NATURAL GAS

Kinder Morgan targets Northeastern winter peaks with permit application

A $5 billion plan to carry natural gas from Pennsylvania's Marcellus formation to markets in New York and New England advanced last week, as Kinder Morgan Inc. subsidiary Tennessee Gas Pipeline Co. submitted paperwork on its proposed Northeast Energy Direct (NED) project.

The project has been in a "pre-filing" process with the Federal Energy Regulatory Commission since September of last year, but last week marked the submission of the project's full application before the agency.

The project consists of two segments: A $3.3 billion "market" segment approved by Tennessee Gas Pipeline this summer would run 188 miles from New York to Massachusetts with extensions in Connecticut and New Hampshire, while a "supply" segment priced at around $1.7 billion, if approved by the company and regulators, would run 174 miles from Pennsylvania to New York.

Both portions of the project also include the construction or modification of numerous compressor stations, meter stations and other related assets.

Kimberly Watson, Kinder Morgan's president for east region natural gas pipelines, in a statement highlighted the need for new natural gas infrastructure to serve both gas customers and electric generators, which are increasingly looking to use natural gas over coal or oil.

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"The NED Project is a transformative project for the northeast United States," Watson said. "Despite being just a few hundred miles from the most abundant and low-cost natural gas production area in the country, consumers in the Northeast pay some of the highest natural gas and electricity rates in the continental United States. These higher prices are due, in large part, to natural gas pipeline infrastructure that is insufficient to meet the winter heating demand of local distribution companies (LDCs) and electric generators."

New York and New England generally have sufficient natural gas pipeline supply to match demand for most of the year but see shortages during the cold winter season when home heating with gas and gas-fired electric power generation spike together.

Watson pointed to a recent study that looked at the polar vortex weather seen during the winter of 2013-2014. It found that if it had been in service at the time, the NED project "would have eliminated gas and electric price spikes on 86 days during the 2013-14 winter and reduced wholesale electricity expenditures by New England's business and residents by $3.7 billion."

Tennessee Gas Pipeline is asking FERC to conclude its project review before the end of 2016, allowing construction to start in early 2017 and operations to begin by Nov. 1, 2018.

The company has pointed to FERC's pre-filing process as instrumental to moving the permitting process forward, as it facilitated early discussions with stakeholders that led to route adjustments and has yielded a proposed path that TGP says is 85 percent co-located with existing natural gas and electrical rights of way.

But opponents have organized in each state along the project's proposed route, raising concerns about damage to fragile ecosystems, natural gas safety risks, expanded natural gas production from new demand and increased climate emissions, among other issues.

In addition, some opponents are citing a new concern for the region: emerging rules that would allow electric generators that rely on natural gas to underwrite a portion of the cost of new gas infrastructure.

To date, electric utilities have not been able to charge ratepayers for costs associated with natural gas pipeline buildout that would serve their plants. But regional stakeholders have been working together over the past several years to change that, in order to remove a bottleneck that many see as distorting financing and investment decisions in the region.

Massachusetts recently issued an order allowing electric development companies to sign contracts for gas deliveries, and neighboring states are weighing similar measures, steps that are contributing to a wave of new pipeline activity. Last week, Spectra Energy Corp. announced a new Access Northeast pipeline project that would also serve Northeast gas markets (EnergyWire, Nov. 19).

Not everyone agrees that committing to hundreds of miles of new gas pipelines is the best answer for the region. Also last week, Massachusetts Attorney General Maura Healey released a study concluding that the Northeast does not need new gas pipelines and does not face an imminent reliability threat, but would be better served by managing its winter natural gas demand through a focus on energy efficiency and demand response.

Doing so would allow the state to continue to use natural gas and oil as the region invests in more climate-friendly alternatives for the long term, the report said.

The NED project's new FERC docket number is CP16-21.

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