Frank Zaski posted this today to the Nexus comments. These arguments work against Rover as well.
http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=14211961
http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=14211961
FERC must consider SUPPLY AND DEMAND CONDITIONS HAVE CHANGED DRAMATICALLY FOR NEXUS AND ROVER. (Many of them are outlined below.) These major changes have to be considered in the application of FERC policies and in the Certificate decision.
Lower demand and lower prices have impacts on proposed and existing pipelines especially; lack of adequate subscription, increased chance of overbuild, lack of financial support, full costs of overbuild passed on to customers, subsidization, lack of public convenience and necessity, environmental degradation, etc. https://www.ferc.gov/legal/maj-ord-reg/PL99-3-001.pdf
THE PREMIUM DAWN HUB PRICE FOR NEXUS AND ROVER IS GONE
“The major markets when this pipe first was put in is gone,..” This is a DTE executive’s comment in reference to a question about NEXUS from an analyst.http://finance.yahoo.com/news/edited-transcript-dte-earnings-conference-200647250.html
According to Maria Cortez of Wood Mackenzie, “ … the need for the Nexus Pipeline that would transport natural gas across northern Ohio appears to have declined. The market for that pipeline may not exist anymore.” http://www.ohio.com/blogs/drilling/ohio-utica-shale-1.291290/shale-downturn-will-cost-ohio-landowners-in-lost-royalties-1.674247
Gas prices at DAWN are now similar to Henry Hub and are expected to be LOWER in 5 years
Today, the prices at Dawn and Henry Hub are virtually the same and the profit incentive to build more capacity to Dawn has disappeared. Note the price convergence in this table.
According to a new Ontario Energy Board (OEB) reports:
Ample supplies of Marcellus/Utica gas are already flowing to Eastern Canada thru Niagara, Chippewa and (soon) Waddington, New York
Gas from these pipes is less expensive than gas from Vector, Dawn, Rover and especially Nexus. The landed cost of gas into the Enbridge EDA (Toronto) would be lower from Niagara ($4.90 $CAD/GJ) and Waddington ($5.30) than from Vector ($5.55), Rover ($5.73) or Nexus ($5.82).
Canadian business, utility and industrial users do not want unnecessary and costly OVERBUILD of the Dawn Parkway pipeline needed to transport additional Rover/Nexus gas from Dawn. Businesses realize they would have to PAY ALL COSTS OF PIPELINE OVERBUILD including legacy costs.
Gas turbines are a very small percentage of Eastern Canada’s electric generation portfolio.
Overall, Canadian demand for gas is forecasted to rise very slowly.
In 2014 the price of gas at Dawn spiked to $16. (Page 6) (This probably encouraged Rover and Nexus to plan pipelines to this hub.)
Dawn and Henry Hub prices are forecasted to be virtually the same from 2015 -2021 with Dawn’s price dropping lower in 2021. (P15) http://www.ontarioenergyboard.ca/oeb/_Documents/EB-2015-0237/Navigant_2015-NGMR_Presentation.pdf
Nexus will have a carrying capacity of 1.5 billion cubic feet of natural gas per day. Of note, DTE’s gas utility sends out about half that, 0.8 billion cubic feet, every day to customers.
Rover will have a capacity of 3.25 billion cubic feet per day, more than twice that of Nexus. Analysts say Rover is the biggest proposed pipeline to emerge from the Appalachian gas boom.
Commitments and financials of Nexus and Rover shippers/producers/customers are questionable
Most are mired in debt and 60 gas and oil producers have already gone bankrupt.
In FERC documents, Nexus reports they have agreements for only 56% of their capacity. Some question the accuracy of this percent.
IT’S OK TO CANCEL (OR FERC TO NOT APPROVE) PIPELINES IF THEY ARE "NOT ECONOMIC"
Kinder Morgan cancelled the NED pipeline because of inadequate capacity commitments
"Unfortunately, despite working for more than two years and expending substantial shareholder resources, we did not receive the additional commitments expected," Wheatley said. "As a result, there are currently neither sufficient volumes, nor a reasonable expectation of securing them,"http://www.unionleader.com/Kinder_Morgan_pipeline_suspended
“ …. this project is not economic, so we're removing it from the backlog," President and CEO Steve Kean said during the company's April 20 earnings call.
"The return on the NED project at the level of commitment that we have would be less than 6% unlevered after-tax. That's clearly not viable and we are far better off having cash available for other uses,"
[Plus, from their press release, “this low-price environment” .. “has made it difficult for producers to make new long term commitments.”]
Approving the multi-billion dollar Rover and Nexus pipelines (which essentially parallel each other from Ohio to Dawn) is imprudent considering:
· the Dawn premium price incentive is gone
· long-range forecasts call for tepid gas demand growth in Ontario and Michigan
· limited East Coast LNG export potential
· cheaper/plentiful Marcellus and Utica gas already flowing to Canada through New York
· and, questionable shipper/producer/customers’ ability to carry out commitments
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