OT: Need for Additional Pipeline Infrastructure in the Northeast

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Friday February 25, 2:28 pm Eastern Time

Company Press Release

Williams Executive Testifies Before Senate Energy Committee on Need for Additional Pipeline Infrastructure in the Northeast

WASHINGTON--(BUSINESS WIRE)--Feb. 25, 2000--Gary D. Lauderdale, senior vice president and general manager of Williams' (NYSE:WMB - news) Transco pipeline, on Thursday testified before the Senate Committee on Energy and Natural Resources, emphasizing the need to expand the existing natural gas pipeline infrastructure serving the northeastern United States.

Lauderdale pointed out that even with a relatively mild winter overall, the existing pipeline infrastructure was so challenged in its ability to supply demand that limitations were imposed by other pipeline systems. This forced customers to turn to heating oil instead, further exacerbating the problems associated with the current high cost of oil.

``A review of the operational and pricing data from this winter shows that the existing pipeline infrastructure was clearly challenged to meet gas demand in the Northeast,'' said Lauderdale. ``In February, the average price for natural gas delivered on Transco's system in New York and the areas surrounding New York increased significantly over last year's levels. We've seen much less dramatic increases in supply prices, indicating that the problem is not a shortage of supply, but a shortage of scarce transportation capacity and pipeline infrastructure to serve the region.''

Transportation rates are regulated by the Federal Energy Regulatory Commission and the holder of the pipeline capacity, not the pipeline itself, retains the value associated with the increased delivered gas prices.

``Clearly the existing pipeline infrastructure is pressed to its limit, raising a critical question -- how will we serve the projected growth for natural gas demand in the future?'' Lauderdale asked. ``It is interesting to note that the operational challenges faced by pipelines and the price increases experienced by consumers occurred this year despite the fact this winter overall had average temperatures well above normal.''

According to demand projections by the Department of Energy's Energy Information Administration and the Gas Research Institute there will be a substantial increase in natural gas demand in the Mid-Atlantic and South Atlantic regions during the 1997-2005 timeframe. EIA projects that the power generation market will drive the majority of this growth in demand for natural gas.

Existing pipelines that serve the Northeast markets operate at very high load factors. Data from the EIA shows that the average annual utilization of these pipelines ranged from 71 percent to 93 percent in 1998. The Transco pipeline typically operates at full capacity during the winter months and has experienced peak days in the summer months when gas is needed to serve the power generation market.

``Any delay in constructing this additional needed pipeline infrastructure could further exacerbate the increases in natural gas and heating oil prices witnessed this winter, especially if the Northeast region experiences more typical colder winter weather in 2001 or if the area experiences the growth in demand projected to occur.''

Williams' gas pipeline unit has headquarters in Houston with offices in Salt Lake City and Owensboro, Ky. Together, its five interstate natural gas pipelines are among the nation's largest-volume transporters of natural gas, delivering approximately 16 percent of the natural gas consumed in the United States. Its 27,300-mile pipeline network stretches from coast to coast with access to every major supply basin in the country.

-- PA Engineer (PA Engineer@longtimelurker.com), February 27, 2000

Answers

Something doesn't add up.

The BPAmoco 1998 report on World Energy indicates that the natural gas reserve for the entire North American continent is a measley 8.4 years. (It would now be down to 7 years and counting.)

If this is the case, why would Williams be advocating expanding NG pipelines to the Northeast? That is an expense. Unless, of course, there is adequate propane capacity in the gulf to be able to make the needed conversion between now and then.

What's your take, PA Engineer?

-- rocky (rknolls@no.spam), February 27, 2000.


SEVEN YEARS? This is bigger than y2k! You mean to say that in seven years there will be zero city gas, natural gas piped in all over the US? And we aren't on a crash program to develop alternatives? This hasn't had any mass media press whatsoever. Yikes!

-- reallyglad (gotwoodstove@woodlot.manycords.stackedup), February 27, 2000.

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