(Proposed natural gas pipeline)

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B.C. Hydro's proposed $340-million gas pipeline to Vancouver Island cleared a major hurdle Wednesday when U.S. regulators announced approval of that country's share of the project.

The U.S. Federal Energy Regulatory Commission (FERC) decision allows construction and operation of the U.S. portion of the 137-kilometre "GSX" line -- leaving only the Canadian portion in doubt.

B.C. Hydro and Oklahoma-based energy company Williams are partners in the line that would run across Washington state west from Sumas, then underneath the Strait of Georgia to Vancouver Island.

Hydro says the line is crucial to meeting power demands on Vancouver Island, where the current electricity supply infrastructure is close to capacity and brownouts are threatened for both industry and residents.

Natural gas transported on the GSX pipeline would fuel electric generation facilities on Vancouver Island.

A related pipeline application to Canadian authorities was also filed in April 2001 -- but those hearings stalled in April 2002.

After hearing from aboriginal groups who said their concerns were not getting sufficient attention, and from environmental groups seeking more information about the project's air-quality impacts, a joint panel of the National Energy Board (NEB) and the Canadian Environmental Assessment Authority postponed hearings.

It instructed Hydro and Williams to address environmental and aboriginal concerns and subsequently said it expects to announce later this month a schedule for a resumption of hearings.

Some parties including the Cowichan First Nation are still not satisfied that their concerns have been dealt with, although Hydro says it is involved in discussions to resolve them.

Hydro revealed this month that the cost of the project has climbed $80 million since the original application to the NEB -- and attributes some of that increase to the delays.

"We are extremely pleased that the [U.S.] commission is acting in such a timely manner," said Williams' Northwest pipeline system marketing vice-president Larry Larsen.

Williams is still pursuing state and local permits in Washington and finalizing agreements with landowners along the right of way.

"We are still waiting for a revised schedule for the regulatory process from the NEB in Canada and a date for a public hearing to begin, which if not resolved soon, could cause even more unnecessary delays," said B.C. Hydro generation vice-president Gary Rodford.

Not all observers are convinced the project is necessary.

Canadian energy policy expert Mark Jaccard, a professor at Simon Fraser University, questions the need for the project given the wide range of energy generation options available on Vancouver Island.

Jaccard noted that a shortlist of candidates to join the B.C. Hydro grid as private generators of electricity includes several on Vancouver Island.

The shortlist was announced earlier this month by Hydro, which is looking at meeting the province's annual increase in demand for electricity through contributions from private producers.

For example Norske Canada is proposing to sell Hydro 697 megawatts -- enough electricity for 70,000 people -- by increasing the energy efficiency of two pulp mills on Vancouver Island.

By contrast a gas-fired generation plant proposed by Hydro for Nanaimo -- using GSX-supplied gas -- would generate 265 megawatts at a cost of $370 million.

Jaccard noted that the projects on the shortlist have a total annual output of 3,000 gigawatts.

"This is just the tip of the iceberg in terms of what is potentially out there because this [request for proposals] was limited to existing customers who want to self-generate -- as opposed to any independent power producer wanting to develop a local wood waste or small hydro site," Jaccard said.

"The GSX and Nanaimo generation projects are not needed at this time."

He added that it would be cheaper and more environmentally friendly to simply renew aging transmission cables that currently carry electricity to Vancouver Island from the mainland.