Pipeline Project
Pipeline projects to improve natural-gas service.
Traditionally stuck at the tail end of natural-gas supplies, New England is poised to leapfrog to the head of the line, according to two groups of industry heavy hitters planning to build new pipelines.
New England residential and commercial consumers will win out, project backers say, because the pipeline will deliver gas over a shorter distance allowing it to be sold at a lower price.
In the first project, a 630-mile pipeline will bring natural gas into the region by 1999. The pipe will originate at gas fields to be developed off Sable Island, Nova Scotia, then nm through parts of Canada's maritime provinces and northern New England, and connect to the North American pipeline grid in Massachusetts.
Project sponsors include Houston-based Panhandle Eastern Corp., which operates one of the largest interstate natural-gas pipelines in the United States; Calgary-based Mobil Oil Canada Properties and Shell Canada Ltd.; and Weston-based Eastern Enterprises, owner of Boston Gas.
Participants are working in two groups: the offshore producers that own and will develop natural-gas fields at Sable Island; and the pipeline group, headed by Panhandle Eastern, which will build and operate the gas transmission line serving local distribution companies such as Boston Gas. The cost for both aspects of the project is estimated at $3 billion, with pipeline construction alone tallying $760 million.
Current pipeline
Currently New England's natural-gas supply travels a great distance from Gulf Coast areas, Oklahoma and western Canada. One major advantage of developing a nearby source in Nova Scotia is making gas more cost- effective.
"The further gas travels, the more expensive it gets," said Jane McCahon, vice president of corporate relations for Weston-based Eastern Enterprises.
The consortium also is planning to answer the current and anticipated demand for a clean alternative fuel to foreign oil or coal. Potential customers, especially heavy industrial users, are under the gun to meet federal and state clean air requirements, according to James A. Grasso, director of government and public relations for Panhandle Eastern.
Although these customers would incur conversion costs to switch, the consortium believes changing to natural gas will be cheaper than installing scrubbers that reduce harmful emissions.
For residential customers, "the gas supplies from Sable Island should meet the energy needs of 1.2 million homes for heat, hot water, cooking and drying, or the equivalent of 26 million barrels of oil," Grasso said.
Available market share
According to McCahon, the Boston energy market is underpenetrated by natural-gas distributors. For example, Boston Gas supplies 43 percent of residential energy needs, compared to a U.S. average (for comparable companies) of 51 percent; and 27 percent of commercial needs, compared to a U.S. average of 39 percent.
Today the U.S. has more than 280,000 miles of pipeline, serving about 60 million consumers, according to the Interstate Natural Gas Association of America.
Panhandle is laying the groundwork for the regulatory process, lobbying legislative leaders, environmental groups and other key officials, said Grasso. The company is approaching local conservation commissions, which can identify environmentally sensitive areas in communities along the proposed pipeline route.
Grasso noted that encountering opposition is an expected part of the permitting process.
"Some resistance will come from oil and coal dealers, some from environmental groups, and some from people who oppose any kind of development," he said.
Project feasibility studies have been ongoing since January. In late October, the consortium announced it would file by the end of the year with the federal Energy Regulatory Commission for permits to begin construction of Phase I. This 63-mile length of pipeline will run from Dracut to Wells, Maine, and will transmit available domestic supplies into southern New Hampshire and Maine.
Wherever possible, the entire pipeline will be built along existing corridors, such as railroad or electrical right-of-ways or along logging roads in Maine.
Competition
Vying for the New England market share is another project being proposed by a different consortium. This consortium--including Gaz Metropolitain of Quebec; Portsmouth, N.H.-based Granite State Gas Transmission Inc. ; Houston-based Tenneco Gas; and Boston-based J. Makowski Co., an energy project management firm, is planning to build a 250-mile pipeline from the Canadian border in Vermont, through Maine and New Hampshire, to Haverhill.
Called the Portland Natural Gas Transmission System, this project will replace and expand gas service now supplied by Granite State (a subsidiary of Bay State Gas Co.) through a leased, converted crude-oil pipeline. The system will bring gas to areas of northern New England not currently served. Natural gas now meets only 3 percent of the energy needs in Maine, New Hampshire and Vermont.
A smaller project overall, costs for the Portland system are estimated at $220 million. Initially, the pipeline will transport 200 million cubic feet of gas, compared to 400 million. Also, unlike the Maritimes project, which includes the development of all-new gas fields in Nova Scotia, the Portland system will transmit supplies from existing production and storage fields in the United States and Canada.
David Reichman, spokesman for Bay State Gas Co., said one of the issues the consortium is addressing is the supply side of the cost equation: New England's shortage of pipeline capacity.
"When gas is less available, it is more expensive. By introducing a major new source, we will make it possible for more gas to be used, " he said.
This consortium expects to file for permits with the federal Energy Regulatory Commission in March 1996, with construction to be completed at the end of 1998.
"The Clinton administration has expressed pro-gas sentiments from Day One. We don't anticipate any policy disagreements," said Reichman.
Boston Gas is part of consortium that plans to build a new 630-mile natural gas pipeline.
8/10/96
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