement (1,000 Dth/d); and Williams Energy (100,000 Dth/d).

Two shippers have signed firm contracts for the Phase IIproject. They include Virginia Power Energy Marketing (100,000Dth/d) and PPL EnergyPlus LLC (30,000 Dth/d).

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