Tennessee Gas plans revisions to New Jersey project to mitigate cost overruns

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Related Companies El Paso Corp. (EP) Tennessee Gas Pipeline Co.

Related Documents Energy Regulatory Filing (Appl/Pet/Req) Tennessee Gas Pipeline Co. 10/30/2009, filed on 10/30/2009

Related Articles 7/30/2009 Tennessee Gas Pipeline proposes $634M expansion in New Jersey, Pennsylvania

Tennessee Gas Pipeline Co. wants to revise a portion of its 300 Line project in New Jersey after discovering that its original cost estimates for installing three crossings missed the mark by $26.8 million.

In a request filed with FERC on Oct. 30, the pipeline company proposed eliminating a crossing of the Monksville Reservoir. The change would save about $4.4 million off the original estimate, Tennessee said, though it simultaneously cautioned that it would still exceed construction estimates for Loop 325 and said there would be a "slight" reduction in pressure at some downstream delivery points.

The El Paso Corp. subsidiary filed an application for its 300 Line project in July, intending to install, modify and replace pipeline looping and compression facilities in Pennsylvania and New Jersey. The $634.1 million project included 128.7 miles of pipe installation and 55,000 horsepower of compression, aimed at adding 350,000 Dth/d of capacity to Northeast markets.

As part of its application, Tennessee proposed Loop 325, an approximately 17.3-mile pipeline looping segment in New Jersey that included three crossings using horizontal directional drill technology. Among the crossings was the Monksville Reservoir, in West Milford Township and Ringwood Borough, N.J.

But after completing a construction feasibility analysis that included a review of subsurface geotechnical conditions, the company said it determined that using the HDD installation method for the three crossings in New Jersey, including the crossing of the Monksville Reservoir, would result in "significantly higher costs to the project than were originally estimated due to the hardness of the underlying bedrock and the associated timing to successfully complete the HDD crossings."

The original estimated cost of the three proposed HDD crossings was approximately $5.6 million, and of that amount, approximately $2.4 million was associated with the Monksville crossing. An additional $2 million was estimated for pipeline materials, welding, inspection and land costs for the Monksville segment.

"However, as a result of the review of the subsurface geotechnical conditions as part of the construction feasibility analysis, Tennessee determined that the costs of using the HDD technology for the three crossings are likely to be approximately $32,400,000, with the costs associated with the Monksville Reservoir HDD crossing estimated to be approximately $14,000,000," the company told FERC.

In an effort to mitigate cost increases, Tennessee told FERC it would remove the Monksville crossing from the project, thus reducing the length of Loop 325 by 1.3 miles to approximately 16 miles.

"The proposed reduction in the length of Loop 325 and the related elimination of the HDD crossing of the Monksville Reservoir has a limited impact on the scope of the project, as was originally described … and results in a net decrease in the associated environmental impact," Tennessee said. "The proposed reduction will not adversely affect Tennessee's ability to provide the 350,000 Dth per day of firm transportation service that will result from the market component of the project."

Although the proposed reduction will result in slight pressure drops at delivery points downstream of Station 325, there will be no adverse effects on existing customers, or on existing pipelines and their customers, Tennessee told FERC.

But while eliminating the HDD crossing of the Monksville Reservoir would result in cost savings of approximately $4.4 million, Tennessee stressed that "these costs savings will be more than offset by the cost increases related to the two proposed HDD crossings that remain as part of the market component of the project."

Noting that the modification is "minor," the company asked FERC to issue a certificate by March 17, 2010 — the original date it requested in its application — so that it can place the new capacity online by November 2011, the in-service date requested by customer EQT Energy LLC. (CP09-444)