[BETA] Fortnightly

RELENTLESS. That's the word consultant Benjamin Schlesinger uses to describe the growing share of North American markets claimed by natural gas produced in the U.S. Rocky Mountain region, the San Juan basin and western Canada.

"Western gas has climbed steadily, from 21 percent of North American gas production in 1975, to 33 percent in 1995," says Schlesinger, president of Benjamin Schlesinger & Associates Inc., Bethesda, Md. "It looks like that figure will reach 35 percent in the next few years. And that doesn't include new supplies from Sable Island [off the coast of Newfoundland]."

A look at the map shows some of the major proposed pipeline projects, with many designed to move Canadian gas to the Chicago hub and points east. Other projects vie to bring gas from the Sable Island into New England.

In seeking U.S. certification, Independence Pipeline sponsors claimed: "Natural gas will serve as the ideal fuel for industrial expansion and power generation in an area that must balance these energy needs with new environmental regulations."

With electricity, however, the news is less ebullient. An ice storm last winter knocked Hydro Quebec on its heels. And in Ontario, well, electricity appears mired in uncertainty (em caught between a restructuring white paper and a nuclear shutdown.

Natural Gas: 10 New Pipes

A year ago, the U.S. Energy Information Administration said it was tracking about 88 pipeline projects at various stages of development in the U.S., Canada and Mexico.

"The most extensive development is focused on expanding the deliverability of Canadian gas to the U.S. Midwest and Northeast, and to Canadian markets¼ Sixteen projects have been proposed that would add more than 8,063 MMcf per day to U.S. import capacity from Canada over the next 4 years, an increase of 78 percent from 1996 levels¼ almost double the total Canadian import capacity added from 1991 through 1996." (See, "Natural Gas Pipeline and System Expansions," by James Tobin, Natural Gas Monthly, April 1997.)

A good chunk of that new capacity would be located on U.S. soil, requiring certification from the U.S. Federal Energy Regulatory Commission. Some of new pipelines, such Viking Voyageur and Vector, will receive approvals in the U.S. Others, such as Alliance and the Maritimes and Northeast line, must apply to both the FERC and the National Energy Board of Canada. (See table, "10 Pipeline Projects.")

Three key issues have emerged before the FERC: (1) Can the market absorb the new pipelines? (2) Can the new pipelines keep their shipper lists confidential? (3) Will the FERC allow equity returns high enough to sustain construction?

In the Alliance case, Natural Gas Pipeline Company of America (a competitor) questioned whether the project sponsors had shown a market need:

"The [FERC order] authorizes a brand-new pipeline that will terminate in the Chicago market. This market is currently served by Natural, ANR Pipeline Co., Trunkline Gas Co., Midwestern Gas Transmission and Northern Natural Gas Co. In addition, the commission has recently approved an application by Northern Border Pipeline to extend its system to Chicago¼ Voyageur Pipeline has announced plans to construct an additional pipeline