The 1 Bcf/d Vector Pipeline project won preliminary approval onnon-environmental grounds from FERC yesterday. The Commission saidno evidence was produced to demonstrate the Midwest project, whichwould link the Chicago, IL, and Dawn, ON, gas transportation hubs,was not required by the public convenience and necessity.

Vector, however, will bear the full risk of building the $447million pipeline because it filed for an optional certificate,which allows an applicant to gain Commission authorization for aproject without demonstrating market demand for services. Despitefiling for an optional certificate, Vector included in itsapplication precedent agreements with four shippers, two of whichare affiliated marketers, for 828,300 Dth/d of firm transportationcapacity, or 82% of the total capacity of the project. Theaffiliated marketers signed up for the majority (700,000 Dth/d) ofthe proposed capacity. Vector is being sponsored by IPL Energy andMCN Energy.

The U.S. portion of the project is designed to be the majorcomponent of a hub-to-hub gas transportation system, extending fromJoliet, IL, near Chicago to the Dawn Hub in Dawn, ON. The projectwould involve construction of 270 miles of 42-inch diameterpipeline through Indiana and Michigan to the U.S. Canadian borderat the St. Clair river. Two 30,000 hp compressor stations and fourmeter/regulator stations would be included. In addition, Vectorproposes to lease for 20 years 59 miles of 36-inch diameter pipethat runs between Milford and Bell River Mills, MI, from MichiganConsolidated Gas. The annual lease payment would be $9 million plustaxes, and the two companies have signed a revenue sharingagreement if service on the line exceeds certificated capacity.

The lease agreement came under serious fire from protesters,particularly competitor ANR Pipeline, which said the lease was notappropriate for an optional certificate because the leased BelleRiver line would be used by MichCon and Vector. FERC said, however,Vector adequately showed the leased line would be operated as partof the Vector system and would be separated from MichCon’sfacilities.

ANR also took issue with Vector’s proposed backhaul service toMichCon using the Bell River loop. The no-fee backhaul service wascritical to the lease agreement between Vector and MichCon, but ANRcontended it was a violation of FERC’s Part 284 service regulationsprimarily because it would not be offered to any shippers otherthan MichCon. Vector told FERC MichCon would be the only shipperrequesting backhaul service. In response, the Commission said itwill require Vector to post monthly on its bulletin board allcustomers receiving backhaul services and the volumes of gasprovided. It also required Vector to make a NGA section 4 filingwithin the first three years of operation and placed Vector at riskfor the costs of any backhaul service provided. The Commission alsosaid Vector must credit to its firm shippers any revenues realizedfrom backhaul operations for third parties on the Belle River Loop.

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