A Federal Energy Regulatory Commission administrative law judge has upheld the need for the Iroquois Gas Transmission System over the objections of U.S. independent producers.
Walter Alprin upheld the Iroquois project on all points, saying it is needed, has reasonable growth rate projections and capital and rate structures, and will not displace U.S. gas supplies.
The line is scheduled to ship western Canadian gas into the U.S. Northeast. TransCanada PipeLines Ltd. is the major owner with a 29% interest.
Opponents to the line, including U.S. gas producers, New England heating oil dealers, and environmentalists, have until Oct. 3 to file objections to Alprin's findings.
If those are overruled, FERC could give the project final approval at a Nov. 28 meeting.
FERC approved Iroquois on most points last July but ordered "expedited and narrowly focused" hearings on market demand and tariff issues (OGJ, July 30, p. 34).
Iroquois is a proposed $582.6 million pipeline to move 575.9 MMcfd from Waddington, N.Y., through Connecticut to South Commack, N.Y., on Long Island. About 80% of the gas is to go to local distribution companies in Connecticut, Massachusetts, New York, New Hampshire, New Jersey, and Rhode Island, and the rest to electrical power generating firms.
FINDINGS, ISSUES
Alprin determined Iroquois' growth rate projections are reasonable, and currently available supplies and alternative energy sources cannot meet current and projected demands for gas in the service area.
"With the probable exception of fuel oil and liquefied natural gas, there would be no displacement of current fuel suppliers," he said. "Even if specific projections do not accurately forecast displacement for the time of initial operation, and for 5 and 10 years thereafter, the overwhelming need for additional peak supply would justify the project." Alprin found that a debt:equity ratio for Iroquois of 75:25 and a return on equity of 14% with a load factor of 87% of system capacity is reasonable.
The hearings placed the burden of proof on those objecting to the project. Alprin mainly disagreed with opponents' estimates of demand for gas in New England, which affected the rate question, too.
Robert J. Reid, Iroquois president, said, "Our opponents called for a hearing to prove that our project was not needed but offered no new independent evidence to support their claims."
He added that Iroquois would move gas equal to 100,000 b/d of imported oil. "We are an effective, near-term solution to reducing the oil dependency of the Northeast, which is more reliant on the use of oil than any other geographic segment of the country."
Paul Hilliard, president of the Independent Petroleum Association of America, said, "We are very disappointed in the judge's finding of fact. He appears to have been predisposed to affirming the commission's preliminary determination on virtually every fact or issue set for hearing.
"IPAA intends to file objections to the judge's determinations with the commission, and we hope the commission will maintain an open mind on these matters. We are not done yet."
Independents also objected to FERC considering the Niagara Import Points Project (NIPS) at its Sept. 12 hearing, saying it is "a Canadian natural gas import project flawed by the same discriminatory rate designs as the Iroquois pipeline import application."
Hilliard said FERC's consideration of NIPS before studying the judge's Iroquois findings would result in a prejudgment of the issues set for hearing in the Iroquois case.
"FERC isn't even interested in hearing what its own judge has to say about discrimination before charging ahead with new Canadian import projects that will harm the domestic production industry," Hilliard said.
At its Sept. 12 hearing, commissioners discussed the allegation and decided that NIPS consideration would not amount to prejudgment of Iroquois.
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