Transco Officials Anxiously Wait To Expand In Northeast

Pipeline & Gas Journal, August, 2000 by Jeff Share

As summer unfolds and the possibility of brownouts or even blackouts increases in the Northeast, Williams Gas Pipeline-Transco's top executive can only wait, watch and wonder when a long overdue expansion of the natural gas system will finally push forward and ease those conditions.

Gary D. Lauderdale, 53, senior vice president and general manager who was tapped earlier this year to succeed Cuba Wadlington Jr., heads a pipeline company active on all fronts of the East Coast. During a wide-ranging interview in the picturesque 64-story Williams Tower in southwest Houston, some good news emerged when the Federal Energy Regulatory Commission (FERC) announced approval of the $108 million SouthCoast Expansion Project, which calls for 44 miles of pipeline looping in Alabama and Georgia and 31,500 hp of compression to transport an additional 200 MMcf/d.

Transco has a major project on the drawing boards to bring nearly 1 Bcf/d of natural gas into central Florida along with Duke Energy as part of the $1.5 billion Buccaneer Pipeline. It's also working on the $134 million Sundance Expansion, which will bring an additional 236 MMcf/d into Georgia and the Carolinas later this year. All told, Williams has a 27,300-mile pipeline system and delivers about 16 percent of the nation's natural gas. A recent report by Merrill Lynch noted that "Williams is well on its way to becoming a leading Btu provider across the entire energy spectrum, in addition to exploiting its growing telecom opportunities."

Williams has approximately $25 billion in assets and nearly 23,000 employees with operations in all 50 states. The heart of the system is the historic 10,000-mile Transco pipeline, which struggled financially for years until it was acquired by Tulsa-based Williams in 1994.

Transco has been a key supplier to the Northeast for 50 years and is New Jersey's primary transporter. Its system worked well last winter as no operational flow orders (OFOs) were issued nor were customers restricted in what they could take. But the pipeline is full and today, the Northeast corridor, particularly around New York City, weighs heavily on company executives' minds.

They filed their application with the FERC two years ago for the MarketLink Expansion Project. With capacity of 700 MMcf/d, the $528 million project would cost $528 million and comprise 154 miles of 42-inch and 36-inch pipeline looping in Pennsylvania and New Jersey along with 62,400 hp of additional compression. MarketLink is designed to be a conduit at Transco's hub in Leidy, PA, connecting with the proposed 400-mile, 916 MMcf/d Independence Pipeline that ANR Pipeline Co., Williams and National Fuel Gas want to build at a cost of $668 million from Defiance, OH. That pipeline would transport gas from the Midwest and Canada to the East Coast. The target date for service, which would end in New York City, is November 2002.

On July 12, federal regulators approved Independence, after the companies involved were able to prove there was enough demand for the new capacity. In April, Transco made MarketLink a separate project with full plans to proceed regardless of Independence's fate -- providing that it can navigate its way through the tricky morass of New Jersey politics. MarketLink did take a big step forward this spring when the FERC endorsed a Certificate of Public Convenience and Necessity for the project. As a stipulation, the FERC is requesting more information about future contracts that will validate the need for the system.

The Energy Information Administration projects natural gas consumption on the East Coast will increase by 3.3 Bcf/d by 2005. In the past 10 years, Williams has added 1.5 Bcf/d of peak capacity for its LDC markets and plans another 2.5 Bcf/d by 2008, primarily to serve power generation loads in southern markets.

Transco has already identified 25 new natural gas-fired power plants that are proposed along its pipeline system in the Mid-Atlantic which will consume that 2.5 Bcf/d. Today, officials note, 3 percent of New Jersey's electricity comes from natural gas-fired power plans compared to 45 percent from coal.

"In the Northeast, particularly around New York City, there really hasn't been much in the way of expansion since 1992," said Lauderdale, who began his career in 1967 as an accountant with Texas Gas. The Indiana native told P&GJ that besides the constantly evolving regulatory challenges in both the gas and electric sides, unbundling at the state level also makes new pipeline projects more challenging to pursue. With fewer local distribution companies (LDCs) buying, selling or otherwise arranging upstream transportation, utilities are hesitant to make long-term commitments for firm capacity in the pipelines, which traditionally was the foundation for significant expansion projects.

"It's not that the capacity isn't going to be needed up there, but the marketers by the very nature of their business take a shorter-term view of their obligation. The big growth market is electric generation and these are actually more timing challenges than a sense of whether the market is really going to be there. We think it's already there now," Lauderdale said.