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The Union Leader
June 21, 1998

Pipeline Obstacle Emerges

Roger Talbot
Manchester, NH

Landowners seek rehearing in Quebec court - and that could delay the arrival of a natural gas supply here.

Pipeline spokesmen promise natural gas from Western Canada will flow in November from a terminus in the Montreal suburb of Lachenaie through New Hampshire to Portland, Maine, but embattled landowners in Quebec's Eastern Townships believe they can change the route of the yet-to-be- built 24-inch line.

If the landowners succeed, it could delay delivery of fuel destined for some of the 40 natural gas-fired electric generating plants - including five in New Hampshire - that have been proposed to meet New England's power needs in the 21st century.

A core group of about 35 landowners has taken Canada's energy giants to court, arguing the so-called Portland Extension should not be built through a "green zone" that includes rich farmland, old maple trees and environmentally sensitive lakes and marshes.

They have asked a judge of the Quebec Superior Court to order a rehearing before a provincial agricultural lands protection commission, which has the power to stop construction of the pipeline. The landowners contend the commission's first hearing and subsequent approval of the project should be set aside. One of the three commissioners who heard the case had a conflict of interest. His brother-in-law holds a high post with the company building the pipeline.

Norman Benoit, a farmer, accountant and president of the Coalition of Landowners Concerned by a Pipeline, said he hopes to hear from the provincial court by June 24, when the judge is scheduled to begin a vacation. A ruling in favor of the landowners would delay construction. If the court does not act, Benoit said his group will seek an injunction to stop construction until the judge returns to court in September.

Told that pipeline spokesmen on both sides of the border voiced assurance the line would be completed by November, Benoit said, "That all remains to be seen."

Benoit said his group is having an unprecedented effect.

An example was the decision of the National Energy Board to schedule for mid-July a rarely held detailed route hearing to review concerns of individual landowners affected by the pipeline.

"I think they (the utility companies) are learning that they will have to respect the property owners," Benoit said.

The landowners have suggested the new line be built generally parallel to an existing pipeline corridor that has carried three smaller pipelines for more than 40 years. The corridor runs south and east from the Montreal suburbs, enters Vermont near Highwater, Quebec, crosses New Hampshire from Lancaster to Shelburne, then over to Maine and down to Portland.

One of the old pipes in the corridor to Vermont has been taken out of service; another carries oil from Portland to the refineries in Canada.

The third, an 18-inch line, has been used to bring Canadian gas to Portland, but it is being refitted to carry oil. The lease on this pipe expired in March. If the new gas pipeline is not completed, this old, limited capacity pipe could be pressed into service for one more winter, according to John Flumerfelt, spokesman for the Portland Natural Gas Transmision System.

The promoters of the new pipeline - TransQuebec & Maritimes Pipeline Inc., Gaz Metropoltain, and PNGTS, their U.S. partner - initially planned to come down through Vermont. That plan was abandoned at a management meeting on Sept. 20, 1996, apparently because "tolling" rules made it cheaper for them to build more of the line in Canada, where the cost of expansion is shared by existing users.

Richard Sadano, commissioner of public service in Vermont, said the state was about four months away from approving the pipeline's path when the promoters abruptly pulled out of negotiations. Sadano conceded there were many sticky environmental issues, especially those involving stream crossings and erosion, but, he said, "it would have been constructable."

The line would have been beneficial to Vermont's poor and sparsely populated Northeast Kingdom. The availability of gas could have attracted commercial and industrial customers and lateral lines could have served communities in the region and a paper mill in Gilman.

"Who knows how things would develop if gas were available in Vermont along that route. We'd like to find out. If they want to look at Vermont again, we're still here," Sadano said.

Flumerfelt said PNGTS' decision not to go through Vermont was based on "a combination of economic, environmental and construction issues."

Vermont had steep hills and environmental concerns, he said, and the opportunities to sell gas there were "relatively marginal," compared to serving markets on both sides of the border.

Routing the line through Southern Quebec, crossing into New Hampshire near Pittsburg, increased the distance in Canada from about 93 miles to about 132 miles. The latest estimate of the overall cost of the Canadian end of the project is $270 million. On the U.S. side, the 272-mile connector between Pittsburg and the Tennessee Gas system in Massachusetts will cost about $302 million.

The re-routing decision prompted Union Gas Limited, a gas distributor and the largest "shipper" on the TransCanada system, to file suit last month with Canada's Federal Appeals Court. Union Gas has asked the court to order the National Energy Board to reexamine its approval of the project.

"Given the tolling methodology," Union Gas said in papers filed with the court, "The effect of the re-routing of the Portland System in the United States was to increase by $100 million the costs of the project borne by TransCanada's shippers. In other words, it was proposed that TransCanada's shipper pay for the advantages obtained by the Portland System as a result of rerouting its pipeline in the United States."

The decision "substantially improved the economics" for the project's promoters by shortening the distance they would pay for construction in the United States and running the pipe closer to potential New Hampshire customers: the paper mills in Groveton, Gorham and Berlin.

Union said it does not object to paying for system expansion, just to the route selected in this case.

"The lowest reasonable cost would have been to take the original route to Highwater, Quebec, and follow the original Vermont route," Union said in papers filed with the court.

"TransCanada, a regulated utility, made a decision to substantially increase costs to its captive shippers as a result of a re-routing decision that directly benefited its unregulated affiliate investment company (TransCanada Portland), its unregulated affiliate gas sales company (TransCanada Gas Services Inc.) its equity interest in TransQuebec & Maritimes and the shippers on the Portland System in which TransCanada had an equity investment," said the papers filed with the court.

Benoit said Union Gas' lawsuit reinforces the landowners' argument that the pipeline should follow the existing corridor, crossing at the Vermont border. He noted that a court ruling in Union's favor would shift the cost burden to the pipeline's builders.

"TQM has problems. If it can't recover those extra millions from its shippers, the pipeline is not viable," Benoit said.

Construction work has begun on both sides of the border, according to company spokesmen, but very little pipe has yet been placed in the ground.

Jean Simard of Forum Communications is the principal spokesman in Canada for TQM's Portland extension project.

"Construction began about 10 days ago," Simard said on Thursday.

He said three teams are working in different sectors, clearing the right of way and planning for directional drilling under waterways.

"We're making progress at about one kilometer a day," Simard said, indicating that a limited amount of pipe has been laid.

We are geared to be able to ship gas by mid-November," he said, expressing hope the court will favor the pipeline plan that augments the gas supply in the Magog region and brings it "for the first time" to the Coaticook area.

"We're undertaking the work until the court says one way or another," Simard said. "We're confident ...that the judge's decision will probably just corroborate what has been decided in prior hearings."

In Portland, John Flumerfelt, the PNGTs spokesman, said crews began clearing the pipeline route in New Hampshire and Maine about two weeks ago. They were working last week in Plaistow, Gorham and Dummer in New Hampshire, and in Wells and Albany, Maine.

The first sections of pipe will go into the ground by July 1 "at the earliest," Flumerfelt said, adding he has no doubts that the pipelines will be joined at the New Hampshire border this fall.

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