GAS IMPORT HIKE SHAPES UP FOR U.S. NORTHEAST

Jan. 22, 1990
The U.S. Department of Energy has tentatively authorized a large increase in the volume of Canadian natural gas transported to the U.S. Northeast, starting with small volumes as early as next autumn. The conditional import authorization gives 18 northeastern gas distribution companies approval to import as much as 397.1 MMcfd of gas from Canada. Canadian gas imports to the Northeast were expected to be more than 340 MMcfd in 1989.

The U.S. Department of Energy has tentatively authorized a large increase in the volume of Canadian natural gas transported to the U.S. Northeast, starting with small volumes as early as next autumn.

The conditional import authorization gives 18 northeastern gas distribution companies approval to import as much as 397.1 MMcfd of gas from Canada.

Canadian gas imports to the Northeast were expected to be more than 340 MMcfd in 1989.

Alberta Northeast Gas Ltd., Boston, a Canadian corporation that represents the U.S. distributors, plans to ship the gas via the proposed Iroquois Gas Transmission System to be built in New York State and Connecticut and expansions of the Tennessee Gas Pipeline Co. and Algonquin Gas Transmission Co. systems.

TransCanada Pipelines Ltd. will carry the gas in Canada.

The authorized volumes will make up about 75% of the volumes scheduled to be transported on Iroquois. The import contracts are for 15 years.

National Fuel Gas Supply Corp., one of the distributors, is authorized to begin importing 10 MMcfd starting next fall.

The added volumes DOE authorized likely will start to flow in earnest in late 1991, assuming Iroquois and the Tennessee-Algonquin facilities are built.

PRICES, VOLUMES

DOE issued the conditional import authorization after making initial findings that the Northeast needs more gas, the proposed sales are economically competitive, and the gas is from secure suppliers.

DOE has been under severe pressure to respond to heating oil shortages, gas curtailments, and price increases that occurred in the U.S. Northeast during last month's severe cold.

Under Alberta Northeast's agreements with Canadian suppliers, the border price of the gas will be determined by indexing a base price of $3.90/MMBTU during winter months and $3.30/MMBTU during summer to the average of natural gas and fuel oil prices in New York City.

Whenever the indexing formula changes by more than 5%, the price will be adjusted. The price of the gas at the border as of Jan. 1, 1990,

would have been $3.24/MMBTU, DOE said.

About 342 MMcfd of gas was imported into the Northeast in 1988, including about 293 MMcfd from Canada.

OTHER APPROVALS

The Federal Energy Regulatory Commission, which has been asked to approve the proposed pipelines, is completing an environmental review of the Iroquois-Tennessee project.

A draft environmental impact statement was issued last November, and a final statement is expected to be complete this summer.

DOE plans to reexamine the import arrangements and decide whether to issue a final authorization after the EIS is complete.

Alberta Northeast was formed in 1985 to buy and export gas on behalf of the 18 local gas distribution companies, which serve New York, New Jersey, and New England.

Four Alberta companies will supply the gas. They are Western Gas Marketing Ltd., ProGas Ltd., Atcor Ltd., and AEC Oil & Gas Co.

Alberta Northeast members besides National Fuel Gas are Brooklyn Union Gas Co., Long Island Lighting Co., Consolidated Edison Co. of New York Inc., Central Hudson Gas & Electric Corp., New York State Electric & Gas Corp., Yankee Gas Services Co., Connecticut Natural Gas Corp., Southern Connecticut Gas Co., Boston Gas Co., Colonial Gas Co., Essex County Gas Co., New Jersey Natural Gas Co., Public Service Electric & Gas Co., Elizabethtown Gas Co., Valley Gas Co., Gas Service Inc., and Manchester Gas Inc.

Michael R. McElwrath, acting DOE assistant secretary for fossil energy, said, "While the additional gas supplies will not help New England this winter, it is clear that any action that increases the supply of economical energy flowing into the region will have benefits in the future.

"Hopefully, we can head off the kind of hardships we have witnessed recently by taking regulatory actions now that give consumers the full benefits of a competitive energy market in future winters.

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