Viking Gas Transmission formally dropped out of the VikingVoyageur partnership earlier this week and now plans to test themarket for a separate, smaller expansion of its existing system,VGT President Greg Palmer, a former spokesman for Voyageur, saidyesterday. VGT intends to hold an open season to collect customerinterest in the project this summer.

Palmer said VGT dropped out of Voyageur because the otherpartners, TransCanada PipeLines and Nicor, were unwilling to let goof the 1.4 Bcf/d expansion project despite clear signals fromCanadian producers it could not go forward. The recent Canadian gasindustry agreement, signed by producers, TransCanada and Nova,virtually assures the competing Alliance Pipeline project will bebuilt and producers have indicated there will not be enough supplyavailable to fill both Alliance and Voyageur in 2000. Both systemswere designed to bring a large amount of Canadian gas to U.S.Midwest markets.

“I think its pretty clear that Alliance is going ahead. We justthought it was time for us to work on maximizing the value thatViking can bring to the U.S. Midwest…on our own,” said Palmer. “Ithink we’re going to look at how we can serve the markets in theMidwest., probably not in direct competition with Alliance orNorthern Border but on markets we’ve historically served.

“What we can offer is additional capacity through the existingViking system and provide that on a shorter timeline than any newproject,” he said. A VGT expansion, however, probably would addonly about 150 MMcf/d, a far cry from the 1.4 Bcf/d Voyageur wouldhave added. And VGT is unlikely to include the extension into newmarkets in eastern Wisconsin and Illinois that was integral to theVoyageur project. VGT currently carries 500 MMcf/d of gas tomarkets in Minnesota and western Wisconsin.

“The big advantage in [Voyageur] going all the way to Joliet,IL, was you had storage on the end and you could use the pipelineat 100% load factor. I’m not sure a shorter extension [would beeconomic],” he explained.

While TransCanada and Nicor are still pushing the Voyageurconcept, they informed FERC this week Commission staff should”suspend its review in these proceedings until July 31, 1998 duringwhich time Voyageur will evaluate various alternatives.” The700-mile Voyageur project was designed to be separate but parallelto the existing Viking system with an extension through Wisconsinto Illinois. Wisconsin gas and power distributors were majorsupporters of the project and a TransCanada spokesman saidWisconsin and Northern Illinois will remain the primary targets ofany project that moves forward. But all options are possible, hesaid, even utilizing space on the competing 1.3 Bcf/d AlliancePipeline project if it is built.

As Palmer put it, however, the big question still remains, i.e.,”.how long will it take for drilling to catch up with all thepipeline projects.”

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