Tick, tick, tick…What’s to come for Spectra’s Growth Plans?

Natural Gas Projects
February 10, 2017

With the Federal Energy Regulatory Commission (FERC) Certificate now in hand for Energy Transfer Partners’ Rover Pipeline Project, the clock continues to tick for Spectra Energy’s Nexus Project. As we close in on the period in which FERC cannot issue Certificates until a new Commissioner is appointed, we’re reminded of the merger of Spectra Energy and Enbridge Inc., which will create, once finalized, North America’s largest energy infrastructure company. Jointly, the combined entity will wield pipeline transmission assets spanning from Spectra’s natural gas assets stretching from the Mexican border to Canada’s East Coast to Enbridge’s lucrative  liquids transmission assets that reach from the Gulf of Mexico to remote northern Canada. Current and future growth projects will expand this reach even further. But the question remains: Will Spectra gain access to the Northeast? And when?

Spectra has been actively expanding system capability across various operating assets, with eight projects currently undergoing Certificate review and one undergoing pre-filing review at the FERC. Recent FERC issuance of a Certificate for Spectra’s Atlantic Bridge Project, a six-mile long effort in New York and Connecticut, is certainly welcome news, although a relatively minor project. As such, Spectra’s growth plans in the Northeast have been hanging on Algonquin Gas Transmission’s Access Northeast Project, which consists of approximately 96.6 miles of mainline pipeline and looping in New York, Connecticut, Massachusetts and Rhode Island, and which is meeting varied success during pre-filing. The Project has been undergoing pre-filing review since November 2015 and has seen extensive protest, with an initially projected in-service date of November 1, 2018.

In mid December 2016, Algonquin announced that it continues to conduct an evaluation of the proposed routes and is coordinating with stakeholders to develop appropriate route variations, suggesting that project planning continues. However, Algonquin also explained that it believes it is prudent to take additional time to solidify the commercial foundation of the Access Northeast facilities. As a result, it expects limited activity on the FERC docket while its evaluation is ongoing, and will re-engage with FERC Staff, agencies and other interested stakeholders through pre-filing activities during the first half of 2017. In addition, Algonquin stated that it anticipates filing draft Resource Reports by mid-2017, followed by the FERC Application in late 2017. But why does Algonquin need to further review the “commercial foundation” of the Project? 

Access Northeast is intended to upgrade and expand the Algonquin pipeline system and provide a Liquefied Natural Gas storage facility in New England that delivers, on peak days, up to 925,000 dekatherms per day. The Project is designed to meet the capacity needs of natural gas-fired electric generation in New England, which continues to see constrained supply and high energy prices. Algonquin executed memoranda of understanding with seven electric distribution companies, subsidiaries of National Grid and Eversource Energy, related to firm transportation service to deliver new natural gas supplies to the electric distribution companies’ service areas.  

Spectra’s initial financing plan relied on unique approvals from state public utility commissions that would essentially pass pipeline costs to electricity ratepayers. National Grid’s proposal to charge electricity customers for its Access Northeast delivered gas failed in Massachusetts, Connecticut and New Hampshire. In January, National Grid withdrew its proposal from review by the Rhode Island Public Utilities Commission. Demonstrating project need is critical to ensuring Certificate approval and Access Northeast seems to meet that need on both a macro and micro level. But will the unexpected change in financing delay the Certificate review, or worse, make the project impractical?

While there are plenty of novel issues to consider with the new administration ramping up efforts, it seems like some old issues live on. Increasing gas supply to New England continues to be difficult problem and, in the case of Access Northeast, one that must be solved at the state level.

Certificate Proceeding Company Estimate Error – Spectra