TEAM 2014 Project Texas Eastern Transmission, LP

Transcription

1 TEAM 2014 Project Texas Eastern Transmission, LP FERC Section 7(b) and 7(c) Application and Public Exhibits, Except F-1 FERC Docket No. CP Volume I PUBLIC February 2013

2 5400 Westheimer Court Houston, TX main Mailing Address: P.O. Box 1642 Houston, TX Ms. Kimberly D. Bose, Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C February 27, 2013 Re: Texas Eastern Transmission, LP, Docket No. CP Abbreviated Application for a Certificate of Public Convenience and Necessity and for Related Authorizations and Order Approving Abandonment Dear Ms. Bose: Texas Eastern Transmission, LP ( Texas Eastern ) hereby submits for filing with the Federal Energy Regulatory Commission ( Commission ) an Abbreviated Application for a Certificate of Public Convenience and Necessity and for Related Authorizations and Order Approving Abandonment ( Application ) regarding its proposed Texas Eastern Appalachia to Market Project 2014 ( TEAM 2014 Project or Project ). The TEAM 2014 Project is a production-driven project designed to provide the pipeline capacity necessary to deliver production from the emerging Marcellus Shale play to diverse markets in the Northeast, Midwest, Southeast and Gulf Coast. The Project responds to significant interest from Marcellus Shale producers who require firm pipeline capacity as their production comes on line. The Project involves modifications of Texas Eastern s existing facilities in Pennsylvania, West Virginia, Ohio, Kentucky, Tennessee, Alabama, and Mississippi. Included herewith are four volumes. Volume I contains public information and is comprised of the Application and its public exhibits, except Exhibits F-I and Z-4. Volume II contains the public version of Exhibit F-I and Exhibit Z-4. Volume III contains privileged and confidential information and is comprised of Appendix F (landowner and stakeholder lists), Appendix J (cultural resource survey reports), Exhibit I (confidential market data), and electronic versions of the hydraulic models supporting Exhibit G. Volume IV contains Critical Energy Infrastructure Information ( CEII ) and is comprised of Appendix B (plot plans), Exhibits G, G- I, G-II, and Exhibit Z-3. Pursuant to the Commission s guidelines for efiling, 1 Texas Eastern is hereby efiling the Application and will provide two complete copies of the Application to OEP Room and one complete copy to OGC-EP Room Volume IV is marked CONTAINS CRITICAL ENERGY INFRASTRUCTURE INFORMATION DO NOT RELEASE 2 and should be treated as confidential pursuant to Order No. 630, et seq. and is for use by the Commission Staff 1 Federal Energy Regulatory Commission Filing Guide/Qualified Documents List (January 2, 2013) C.F.R (b), (2012).

3 Ms. Kimberly D. Bose, Secretary February 27, 2013 Page 2 only and not to be released to the public. 3 Volume III is marked CONTAINS PRIVILEGED INFORMATION DO NOT RELEASE. 4 Privileged information should be treated as confidential and is for use by Commission Staff only and not to be released to the public. Questions pertaining to confidential information may be submitted to: Marcy F. Collins Associate General Counsel Texas Eastern Transmission, LP P.O. Box 1642 Houston, Texas Phone: (713) Fax: (713) mfcollins@spectraenergy.com The hydraulic models contain both CEII and PRIVILEGED AND CONFIDENTIAL information. Texas Eastern notes that the Commission s efiling system does not include the ability to designate files as both CEII and privileged and confidential. Accordingly, Texas Eastern is marking these hydraulic model files as privileged and confidential for efiling purposes, but Texas Eastern requests both CEII and privileged and confidential treatment for the files. In accordance with Rule 2011(c)(5) of the Commission s Rules of Practice and Procedure, 18 C.F.R (c)(5), I hereby state that I have read the hard copy version of the filing and am familiar with the contents thereof; that the paper copies contain the same information as the electronic media; and that all of the statements contained therein are true and correct, to the best of my knowledge, information and belief. 3 Critical Energy Infrastructure Information, Order No. 630, FERC Stats & Regs Regulations Preambles 31,140 (2003), 68 Fed. Reg (Mar. 3, 2003), order on reh g, Order No. 630-A, 104 FERC 61,106 (2003), 68 Fed. Reg (Aug. 6, 2003) C.F.R , (2012).

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5 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Texas Eastern Transmission, LP ) Docket No. CP ABBREVIATED APPLICATION OF TEXAS EASTERN TRANSMISSION, LP FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY AND FOR RELATED AUTHORIZATIONS AND ORDER APPROVING ABANDONMENT

6 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Texas Eastern Transmission, LP ) Docket No. CP ABBREVIATED APPLICATION OF TEXAS EASTERN TRANSMISSION, LP FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY AND FOR RELATED AUTHORIZATIONS AND ORDER APPROVING ABANDONMENT Pursuant to Sections 7(b) and 7(c) of the Natural Gas Act ( NGA ), as amended, 1 and Part 157 of the regulations of the Federal Energy Regulatory Commission ( Commission ), 2 Texas Eastern Transmission, LP ( Texas Eastern ) hereby files this abbreviated application for a certificate of public convenience and necessity and for related authorizations and order approving abandonment ( Application ) seeking Commission authorization to make the necessary facility modifications, as described herein, and enable Texas Eastern to provide service under the Texas Eastern Appalachia to Market 2014 Project ( TEAM 2014 Project or Project ). Texas Eastern initiated the pre-filing process for the TEAM 2014 Project in Docket No. PF and received approval from the Commission to use the prefiling process on July 13, The instant Application incorporates the comments and information received during the pre-filing process from Commission Staff and relevant stakeholders U.S.C. 717f(b)-(c) (2012) C.F.R (2012). 3 Texas Eastern Transmission, LP, Approval of Pre-Filing Request, Docket No. PF12-19 (July 13, 2012).

7 The TEAM 2014 Project is a production-driven project that will provide the capacity necessary for Texas Eastern to transport an additional 600,000 dekatherms per day ( Dth/d ) of natural gas from receipt points on the Texas Eastern system in the Marcellus Shale region in western Pennsylvania and West Virginia to delivery points in Texas Eastern s traditional market areas in New Jersey and New York, as well as to expanding markets in Ohio, Mississippi and Louisiana. The Project is designed to provide 300,000 Dth/d of incremental transportation service from western Pennsylvania to the eastern end of the system in Lambertville, New Jersey and Staten Island, New York, 50,000 Dth/d of incremental transportation service from western Pennsylvania to the Lebanon, Ohio hub and 250,000 Dth/d of incremental transportation service from western Pennsylvania to markets in Texas Eastern s Zones ELA and WLA in the Access Area. The facilities that are proposed as part of the Project are described in detail herein and involve pipeline looping and aboveground modifications located on various segments of the Texas Eastern system in Pennsylvania, West Virginia, Ohio, Kentucky, Tennessee, Alabama, and Mississippi, including approximately 33.6 miles of new 36-inch diameter pipeline loop and related aboveground facilities, compressor station upgrades and abandonments resulting in a net increase of 77,100 horsepower ( HP ) of compression, and certain other facility modifications to accommodate bi-directional flow along Texas Eastern s system. Texas Eastern has executed precedent agreements with two shippers for long-term firm transportation service for the full 600,000 Dth/d of Project capacity. These two shippers are major producers in the Marcellus Shale play and require the firm capacity to be created by the Project to ensure that pipeline capacity exists to transport their 2

8 production to growing markets as the production comes on line. Texas Eastern is proposing to charge initial incremental recourse rates for service on the TEAM 2014 Project facilities under Rate Schedule FT-1. These recourse rates and the support for the derivation of these rates are set forth in Exhibit P to the Application. The TEAM 2014 Project shippers have agreed to pay negotiated rates in accordance with the terms of the executed precedent agreements and Section 29 of Texas Eastern s General Terms and Conditions ( GT&C ). 4 Texas Eastern requests that the Commission grant the authorizations requested herein on or before November 21, 2013, in order for Texas Eastern to have the time necessary to complete and place into service the facilities proposed herein by November 1, Texas Eastern has agreed pursuant to the terms of its Precedent Agreements with the Project shippers to proceed with due diligence to complete and place the Project facilities into service by November 1, 2014, which, in turn, will ensure that pipeline capacity exists to transport the Project shippers production to growing markets as that production comes on line. In support hereof, Texas Eastern shows as follows: I. Identity of Applicant The exact legal name of Texas Eastern is Texas Eastern Transmission, LP. Texas Eastern is a limited partnership organized and existing under the laws of the State of Delaware and has its principal place of business at 5400 Westheimer Court, Houston, Texas Texas Eastern is an indirect, wholly owned subsidiary of Spectra Energy Transmission, LLC. 4 Texas Eastern will file the applicable negotiated rate tariff records for approval within 30 to 60 days prior to the in-service date of the TEAM 2014 Project. 3

9 Texas Eastern is a natural gas company as defined in the NGA, engaged in transmission of natural gas in interstate commerce, subject to the jurisdiction of the Commission. Texas Eastern s transmission system extends from Texas, Louisiana and the Gulf of Mexico, through the states of Mississippi, Arkansas, Missouri, Tennessee, Illinois, Indiana, Kentucky, Ohio, Pennsylvania and New Jersey, to its principal terminus in the New York City metropolitan area. The names, titles and mailing addresses of the persons to whom correspondence and communications concerning this Application should be addressed are: *Berk Donaldson Director, Rates and Certificates Austin C. Isensee Analyst, Rates and Certificates Texas Eastern Transmission, LP P.O. Box 1642 Houston, Texas Phone: (713) Fax: (713) bdonaldson@spectraenergy.com *Marcy F. Collins Associate General Counsel Texas Eastern Transmission, LP P.O. Box 1642 Houston, Texas Phone: (713) Fax: (713) mfcollins@spectraenergy.com and *James D. Seegers James E. Olson Sabina D. Walia Suzanne E. Clevenger Vinson & Elkins L.L.P Fannin, Suite 2500 Houston, Texas Phone: (713) Fax: (713) jseegers@velaw.com * Texas Eastern requests that these persons be included on the Commission s official service list. 4

10 II. Description of Project A. Overview of Project The TEAM 2014 Project is an efficient and cost-effective means for providing additional capacity to satisfy the need of the Project shippers to have pipeline capacity available to transport the shippers production to growing markets as that production comes on line. The Project facilities are designed to transport this new production to the traditional Northeastern market area and to expanding markets in the Midwest, Southeast and Gulf Coast. The Project will deliver supplies of Marcellus Shale gas from certain Texas Eastern interconnections in Greene County, Pennsylvania, Fayette County, Pennsylvania and Marshall County, West Virginia to delivery points along Texas Eastern s system at Lambertville, New Jersey and Staten Island, New York, and to delivery points in other market areas along the system in Lebanon, Ohio, Copiah County, Mississippi and Acadia Parish, Louisiana. The TEAM 2014 Project will improve the flexibility and reliability of service on the Texas Eastern system and the overall pipeline grid. The Project will have no adverse impact on Texas Eastern s existing customers or on existing pipelines and their captive customers. As demonstrated by the Resource Reports accompanying this Application, the construction and operation of the TEAM 2014 Project will not involve any significant environmental or landowner impacts that cannot be adequately mitigated. For these reasons, the benefits of the Project outweigh any potential adverse effects. Texas Eastern has executed precedent agreements with two Project shippers, Chevron U.S.A., Inc. ( Chevron ) and EQT Energy, LLC ( EQT ) for transportation service on the Project facilities totaling 600,000 Dth/d, the entire capacity to be created 5

11 by the Project facilities ( Precedent Agreements ). Chevron and EQT own significant natural gas production acreage in the Marcellus Shale region, and their respective firm service commitments are designed to provide the revenue support necessary for Texas Eastern to construct the firm pipeline capacity that will transport this production to markets along the Texas Eastern system. In addition to providing access to major natural gas markets for the Project shippers, the TEAM 2014 Project will also promote increased commodity price competition and reduce price volatility by introducing new supply sources from the Appalachian production area, particularly the prolific Marcellus Shale, to these market areas. The Project also provides supply access to developing markets in the Gulf Coast Region. Overall, the Project will improve transportation security, flexibility, and reliability on the Texas Eastern system. Pursuant to the Precedent Agreements, Texas Eastern has agreed, subject to certain conditions, to proceed with due diligence to construct the TEAM 2014 Project with a targeted in-service date of November 1, 2014, and to provide, collectively, 600,000 Dth/d of firm service to Chevron (300,000 Dth/d) and EQT (300,000 Dth/d) under firm service agreements with primary terms of 10 years. The Commission views agreements for long-term firm capacity as important evidence of market demand. 5 These Precedent Agreements are included herewith as Exhibit I and have been submitted as privileged pursuant to Section of the Commission s regulations. 5 Agreements for long-term firm capacity are important evidence of market demand for a new project. Certification of New Interstate Natural Gas Pipeline Facilities, 88 FERC 61,227, at p. 61,744 (1999) ( Certificate Policy Statement ), order clarifying Statement of Policy, 90 FERC 61,128 (2000), order further clarifying Statement of Policy, 92 FERC 61,094 (2000). 6

12 B. Description of Facilities By this Application, Texas Eastern proposes to construct pipeline looping and aboveground modifications located on various segments of the Texas Eastern system in Pennsylvania, West Virginia, Ohio, Kentucky, Tennessee, Alabama, and Mississippi, including approximately 33.6 miles of new 36-inch diameter pipeline loop and related aboveground facilities, compressor station upgrades and abandonments resulting in a net increase of 77,100 HP of compression, and certain other facility modifications to accommodate bi-directional flow along Texas Eastern s system. Specifically, the proposed pipeline facilities include the following: (i) (ii) (iii) (iv) (v) 6.7 miles of new 36-inch pipeline loop in Fayette County, Pennsylvania, downstream of Texas Eastern s existing Holbrook Compressor Station; 8.1 miles total of new 36-inch pipeline loop in two segments (a 2.7-mile segment and a 5.4-mile segment) in Perry County, Pennsylvania, downstream of Texas Eastern s existing Perulack Compressor Station; 7.1 miles of new 36-inch pipeline loop in Dauphin County, Pennsylvania, downstream of Texas Eastern s existing Shermans Dale Compressor Station; 6.1 miles total of new 36-inch pipeline loop in two segments (a 2.3-mile segment and a 3.8-mile segment) in Lebanon County, Pennsylvania, downstream of Texas Eastern s existing Grantville Compressor Station; and 5.6 miles of new 36-inch pipeline loop in Berks County, Pennsylvania, downstream of Texas Eastern s existing Bernville Compressor Station in Berks County, Pennsylvania; The compressor station modifications include the following: (i) uprate of one existing 16,000 HP electric unit to 20,000 HP (by removing the software restriction currently in place in order to allow the unit to operate at its full service factor) and uprate of two existing 12,250 HP units to 13,300 HP each (by exchanging existing engines for new engines capable of greater horsepower) at Texas Eastern s existing Uniontown Compressor Station in Fayette County, Pennsylvania; 7

13 (ii) (iii) (iv) (v) (vi) installation of one new 26,000 HP gas turbine compressor unit and one new 26,000 HP electric motor-driven compressor unit at Texas Eastern s existing Delmont Compressor Station in Westmoreland County, Pennsylvania; abandonment in place of one existing 18,500 HP gas turbine compressor unit and six 1,100 HP reciprocating gas compressor units for a total abandonment of 25,100 HP at the Delmont Compressor Station in Westmoreland County, Pennsylvania; installation of one new 18,100 HP gas turbine compressor unit at Texas Eastern s existing Armagh Compressor Station in Indiana County, Pennsylvania; installation of one new 26,000 HP gas turbine compressor unit at Texas Eastern s existing Entriken Compressor Station in Huntingdon County, Pennsylvania; and installation of associated facilities, such as aero assemblies and cooling equipment, on existing gas compressor units at the Delmont, Uniontown, Armagh, and Entriken Compressor Stations, as more fully described in Resource Report 1. The modifications at the compressor stations described above will result in a net increase in certificated horsepower at the stations of 77,100 HP. With this net increase in horsepower, the total certificated horsepower will be: 80,900 HP at the Uniontown Compressor Station; 73,300 HP at the Delmont Compressor Station; 40,100 HP at the Armagh Compressor Station; and 48,000 HP at the Entriken Compressor Station. Texas Eastern proposes to abandon in place the seven compressor units at the Delmont Compressor Station described above by cutting and capping the aboveground suction and discharge pipeline. No ground disturbance will be associated with the abandonment. Texas Eastern may, from time to time, use various parts from the abandoned compressor unit facilities as spare replacement parts for other facilities. Texas Eastern will achieve the uprate of the existing 16,000 HP electric-powered compressor unit at the Uniontown Compressor Station by modifying controls and other 8

14 ancillary facilities on the existing equipment, as described above, and no earth disturbance will take place as a result of this uprate. In addition to the facilities above, Texas Eastern is also proposing to install associated facilities, such as launchers, receivers, and valves to support the pipeline expansion, as well as minor modifications and maintenance work at 41 existing facility sites along Texas Eastern s transmission system between Pennsylvania and Mississippi to allow for bi-directional flow on Texas Eastern s system. All of the work associated with these minor modifications will occur entirely within existing compressor station, launcher and receiver, or meter and regulating facility sites along Texas Eastern s existing right of way, with the exception of one location that will require additional workspace outside of the previously disturbed pipeline easement. These facilities and their locations are described in detail in Resource Report 1. Texas Eastern requests that the Commission grant the authorizations requested herein on or before November 21, 2013, in order for Texas Eastern to have the time necessary to complete and place into service the Project facilities by November 1, Texas Eastern has an obligation under the Precedent Agreements to proceed with due diligence to complete construction of the Project facilities and to place such facilities into service by November 1, 2014, which, in turn, will ensure that the pipeline capacity necessary to transport the Marcellus Shale production of Chevron and EQT will be available for growing markets as that production comes on line. Texas Eastern requests that the Commission grant any other authorizations and waivers necessary to implement the proposal contained herein. 9

15 III. Evaluation of Application Pursuant to Certificate Policy Statement The Commission established criteria for determining whether there is a need for a proposed project and whether the proposed project will serve the public interest in the Certificate Policy Statement. 6 The Certificate Policy Statement explains that, in deciding whether to authorize the construction of major new pipeline facilities, the Commission balances the public benefits of the project against the project s potential adverse consequences. 7 The Commission s stated goal is to give appropriate consideration to the enhancement of the competitive transportation alternatives, the possibility of overbuilding, subsidization by existing customers, the applicant s responsibility for unsubscribed capacity, the avoidance of unnecessary disruptions of the environment, and the unneeded exercise of eminent domain in evaluating new pipeline construction. 8 Once the applicant demonstrates that the benefits to be achieved by the project will outweigh the potential adverse effects, the Commission will find that the project is required by the public convenience and necessity. 9 As demonstrated herein, the facilities proposed herein meet the criteria of the Certificate Policy Statement, and approval of the Project will serve the public interest and is required by the public convenience and necessity. A. The TEAM 2014 Project Meets the Threshold No-Subsidy Test. The TEAM 2014 Project satisfies the economic threshold requirement for existing pipelines because it avoids subsidization by Texas Eastern s existing customers and does not adversely impact their rates. Specifically, Texas Eastern is proposing herein initial 6 Id. 7 Tennessee Gas Pipeline Co., 92 FERC 61,142, pp. 61, (2000). 8 Id. 9 Certificate Policy Statement at p. 61,

16 incremental recourse rates for service on the TEAM 2014 Project facilities. Because Texas Eastern is proposing herein to recover the costs associated with the TEAM 2014 Project facilities, through incremental rates, the TEAM 2014 Project is financially viable without any adverse rate effect on, or subsidies from, Texas Eastern s existing customers. Accordingly, the TEAM 2014 Project meets the threshold requirement established by the Commission s Certificate Policy Statement. 10 While Texas Eastern is not seeking approval at this time to roll-in the costs of the Project, Texas Eastern reserves its right to do so in the future as part of a general rate case proceeding. B. The TEAM 2014 Project Will Have No Adverse Effects on Existing Customers or on Existing Pipelines and Their Captive Customers. The next step in the Certificate Policy Statement analysis is to identify potentially adverse effects of the project on the existing customers of the pipeline proposing the project, existing pipelines in the market and their captive customers, or landowners and communities affected by the new construction and to determine whether the applicant has made efforts to eliminate or minimize those adverse effects. 11 If residual adverse effects on these groups are identified after efforts have been made to minimize them, the Commission will evaluate the project by balancing the evidence of public benefits to be achieved against the residual adverse effects. 12 The TEAM 2014 Project will not be detrimental to Texas Eastern s existing customers. The TEAM 2014 Project will result in no degradation of service to existing customers, and, as explained above, Texas Eastern has proposed incremental rates for the Project. Additionally, Texas Eastern s proposal has benefits for existing and potential 10 Id. at p. 61, Id. 12 Id. 11

17 shippers, as well as the Northeast, Midwest, Southeast, and Gulf Coast markets overall. The additional compression and market reach associated with the Project will benefit existing customers by increasing the reliability and flexibility of service on the Texas Eastern system. Furthermore, by transforming the segment of the Texas Eastern system from the Holbrook, Pennsylvania area to the Access Area in Mississippi and Louisiana into a bi-directional system, Texas Eastern s existing shippers and markets south of Holbrook on the Texas Eastern system will have direct access to the emerging Marcellus Shale production area for the first time. The bi-directional nature of this segment of the system will also increase the efficiency of the system and enhance reliability of service on the system by diversifying supply sources that can be accessed by markets along the system. This additional access to new and abundant supply sources also will provide the markets along the system with a better ability to manage price volatility. Accordingly, the TEAM 2014 Project will not have an adverse effect on existing customers and, instead, will increase the overall strength, reliability, diversity, and flexibility on the pipeline grid in market areas along the system. The TEAM 2014 Project will have no adverse effect on existing pipelines in the region or their customers. The Project will provide incremental capacity to the Northeast, Midwest, Southeast and Gulf Coast regions to accommodate new supplies from the Marcellus Shale play. The Project is not designed to bypass an existing pipeline or to provide service that is already provided by another pipeline. Therefore, the Project serves incremental demand and offers new transportation capacity for new production as that production comes on line and will not have adverse effects on existing pipelines or their customers. The additional compression associated with the TEAM 2014 Project will increase the overall reliability of the interstate pipeline grid in the Northeast, 12

18 Midwest, Southeast and Gulf Coast regions, and the benefits associated with increasing reliability on the pipeline grid will accrue to customers of all pipelines comprising the grid. For the foregoing reasons, the TEAM 2014 Project will have no adverse effect on existing customers or existing pipelines and their customers. C. Texas Eastern Has and Continues to Minimize the Potential for Adverse Impacts on Landowners and Communities Affected by the TEAM 2014 Project. As demonstrated in the accompanying Resource Reports, Texas Eastern has made substantial efforts to ensure that the construction of the TEAM 2014 Project will have limited residual adverse impacts to landowners and the environment. To the extent practicable, Texas Eastern will construct the facilities utilizing existing rights-of-way and previously disturbed property, thereby limiting any new disturbances to the environment during construction. All of the compressor station modifications will be within the fence line of existing facilities, and the other aboveground modifications to associated facilities to support the expansion and to allow for bi-directional flow will take place within Texas Eastern s existing right-of-way, with the exception of one location that will require additional workspace as noted in Resource Report 1. Aside from this one location that will require a new permanent access road within Texas Eastern s property, no additional land use impacts will result from operation of these modified facilities. A portion of the Project consists of Texas Eastern s replacement of older, less efficient compressor units with more efficient and, from an emissions standpoint, more environmentally-friendly units. Consistent with the Commission s desire for early input by potential stakeholders and with the Commission s endorsement of the use of collaborative procedures in developing new pipeline projects, since February 2012, Texas Eastern has made 13

19 significant efforts prior to and throughout the pre-filing process in Docket No. PF12-19, to inform the public, particularly affected landowners, relevant resource agencies, and other interested stakeholders about the TEAM 2014 Project. Texas Eastern will provide timely written notice of this Application and other required information to landowners that are directly affected by the Application, as well as to local communities and local, state, and federal governments and agencies involved in the TEAM 2014 Project in accordance with the Commission s landowner notification requirements. 13 The TEAM 2014 Project will have limited residual impact on landowners and communities affected by the Project. Texas Eastern will construct the TEAM 2014 Project utilizing proven construction techniques and mitigation procedures, and the Project will not result in significant impacts on the environment. The Resource Reports attached in Exhibit F-1 include a detailed explanation of the limited environmental impacts associated with the TEAM 2014 Project and the measures that Texas Eastern intends to take to mitigate any impacts. D. The Benefits of the TEAM 2014 Project Outweigh Potential Residual Adverse Effects. When determining whether a proposed project is needed and will serve the public interest, the Commission balances the public benefits to be achieved by the project against the residual impacts of the proposed project on the relevant interests listed above. Given Texas Eastern s mitigation efforts, and the limited residual impacts on the relevant 13 See 18 C.F.R (d)(1)(i) (2012). In accordance with the Commission s regulations, Texas Eastern will also publish notice of the Application in relevant daily and/or weekly newspapers of general circulation. See 18 C.F.R (d)(1)(iii) (2012). In addition, Texas Eastern will place a copy of the Application in the town or city hall and library of each municipality along the proposed route, thereby exceeding the Commission s requirements. See 18 C.F.R (c) (2012). 14

20 interests listed above, the benefits of the TEAM 2014 Project far outweigh any potential adverse effects. The primary purpose of the TEAM 2014 Project is to provide new pipeline capacity for Marcellus Shale production currently under development to ensure that firm transportation service is available for the Project shippers to serve growing markets as their production comes on line. The Project offers a cost-effective and reliable transportation outlet for this new production. The ability for Texas Eastern to expand its system along its existing footprint helps to ensure that Texas Eastern can meet the target in-service date of November 1, 2014, and at the same time minimizes impacts to the environment. In addition, the TEAM 2014 Project will benefit system shippers and markets on the Texas Eastern system by providing additional access to reliable, long-term production from the emerging Marcellus Shale play to markets along and downstream of the system. The TEAM 2014 Project will increase diversity of supply, enhance the ability of markets along the system to better manage price volatility, and provide additional security and reliability to these markets. E. The TEAM 2014 Project Is Required by the Public Convenience and Necessity. The TEAM 2014 Project is consistent with the criteria of the Certificate Policy Statement, and the construction and operation of the facilities proposed herein are in the public interest and required by the public convenience and necessity. The TEAM 2014 Project will provide numerous benefits to the Project shippers, existing shippers and markets along the system and natural gas consumers, including: (i) providing a long-term, secure firm transportation outlet for the TEAM 2014 Project shippers as the shippers Marcellus Shale production comes on line; 15

21 (ii) (iii) (iv) (v) providing the necessary new capacity to enable new supplies of natural gas from the Marcellus Shale to reach diverse regions and markets on the Texas Eastern system; providing existing and new markets with diverse supply that promotes stability and reliability and better management of price volatility; providing additional operational flexibility and reliability through the addition of new compression and pipe on Texas Eastern s system; and enhancing flexibility and reliability of service on the pipeline grid generally by increasing delivery options off the Texas Eastern system. For the foregoing reasons, Texas Eastern respectfully submits that granting the authorizations requested herein is required by the public convenience and necessity. Approval of the TEAM 2014 Project in the timing contemplated herein will benefit the Northeast, Midwest, Southeast and Gulf Coast regions along the Texas Eastern system by delivering new long-term sources of natural gas at the earliest possible time to these market areas. In summary, the TEAM 2014 Project satisfies the Commission s Certificate Policy Statement and is consistent with the Commission s economic and environmental goals. Texas Eastern will construct the Project with minimal landowner and environmental impacts. As described in detail in this Application and the accompanying exhibits, the TEAM 2014 Project significantly and substantially benefits the natural gas transmission grid in the Northeast, Midwest, Southeast and Gulf Coast regions and will provide the pipeline capacity necessary to transport the Project shippers developing Marcellus Shale production as that new production comes on line. The benefits of this Project far outweigh the potential residual impacts of the Project, which have been or will be mitigated through Texas Eastern s efforts as described in this Application. Accordingly, the TEAM 2014 Project meets the standards of the Certificate Policy 16

22 Statement, is in the public interest, and is required by the public convenience and necessity. IV. Open Season/Reverse Open Season While Texas Eastern believes the information provided in this Application will show that it has met the tests both factually and legally to build the Project as proposed, Texas Eastern hereby provides the following summary of the Open Season and Reverse Open Season process for the TEAM 2014 Project. A. Open Season for the TEAM 2014 Project. Texas Eastern entered into a Precedent Agreement with Chevron in December 2011, and with EQT in January 2012, for transportation service on the Project facilities totaling 600,000 Dth/d, with a target in-service date of November 1, In compliance with Commission policy and precedent, Texas Eastern conducted a binding Open Season to determine whether additional demand existed for firm service as part of the TEAM 2014 Project. Texas Eastern held the Open Season from January 17, 2012 through February 17, 2012 requesting bids for up to an overall potential capacity of 1,400,000 Dth/d inclusive of the existing commitments from the Project shippers. The Open Season Notice described the design of the proposed project to accommodate a primary firm path for all Project shippers to be split, with 50 percent of the firm path to extend to the East and 50 percent of the firm path to extend to the West and South from the Appalachian supply region. 14 After the conclusion of the Open Season, Texas Eastern determined to move forward with a project that was sized to accommodate the two Project shippers, as no 14 A copy of the Open Season Notice is included as part of Exhibit Z-1(a). 17

23 additional precedent agreements resulted from the Open Season. Texas Eastern then confirmed the design of the TEAM 2014 Project as an expansion of Texas Eastern s Penn-Jersey system, 15 taking into consideration the Project shippers requested timing and the fact that no receipt and delivery points had been requested on the Capacity Restoration Project ( CRP ) system, 16 all as more fully described below. B. Reverse Open Season for the TEAM 2014 Project. Promptly following the execution of the Precedent Agreements and the Open Season, Texas Eastern held a Reverse Open Season in March 2012 to solicit turnback capacity. In the Reverse Open Season Notice, 17 Texas Eastern offered its current firm shippers the opportunity to release, subject to specified criteria, all or a portion of their current firm transportation entitlements. The Reverse Open Season Notice made clear that the capacity that shippers wished to turn back must enable Texas Eastern to reduce the scope of the proposed incremental facilities, as finally scoped and designed, necessary to satisfy Texas Eastern s obligations pursuant to the TEAM 2014 Project, while maintaining or improving the economics of the Project. Texas Eastern further specified that the shipper s turnback capacity must result in available capacity on Texas Eastern s facilities from receipt points on the Texas Eastern system to the proposed delivery points on the Texas Eastern system designated for the Team 2014 Project and must not result in a release of any capacity unnecessary for the Project The Penn-Jersey system extends from the Oakford Storage facilities and Texas Eastern s Delmont Compressor Station in western Pennsylvania to Texas Eastern s Lambertville, New Jersey Compressor Station. 16 The CRP system extends from Texas Eastern s Uniontown Compressor Station in western Pennsylvania to Texas Eastern s Lambertville, New Jersey Compressor Station. 17 A copy of the Reverse Open Season Notice is included as Exhibit Z-1(b). 18 Texas Eastern s reverse open season followed the Commission s policy and precedent regarding reverse open seasons. See, e.g., PG&E Gas Transmission, 84 FERC 61,204, at 62,001 (1998) (finding that the 18

24 In response to the Reverse Open Season Notice, Texas Eastern received requests from a total of three current Texas Eastern shippers to turn back capacity under a total of six separate contracts. Texas Eastern has provided a diagram as Exhibit Z-1(c) that reflects the turnback requests that Texas Eastern received. ConocoPhillips Company ( ConocoPhillips ) was one of these three shippers and sought to turn back capacity under two agreements (Nos R2 and R1). 19 Both agreements are firm service agreements that ConocoPhillips executed for service on Texas Eastern s TEMAX expansion, on a path that overlays the CRP system. As noted above, however, Texas Eastern designed the TEAM 2014 Project facilities to consist of an expansion of Texas Eastern s Penn-Jersey system and not its CRP system, taking into consideration all of the shippers needs, including the timing required by the shippers (as discussed further below) and, again, the fact that neither of the Project shippers requested receipt or delivery points located on the CRP system. Texas Eastern evaluated each turnback request in conjunction with the other turnback requests to determine which portions of the paths offered for turnback, in combination with portions of the paths offered by other shippers for turnback, would result in the greatest decrease in the scope of Project construction and at the same time allow Texas Eastern to satisfy its contractual obligations with the TEAM 2014 Project shippers. No turnback request or combination of requests would have resulted in a reduction in the scope of the Project for deliveries to the south or west of the western pipeline did not have to accept turnback of capacity from Kingsgate, British Columbia (at the US-Canada border) to Malin, Oregon when the expansion only involved a shorter path from Kingsgate to Stanfield, Oregon); Columbia Gas Transmission Corp. and Texas Eastern Transmission Corp., 79 FERC 61,160 (1997) (noting that [a] pipeline should not be required to take back its customers unrelated, unwanted capacity simply because it wants to construct new facilities somewhere else on its system ). 19 ConocoPhillips has disclosed in public filings with the Commission information about ConocoPhillips turnback proposal. Accordingly, Texas Eastern identifies ConocoPhillips in this Application but does not specifically identify the other two shippers that participated in the Reverse Open Season. 19

25 Pennsylvania receipt points. However, as detailed below, Texas Eastern was able to offer to accept in one case all of the capacity offered for turnback from one turnback shipper and portions of the capacity offered for turnback from the two other turnback shippers, including some of the capacity offered for turnback from ConocoPhillips. Texas Eastern has provided a diagram as Exhibit Z-1(d) that reflects the Project scope that would have resulted if all turnback shippers accepted Texas Eastern s offer to take back their capacity. In considering the turnback requests, one turnback shipper offered capacity under three separate service agreements, including a turnback offer for 50,000 Dth/d that could satisfy the entire TEAM 2014 Project eastern contract path through to delivery points at Lambertville and Staten Island. This 50,000 Dth/d turnback offer presented the greatest volumetric reduction in facilities construction among all turnback requests received. Therefore, Texas Eastern accepted that entire path for the full quantity. A second turnback shipper offered 100,000 Dth/d for turnback on a path located entirely within the TEAM 2014 Project construction path. Accepting that quantity provided the second largest reduction in facilities construction for the Project. Therefore, Texas Eastern accepted that quantity in its entirety. After accepting the 150,000 Dth/d described above, Texas Eastern allocated the remaining 150,000 Dth/d (of the 300,000 Dth/d eastern expansion path) among the remaining requests one request from ConocoPhillips was for turnback of 395,000 Dth/d while the other, from another shipper, was for 100,000 Dth/d. The remaining requests each included primary points of delivery only on Texas Eastern s CRP system, not on or to the east of Texas Eastern s Penn-Jersey system. Therefore, only a portion of the paths offered for turnback under these remaining requests from Clarington to Uniontown 20

26 upstream of the split between the Penn-Jersey system and the CRP system could result in any reduction in the scope of facilities construction. Texas Eastern determined that the turnback offers for these remaining agreements were similarly situated because the entire path available for turnback from these shippers was the same and resulted in an equivalent reduction of facilities construction. Therefore, it was necessary to pro-rate on a volumetric basis Texas Eastern s proposed acceptance of the turnback quantity on this path between these two shippers. In doing the analysis, Texas Eastern capped ConocoPhillips 395,000 Dth/d request at 300,000 Dth/d to make it equivalent to the TEAM 2014 Project quantity in this path. The pro-ration of the remaining 150,000 Dth/d resulted in ConocoPhillips having the opportunity to turnback 112,500 Dth/d of its capacity. The result of the credit offered to shippers turning back capacity based upon the reduction of facilities contemplated to occur with the requested turnback capacity totaled approximately $11.1 million per year, which is approximately 13 percent of the annual cost of service for the proposed expansion of the Penn-Jersey system. The reverse open season provided shippers with more flexibility than is required or customary. Pursuant to the Reverse Open Season Notice, each of the three turnback shippers had five business days until April 25, 2012 to consider Texas Eastern s offer to accept the turnback capacity. If a shipper did not agree to Texas Eastern s offer by the deadline, the offer would expire and the shipper s turnback request would be null and void. Two of the three shippers responded prior to the deadline that they had decided to retain their capacity. Upon inquiry from ConocoPhillips, Texas Eastern clarified that Reverse Open Season responses would not be finally binding on the shipper. Texas Eastern also was open to responding to shipper inquiries and requests for clarification. 21

27 Unlike the other two shippers, ConocoPhillips requested an extension of the deadline for responding to Texas Eastern s turnback offer. While Texas Eastern was not obligated to do so, Texas Eastern agreed as an accommodation to ConocoPhillips to extend the deadline for all shippers until May 1, During this extension period, in response to questions from ConocoPhillips, Texas Eastern provided feedback and answers to ConocoPhillips questions regarding the TEAM 2014 Project and Texas Eastern s rationale for selection of the Penn-Jersey system path for the Project, rather than the CRP system path preferred by ConocoPhillips. Texas Eastern explained to ConocoPhillips that, with the exception of the Clarington to Uniontown segment that Texas Eastern had agreed to accept in response to ConocoPhillips turnback offer, the capacity that ConocoPhillips was attempting to turn back was not on Texas Eastern s intended construction path for the TEAM 2014 Project. In Texas Eastern s last piece of correspondence to ConocoPhillips regarding the Reverse Open Season results, Texas Eastern informed ConocoPhillips that the revised May 1, 2012 response deadline had passed and that Texas Eastern would be moving forward with the TEAM 2014 Project based on the understanding that ConocoPhillips had decided not to turn back the 112,500 Dth/d of capacity from Clarington to Uniontown. C. Texas Eastern s Reverse Open Season Complied with Commission Policy. Several months following the completion of the Reverse Open Season, ConocoPhillips filed a complaint against Texas Eastern in Docket No. RP on October 1, 2012 ( Complaint ). ConocoPhillips claimed that Texas Eastern should have held a reverse open season for a project other than the project that Texas Eastern has proposed to construct. ConocoPhillips argued that Texas Eastern s Reverse Open Season discriminated against ConocoPhillips because Texas Eastern did not agree to take back 22

28 the entirety of ConocoPhillips firm capacity and construct a project different from the TEAM 2014 Project. ConocoPhillips argued that Texas Eastern should have accepted ConocoPhillips full turnback offer of 300,000 Dth/d and that then Texas Eastern could construct another project that would be less costly and have less environmental impacts. The Commission dismissed the complaint in an order dated October 26, ConocoPhillips filed comments in the TEAM 2014 pre-filing proceeding, Docket No. PF , on November 2, 2012, which continue to argue that Texas Eastern should construct a project different than the proposed Project ( ConocoPhillips Comments ). Texas Eastern expects that ConocoPhillips will raise the same arguments in a protest to the Application. ConocoPhillips arguments about the Project, including the Open Season and Reverse Open Season, are without merit. ConocoPhillips argument rests on the claim that because the TEAM 2014 Project involves an expansion of Texas Eastern s Penn-Jersey system rather than an expansion of Texas Eastern s separate CRP system, ConocoPhillips was not able to turn back more of its capacity during the Reverse Open Season for the TEAM 2014 Project and therefore the Reverse Open Season discriminated against ConocoPhillips. However, Texas Eastern considered alternative expansions of the CRP system during the initial project development stages, but given the impacts to project cost and schedule, as described further below and in Resource Report 10, the alternatives utilizing Texas Eastern s CRP system ceased to be a viable option for this Project early in the development process. The analysis by Texas Eastern of alternatives involving an expansion of the CRP system included scenarios with and without a river crossing, as set forth below. 20 ConocoPhillips request for rehearing of this order was subsequently denied. ConocoPhillips Co., 141 FERC 61,071 (2012), reh g denied, 142 FERC 61,123 (2013). 23

29 Texas Eastern s CRP alternative with river crossing: One alternative utilizing the CRP system instead of the Penn-Jersey system that Texas Eastern considered would require significant greenfield construction and a new crossing of the Delaware River. The flow diagram prepared by Texas Eastern in late 2011 to study this alternative (as depicted only downstream of the Marietta Compressor Station) is provided as the first diagram in Exhibit Z-3. Once Texas Eastern finalized the Precedent Agreements with the anchor shippers in December 2011 and January 2012, respectively, which targeted an inservice date of November 1, 2014, Texas Eastern had to rule out this alternative due to timing. 21 While the estimated cost for this CRP alternative that involved the Delaware River crossing was nearly the same as the cost of constructing the Penn-Jersey system expansion, the increased permitting issues and schedule risk involved with the greenfield construction and the Delaware River crossing associated with a CRP expansion would not have allowed Texas Eastern to meet the November 1, 2014 in-service date for the Project. Texas Eastern s CRP alternative without river crossing: To avoid the Delaware River crossing, Texas Eastern also studied an alternative downstream of the Marietta Compressor Station in late 2011 that would have avoided crossing the Delaware River by constructing a greenfield cross-over pipeline from the CRP system to the Penn-Jersey system at a point west of the Delaware River. The flow diagram prepared by Texas Eastern in late 2011 to study this alternative downstream of the Marietta Compressor 21 In the Open Season Notice, Texas Eastern suggested various delivery points in Zone M3, including a point off of the Marietta Extension, which is located on the CRP system. While Texas Eastern intended to expand the Penn-Jersey system as part of the Project, Texas Eastern also could have expanded the CRP system up to the Marietta Extension without crossing the Delaware River and, therefore, deliveries at or upstream of the Marietta Extension could have been possible by the November 1, 2014 target in-service date for the Project. Ultimately, however, no receipt or delivery points on the CRP system were requested as a result of the Open Season. 24

30 Station is provided as the second diagram in Exhibit Z-3. The cost estimate for this alternative that avoided the Delaware River crossing was approximately $95 million greater than the alternative utilizing the CRP system by crossing the Delaware River. Due to this significant additional cost, along with the potential scheduling risks related to the greenfield construction required for this alternative, Texas Eastern ruled out this alternative as well. D. The Commission Should Disregard ConocoPhillips GSC Study. 1. The Commission should not engage in an Ashbacker-style comparison between Texas Eastern s Project and ConocoPhillips hypothetical project. ConocoPhillips included in the pre-filing docket a study prepared by Gas Supply Consulting, Inc. to support its contentions and its proposed alternative to the Project ( GSC Study ). 22 The GSC Study contains a comparison between ConocoPhillips proposed CRP expansion, which does not require crossing the Delaware River, and the Penn-Jersey expansion that Texas Eastern has proposed herein. The GSC Study s conclusions are incorrect because they are based on faulty assumptions, as explained further below in Section IV.D.2 and in Resource Report 10. However, there is another important point regarding the comparison contained in the GSC Study. The study almost entirely involves a comparison of costs for expansion investment and engineering matters and analyzes the two separate projects similar to the way potential shippers might review competing projects in the marketplace or in the way the Commission might have reviewed competing, mutually exclusive pipeline certificate applications decades ago under an Ashbacker analysis. 23 The Commission has long abandoned Ashbacker-style 22 ConocoPhillips also included the GSC Study in its October 1, 2012 Complaint filing. 23 Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1945). 25

31 hearings where these kinds of comparisons of competing projects were analyzed at length, 24 and, in any event, here, Texas Eastern has only proposed the Penn-Jersey expansion as part of the TEAM 2014 Project, not a CRP expansion. As previously discussed, Texas Eastern determined that an expansion of the Penn-Jersey system was preferable from a timing and risk standpoint and more closely-aligned with Texas Eastern s business objectives and the needs of the Project shippers. Texas Eastern decided to proceed with a proposal for a project that includes an expansion of the Penn- Jersey system and, contrary to ConocoPhillips desired outcome, Texas Eastern cannot be required to build any other project. ConocoPhillips arguments also reflect a fundamental misunderstanding of the Commission s reverse open season policy and Commission and court precedent regarding the discretion that a pipeline company has under the NGA to design and propose projects that satisfy the pipeline s business objectives. Texas Eastern was not required to design the TEAM 2014 Project based upon turnback offers or to accept back from ConocoPhillips capacity on a project that Texas Eastern had no intention of constructing. Prior Commission and court decisions have made it clear that pipelines would not be compelled to build a project different from the one the pipeline has determined to build. 25 The Commission has stated that it does not direct the development of the gas industry s 24 See ANR Pipeline Co., 78 FERC 61,326 (1997), order denying reh g, 85 FERC 61,056 (1998), aff d, ANR Pipeline Co., v. FERC, 205 F.2d 403 (2000) (affirming the Commission s reliance on market forces and holding that an Ashbacker comparative hearing was not required). 25 See Panhandle Eastern Pipe Line Co. v. FPC, 204 F.2d 675, 680 (3d Cir. 1953) ( Panhandle v. FPC ) ( Congress meant to leave the question whether to employ additional capital in the enlargement of its pipeline facilities to the unfettered judgment of the stockholders and directors of each natural gas company involved. ); see also Tennessee Gas Pipeline Co. v. Columbia Gulf Transmission Co., 113 FERC 61,200, at PP (2005); El Paso Natural Gas Co., et al., 104 FERC 61,045, at P 104 n.104 (2003). 26

32 infrastructure, neither on a broad regional basis nor in the design of specific projects. 26 Instead, the Commission respond[s] when an application is presented to [the Commission], and in each application the parameters of the project are predetermined by the applicant. 27 Similarly, the Commission has pointed out that [w]ith limited exceptions, the Commission has no authority to compel companies to construct gas facilities, 28 and courts have also made it clear that, except in very limited circumstances, 29 the Commission has no authority under the NGA to order a pipeline company to construct additional capacity. 30 Here, Texas Eastern has proposed facilities to create the additional capacity for the TEAM 2014 Project by expanding the Penn-Jersey system in concert with the timeline required by the Project shippers, not the CRP system. As the Commission has explained, Texas Eastern has the right to determine the project that it will propose to construct to the Commission. The Commission will not direct the design of the project, 26 Texas Eastern Transmission, LP, et al., 141 FERC 61,043 at P 25 (2012) ( Texas Eastern ); see also Millennium Pipeline Company, L.L.C., 141 FERC 61,198 at PP (2012). 27 Texas Eastern, 141 FERC 61,043 at P 25 (emphasis added). 28 Id. at P 28. The Commission noted that the limited exceptions include its ability, under certain circumstances, to require open-access transporters to construct interconnections, to direct natural gas companies to extend facilities to serve a municipality or LDC, and to direct existing pipelines to expand offshore pipeline capacity. None of these limited exceptions apply here. 29 These circumstances involve limited directives under Section 7(a) of the NGA to extend facilities to serve a municipality or LDC. 30 See Panhandle v. FPC, 204 F.2d at 680 ( Congress meant to leave the question whether to employ additional capital in the enlargement of its pipeline facilities to the unfettered judgment of the stockholders and directors of each natural gas company involved. ); see also Tennessee Gas Pipeline Co. v. Columbia Gulf Transmission Co., 113 FERC 61,200, at PP (2005); El Paso Natural Gas Co., et al., 104 FERC 61,045, at P 104 n.104 (2003); In re Panhandle Eastern Pipe Line Co., et al., 15 FPC 46 (1956) (citing Panhandle v. FPC and stating that [a]s the court s language establishes, there is a sphere wherein, under the [NGA], the judgment of the stockholders and directors of the company has free exercise, and the investment capital for the purpose of enlarging pipeline facilities comes within that sphere. We can deny the proposed construction of facilities but except to the limited extent [NGA Section 7(a)] permits, we cannot require a company to risk its capital in a venture which in the exercise of its officers judgment, it considers unwise to undertake. ). 27

33 and the Commission does not have the authority to compel Texas Eastern to construct an expansion of the CRP system or any other different project. 2. The conclusions in the GSC Study are incorrect. The Commission should disregard the GSC study because it is predicated on an expansion path that Texas Eastern ruled out more than one year ago as not viable for the TEAM 2014 Project. Texas Eastern has explained the shortcomings of the GSC Study in Resource Report 10 in response to data requests from FERC Staff. Texas Eastern provides a summary of its Resource Report 10 analysis here. In response to Texas Eastern s concerns regarding scheduling risks for crossing the Delaware River, the alternative project that the GSC Study attempts to support involves a greenfield connecting pipeline from a point downstream of Texas Eastern s Eagle Compressor Station on the CRP system to a point on the Penn-Jersey system just west of the Delaware River ( Cross-over Pipeline ) in order to avoid crossing the Delaware River. Resource Report 10 details the critical engineering flaws associated with the alternative project, including that the study: (i) incorrectly assumes the Penn- Jersey system has sufficient capacity to flow the entire Project contract quantity from an interconnection with the Cross-over Pipeline between the CRP system and the Penn- Jersey system across the Delaware River to the delivery points at Lambertville and Staten Island; (ii) fails to include a greenfield compressor station near the interconnection between the proposed Cross-over Pipeline and the Penn-Jersey system that is necessary due to the higher maximum allowable operating pressure on the Penn-Jersey system and the fact that the operating pressure on the Penn-Jersey system often exceeds the operating pressure of the Cross-over Pipeline; (iii) miscalculates the additional compression that would be required at the Eagle Compressor Station; and (iv) depending on the 28

34 compression required for the alternative project, does not consider that the alternative project may require a new greenfield compressor station near the Eagle Compressor Station site. The flow diagram prepared by Texas Eastern to correct the critical engineering flaws noted above that occur downstream of the Marietta Compressor Station is provided as the third diagram in Exhibit Z-3. The modifications necessary to correct these engineering flaws result in environmental impacts and permitting issues that make such an alternative incapable of satisfying the purpose and need of the TEAM 2014 Project, as explained more fully in Resource Report 10. In addition, the costs of the alternative project would be significantly greater than the costs provided in the GSC Study and significantly greater than the costs associated with expanding the CRP system with a crossing of the Delaware River. Specifically, the cost associated with the facilities downstream of the Marietta Compressor Station in the GSC Study alternative, as modified to correct engineering flaws, would be approximately $125 million greater than the costs associated with the facilities downstream of the Marietta Compressor Station in Texas Eastern s alternative to expand the CRP system with a crossing of the Delaware River. However, as discussed herein and in Resource Report 10, expanding the CRP system did not meet Texas Eastern s business objectives. Thus, for this reason, the reasons stated above and for all the reasons explained in detail in the Environmental Report, ConocoPhillips preferred CRP system expansion should not be considered and is not a viable alternative for the Project. 29

35 E. The Commission Should Disregard Any Challenge by ConocoPhillips to the Design of the TEAM 2014 Project. The Open Season and Reverse Open Season undertaken by Texas Eastern for the Project complied with Commission policy and precedent and did not result in any discrimination against ConocoPhillips or any other shipper. Accordingly, the Project is appropriately designed, and the Commission should disregard arguments to the contrary by ConocoPhillips. Contrary to ConocoPhillips desired outcome, prior Commission and court decisions are clear that pipelines cannot be compelled to build another project because the Commission does not direct the design of projects nor does the Commission have the authority to compel applicants to construct a different project than the one proposed by the applicant. In addition, ConocoPhillips own study is incorrect. For all these reasons, Texas Eastern respectfully requests that the Commission find that its Open Season and Reverse Open Season were conducted in compliance with the Commission s policy and precedent and deny any requests from ConocoPhillips that Texas Eastern construct a different project involving an expansion of the CRP system. V. Environmental Impact The Resource Reports included herewith more fully describe the potential environmental impacts of the TEAM 2014 Project. The information provided in the Resource Reports has been prepared in accordance with Part 380 of the Commission s regulations for the Commission Staff to conduct its environmental analysis of the Project in this proceeding. In addition, Texas Eastern has included, as Exhibit Z-4 attached hereto, a draft Environmental Assessment and, as Exhibit Z-5 attached hereto, a matrix that identifies the specific locations in the Resource Reports where the information requested by Commission Staff in Docket No. PF12-19 has been incorporated. 30

36 As the Resource Reports show, the environmental impact associated with the construction of the TEAM 2014 Project is limited. Texas Eastern has incorporated the Commission s Upland Erosion Control, Revegetation and Maintenance Plan and the Commission s Wetland and Waterbody Construction and Mitigation Procedures (January 17, 2003 versions of both) into the Erosion and Sediment Control Plan to be used in this proposal. In addition, Texas Eastern has co-located its pipeline segments with its existing transmission system and will incorporate standard environmental mitigation measures into its construction specifications. The Resource Reports demonstrate that (i) the impact of the proposed TEAM 2014 Project will be minimal, (ii) any adverse impacts can be mitigated or avoided, (iii) the proposed action is the best alternative, and (iv) the short-term use of the environment will not conflict with the long-term productivity. Additionally, Texas Eastern will accommodate general and site-specific protective measures for any sensitive wildlife habitat and species identified during the course of the Project. Under these circumstances, approval of the proposed facilities described herein will not be a major federal action significantly affecting the quality of the human environment. The TEAM 2014 Project will be constructed in accordance with applicable environmental permits, approvals and regulations. Texas Eastern is committed to minimizing the environmental impact of the Project and to reclaiming all disturbed areas to a consistently high standard, regardless of land ownership. Texas Eastern will work diligently to ensure that any questions related to the environmental aspects of the TEAM 2014 Project are resolved promptly and completely and that the facilities are constructed in an efficient and appropriate manner. In addition, and consistent with the Commission s desire for early input by potential stakeholders, Texas Eastern has made 31

37 significant efforts throughout the pre-filing process in Docket No. PF12-19 to inform the public, particularly landowners, relevant resource agencies, and other interested stakeholders, about the TEAM 2014 Project. The construction activities are not anticipated to have adverse effects on residences or industrial areas. The construction activities will not have a negative impact on public, recreational, or scenic areas, and the impact on vegetation, wildlife, and cultural resources will be minimal. As described in the Resource Reports, Texas Eastern, to the extent practicable and in most cases, will utilize existing right-of-way to install new pipeline loop and for the aboveground facility modifications. The abandonment in place of the compressor units will be achieved by cutting and capping the aboveground suction and discharge pipeline, without earth disturbance at the compressor station. VI. Supply Texas Eastern s shippers are responsible for obtaining the gas supplies to be transported on Texas Eastern s pipeline system. Texas Eastern proposes to provide only open-access transportation service for the facilities proposed herein. VII. Rates and Tariff Texas Eastern is proposing to charge initial incremental recourse rates under Rate Schedule FT-1 for firm service on the TEAM 2014 Project facilities. These rates and the support for the derivation of these rates are set forth in Exhibit P to this Application. As reflected on the pro forma tariff records attached hereto as part of Exhibit P, the incremental recourse reservation rate is $ per month per Dth of capacity subscribed, with respect to firm service on the TEAM 2014 Project facilities. As shown 32

38 in Exhibit P, Texas Eastern has utilized its mainline depreciation rate for onshore facilities of 1.22 percent. With respect to interruptible service that is available on the TEAM 2014 Project facilities during those times when all of the reserved firm capacity on the Project facilities is not being utilized, Texas Eastern does not propose to track interruptible service separately on existing facilities or the expansion facilities. Accordingly, Texas Eastern proposes to charge its system interruptible transportation rates for all interruptible throughput on the TEAM 2014 Project facilities consistent with the rate design approved by the Commission for various other Texas Eastern incremental projects in the Northeast market area, including Texas Eastern s TIME, TIME II, TIME III, TEMAX, and TEAM 2012 Projects. 31 Texas Eastern proposes to recover incremental fuel use and lost and unaccounted for fuel ( LAUF ), as well as incremental electric power costs associated with providing firm service on the TEAM 2014 Project facilities, through incremental Applicable Shrinkage Adjustment ( ASA ) percentages and incremental Electric Power Cost ( EPC ) rates. The incremental fuel and electric power derivation is shown on Exhibit Z- 2. Consistent with the Commission s policy and precedent, 32 Texas Eastern proposes to track changes in fuel and electric power costs for these incremental services on an incremental basis through its ASA mechanism set forth in Section 15.6 of its GT&C and through its EPC Adjustment mechanism set forth in Section 15.1 of its GT&C. Texas 31 See Texas Eastern Transmission, LP, 137 FERC 61,140 (2011); Texas Eastern Transmission, LP, 129 FERC 61,151 (2009); Texas Eastern Transmission, LP, 119 FERC 61,258 (2007); Texas Eastern Transmission, LP, 99 FERC 61,383 (2002), order denying reh g and granting clarification, 101 FERC 61,046 (2002). 32 Id. 33

39 Eastern will adjust its periodic tracker mechanisms to ensure that existing customers do not subsidize the costs resulting from these new incremental services. Texas Eastern will provide services to the TEAM 2014 Project shippers at negotiated rates in accordance with the negotiated rate authority set forth in Section 29 of Texas Eastern s GT&C and pursuant to the terms of the Precedent Agreement. Texas Eastern will file tariff records reflecting its negotiated rate agreements with the TEAM 2014 Project shippers within 30 to 60 days prior to when the underlying negotiated rates are proposed to become effective. In addition, in light of the north-to-south path subscribed by the TEAM 2014 Project shippers on the Texas Eastern system from Zone M2 to Access Area Zones ELA and WLA and the modifications proposed herein that are designed to make portions of the system from Zone M2 to the Access Area bi-directional, Texas Eastern will provide the TEAM 2014 Project shippers with Order No. 637 rights in Access Area Zones ELA and WLA. To implement these rights, Texas Eastern will deem that, for purposes of the TEAM 2014 Rate Schedule FT-1 Agreements, Zones ELA and WLA are Market Area Zones, as that term is defined in Texas Eastern s Tariff, for purposes of segmentation rights under the Tariff. Texas Eastern will make a tariff filing with respect to these rights prior to placing the TEAM 2014 Project facilities into service. AFUDC Representation Texas Eastern hereby provides its statement representing that the Allowance for Funds Used During Construction ( AFUDC ) accruals included in the cost of the TEAM 2014 Project, reflected in Exhibit K hereto, are in compliance with the Commission s 34

40 policy on AFUDC accruals as set forth in the Docket No. AD proceeding. 33 Texas Eastern began accruing AFUDC for the TEAM 2014 Project on April 10, 2012, and in accordance with the Commission s AFUDC policy, Texas Eastern hereby affirms that it had begun to incur capital expenditures for the Project on that date and that activities necessary to prepare the Project for its intended use were in progress at that time. VIII. Other Applications With the exception of the instant Application, Texas Eastern knows of no other applications pending or required before the Commission under the NGA for the proposed TEAM 2014 Project. Texas Eastern will require other federal, state, and local authorizations for the facilities proposed herein, in addition to the authorizations requested in this Application. Texas Eastern is working with a number of federal, state, and local agencies, as necessary, to obtain permits to complete the construction of the Project. Texas Eastern has included in Exhibit J a list of all federal approvals and, as part of Resource Report 1, a list of all required permits and consultations to construct the facilities proposed in this Application and the agencies in which the application for such permits or certificates was filed or is expected to be filed. hereto. IX. Notice A form of Notice suitable for publication in the Federal Register is attached 33 Southern Natural Gas Co., et al., 130 FERC 61,193 (2010); see also Texas Eastern Transmission, LP, 131 FERC 61,164 (2010). 35

41 X. Exhibits This is an abbreviated application filed pursuant to Section of the Commission s regulations under the NGA, pursuant to which Texas Eastern has omitted the exhibits and data that are inapplicable or are unnecessary to disclose fully the nature and extent of the proposal herein. A list of the exhibits and documents filed with this Application, which are incorporated by reference as if set forth fully herein, or which have been omitted for the reasons set forth below, is as follows: Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E Exhibit F Exhibit F-I Articles of Incorporation Omitted. Exhibit A has been filed in Docket No. CP and is incorporated herein by reference. State Authorization Omitted. Exhibit B has been filed in Docket No. CP and is incorporated herein by reference. Company Officials Attached. Subsidiaries and Affiliates Attached. Other Pending Applications and Filings Omitted. This information is contained in Section VIII of this Application. Location of Facilities Attached. Environmental Report Attached hereto in Volumes II through IV. Resource Report Nos. 1 through 12 as specified in Sections and of the Commission s regulations are included herewith. Appendices from Resource Report 1 (landowner information) and Resource Report 4 (cultural resource assessment) have been segregated and bound separately in Volume III and are labeled Contains Privileged Information Do Not Release. Appendices containing Critical Energy Infrastructure Information have been segregated and bound separately in Volume IV and are labeled 36

42 Contains Critical Energy Infrastructure Information Do Not Release. Exhibits G through G-II Exhibit H Exhibit I Exhibit J Exhibit K Exhibit L Flow Diagrams and Flow Diagram Data Attached hereto as part of Volume IV and marked Contains Critical Energy Infrastructure Information Do Not Release. The confidential hydraulic models supporting Exhibits G through G-II are available in electronic form only and are found in Volume III. Two sets of Exhibit G are included as part of Volume IV. One set shows the forward-flow component of the Project, and the other set shows the reverse-flow component of the Project. With respect to the facilities accommodating the reverse-flow component of the Project, there have been no changes with respect to the design of those facilities for traditional forward flow. The facilities designed to accommodate the forward-flow component are based on a winter peak day design, while the facilities designed for the reverse-flow component are based on a reverse-flow design day. The two design day scenarios are mutually exclusive. Total Gas Supply Omitted. This information is contained in Section VI of this Application. Market Data Enclosed herewith under seal as part of Volume III and marked Contains Privileged Information Do Not Release. This exhibit includes copies of the Precedent Agreements between Texas Eastern and the TEAM 2014 Project shippers. Federal Authorizations Attached. This exhibit identifies the following: each federal authorization that the Project will require; the federal or state agency or officer that will issue each required authorization; the date each request for authorization was submitted; why any request was not submitted and the date submission is expected; and the date by which final action on each federal authorization has been requested or is expected. Cost of Facilities Attached. Financing Omitted. Texas Eastern will finance the costs of the TEAM 2014 Project through funds on hand and borrowings under short-term financing arrangements. 37

43 Exhibit M Exhibit N Exhibit O Exhibit P Exhibit T Exhibit U Exhibit V Exhibit W Exhibit X Construction, Operation and Maintenance Omitted. Texas Eastern will construct or cause the proposed facilities to be constructed, and will manage and operate the proposed facilities. Revenues, Expenses and Income Omitted. This information is included in Exhibit P. Depreciation and Depletion Omitted. Texas Eastern will use its existing onshore depreciation rate of 1.22% for the facilities proposed herein. Tariff and Rates Pro forma tariff records setting forth the proposed initial incremental recourse rates for the TEAM 2014 Project facilities are included herewith. In addition, Exhibit P includes the support schedules for the derivation of such initial recourse rates. Related Applications Three of the six 1,100 HP reciprocating gas compressor units proposed for abandonment at the Delmont Compressor Station were certificated in Docket No. G The additional three 1,100 HP reciprocating gas compressor units proposed for abandonment at the Delmont Compressor Station were certificated in Docket No. G The 18,500 HP gas turbine compressor unit proposed for abandonment at the Delmont Compressor Station was certificated in Docket No. CP81-4. Contracts and Other Agreements Omitted. No contracts or other agreements pertain to the abandonment of the facilities proposed herein. Flow Diagram After Abandonment Omitted. This exhibit is provided as part of Exhibits G through G-II, which are attached hereto in Volume IV and marked Contains Critical Energy Infrastructure Information Do Not Release. Impact on Customers Omitted. No service to customers will be terminated by the abandonment of facilities proposed herein. Effect on Existing Tariffs Omitted. No effect upon any of Texas Eastern s rate schedules or tariffs on file with the Commission will occur from granting the 38

44 proposed abandonment. Exhibit Y Exhibit Z Exhibit Z-1 Exhibit Z-2 Exhibit Z-3 Exhibit Z-4 Accounting Treatment of Abandonment Attached. Location of Facilities Omitted. This information is included as Exhibit F. Open Season Notice (Exhibit Z-1(a)), Reverse Open Season Notice (Exhibit Z-1(b)), and related diagrams referenced in Section IV.B (Exhibit Z-1(c) and (d)). Incremental Fuel and Electric Power Derivation Flow diagrams representing the alternatives discussed in Section IV.C and IV.D.2 and in Resource Report 10, including the associated costs for each alternative design, are attached hereto as part of Volume IV and marked Contains Critical Energy Infrastructure Information Do Not Release. Draft Environmental Assessment Exhibit Z-5 Matrix of information in the Resource Reports reflecting Commission Staff s comments in Docket No. PF XI. Other Texas Eastern requests that the Commission grant this Application in accordance with the shortened procedures set forth in Rules 801 and 802 of the Commission s Rules of Practice and Procedure. Also, if the Commission utilizes the shortened procedures, Texas Eastern requests that the intermediate decision procedure be omitted and waives oral hearing and opportunity for filing exceptions. Exhibits G through G-II and Exhibit Z-3, as well as parts of Exhibit F-I, are found in Volume IV and contain Critical Energy Infrastructure Information regarding system pressure and flow. Pursuant to Section of the Commission s regulations, Texas Eastern hereby requests privileged treatment of these exhibits, which are marked as Contains Critical Energy Infrastructure Information Do Not Release. In addition, 39

45 Texas Eastern is marking Volume III as privileged because it contains cultural resource location information and landowner information from Exhibit F-I, confidential agreements representing market data from Exhibit I, and confidential hydraulic models supporting Exhibits G through G-II. 34 Texas Eastern requests privileged treatment for this volume and has marked it Contains Privileged Information Do Not Release. Texas Eastern has also submitted herewith the Form of Notice of this Application. XII. Summary of Authorizations Requested WHEREFORE, Texas Eastern respectfully requests that for the reasons set forth herein, the Commission review this Application and issue a final certificate of public convenience and necessity approving the proposal as described herein without condition or modification, and approving, authorizing and/or granting Texas Eastern: (i) a certificate of public convenience and necessity to construct, install, own, operate and maintain the facilities, as proposed herein, including an order to abandon in place certain facilities; (ii) authority to charge initial incremental recourse rates for firm service on the TEAM 2014 Project facilities and existing system recourse rates for interruptible service on such facilities; and (iii) any waivers, authority, and further relief as may be necessary to implement the proposal contained herein. 34 The hydraulic models supporting Exhibits G through G-II are available only in electronic form in WFP format. These hydraulic model files should be treated as both Critical Energy Infrastructure Information ( CEII ) and privileged and confidential pursuant to Section of the Commission s regulations because the files contain proprietary modeling information. 18 C.F.R (2012). Accordingly, Texas Eastern is hereby providing the hydraulic models designated as both CEII and privileged and confidential. Texas Eastern notes that the Commission s efiling system does not include the ability to designate files as both CEII and privileged and confidential. Accordingly, Texas Eastern is marking these hydraulic model files as privileged and confidential for efiling purposes, but Texas Eastern requests both CEII and privileged and confidential treatment for the files. 40

46

47 TEXAS EASTERN TRANSMISSION, LP TEAM 2014 PROJECT DOCKET NO. CP Verification

48

49 TEXAS EASTERN TRANSMISSION, LP TEAM 2014 PROJECT DOCKET NO. CP Exhibit C Company Officials

50 Texas Eastern Transmission, LP Uses Officers of its General Partner Spectra Energy Transmission Services, LLC EXHIBIT C Spectra Energy Transmission Services, LLC As General Partner to Texas Eastern Transmission, LP Board of Managers: Theopolis Holeman J. Patrick Reddy William T. Yardley Officers: William T. Yardley, President Brian R. McKerlie, Vice President, Business Development, Northeast Transmission John V. Adams, Vice President, Supply Chain Gregory P. Bilinski, Vice President, Transmission Services Guy G. Buckley, Vice President and Treasurer Frederick S. (Steve) Bush, Vice President and Controller Allen C. Capps, Vice President Stephen W. Craft, Vice President J. Andrew Drake, Vice President, Asset Integrity Tina V. Faraca, Vice President, Engineering and Construction Richard J. Kruse, Jr., Vice President, Regulatory and FERC Compliance Officer John Thomas McCraw, Vice President Allison McHenry, Assistant Secretary James M. Pruett, Vice President Patricia M. Rice, Vice President and Secretary David A. Shammo, Vice President W. L. Whaley, Jr., Vice President, Gas Control Paul K. Haralson, Assistant Treasurer Thomas V. Wooden, Vice President, Field Operations Fulkra J. Mason, Vice President, Environmental, Health and Safety John Bremner, Vice President, US Storage & Southeast Business Development Gregg E. McBride, Vice President, Rates & Certificates Richard Paglia, Vice President, Marketing

51 TEXAS EASTERN TRANSMISSION, LP TEAM 2014 PROJECT DOCKET NO. CP Exhibit D Subsidiaries and Affiliates

52 Texas Eastern Transmission, LP Exhibit D Subsidiaries and Affiliates Texas Eastern Transmission, LP is owned by: Spectra Energy Transmission Resources, LLC % Spectra Energy Transmission Services, LLC 1.00 %, General Partner Texas Eastern Transmission, LP owns: Texas Eastern Communications, Inc % Texas Eastern Terminal Company % Spectra Energy Southeast Services, LLC %

53 TEXAS EASTERN TRANSMISSION, LP TEAM 2014 PROJECT DOCKET NO. CP Exhibit F Location of Facilities

54 Texas Eastern Transmission, LP TEAM 2014 Project 7(b) and 7(c) Application Exhibit F Location of Facilities Richmond County, NY Hunterdon County, NJ Bi directional flow modifications Delivery point Multiple Receipts in: Greene/Fayette Counties, PA & Greene/Fayette Counties PA & Marshall County, WV Receipt point Existing TETLP system Existing TETLP system Existing station HP upgrades / additions New loop installation Warren County, OH Copiah County, MS Acadia Parish, LA Existing station