Federal Appeals Court Rules in Favor of Islander East - Duke Energy

News Release
Oct. 6, 2006

Federal Appeals Court Rules in Favor of Islander East

BOSTON AND NEW YORK – The Second Circuit Court of Appeals yesterday ruled that the Connecticut Department of Environmental Protection (CTDEP) had no legal basis for denying a water quality certificate to the Islander East Pipeline Company, L.L.C., for the interstate natural gas pipeline project that Islander East proposes to construct across Long Island Sound.

This ruling advances Islander East's efforts to meet the public's growing need for more natural gas. Islander East will provide the means to deliver natural gas supplies from throughout North America to markets in Connecticut, Long Island and New York City. This will exert a stabilizing influence on gas and electricity prices, provide potential new sources of electricity supply to southwestern Connecticut and improve air quality in the region.

"We believe that the court made a fair and well-reasoned decision that clears the way for the CTDEP and Islander East to work together to address the few  remaining issues that need to be addressed prior to construction," said Bill Yardley, vice president, Duke Energy Gas Transmission, a partner with KeySpan  in Islander East.

The CTDEP is now required by the court to conduct a further review of Islander East's application and to either provide record evidence in support of a denial or to clear the way for the Islander East project to move forward, in either case in the next 75 days. If the CTDEP chooses the latter course, Islander East is prepared to work collaboratively with them. 

"Ultimately, this ruling demonstrates that the federal appeals process can play a valuable role in resolving differences between state and federal regulators which affect the timely approval of interstate energy projects," said Yardley. "We are optimistic about the prospect of getting beyond past differences and begin actively working with the CTDEP to construct and maintain a natural gas pipeline that addresses the region's energy needs in an environmentally responsible manner. Islander East will enhance the security and reliability of the natural gas delivery system in the region. The northeast is interdependent and interconnected when it comes to energy, just as with economies and transportation."

The federal court now joins the Federal Energy Regulatory Commission (FERC), the U.S. Department of Commerce and New York State in recognizing the importance of Islander East in the energy future of the Northeast.

In 2002, FERC issued its final approval authorizing the construction and operation of approximately 50 miles of natural gas pipeline facilities in Connecticut and Long Island. FERC concluded at that time that the project meets the test of public convenience and necessity benefiting the public interest.

Previously, FERC issued an environmental report finding the project will have minimal and temporary adverse impact on the environment. New York regulatory agencies soon followed suit and issued the necessary permits to Islander East.  The Energy Policy Act of 2005 made it possible for Islander East to make its case in front of the U.S. Second Circuit Court of Appeals.

Islander East (www.islandereastpipeline.com) is an equally owned, limited-liability company formed between the subsidiaries of KeySpan Corp. and Duke Energy.

A member of the S&P 500, KeySpan Corporation (NYSE: KSE) is the largest distributor of natural gas in the Northeast, with 2.5 million gas customers and more than 12,000 employees.
 
KeySpan is also the largest investor-owned electric generator in New York State and operates Long Island's electric system under contract with the Long Island Power Authority for its 1.1 million customers. With headquarters in Brooklyn, Boston and Long Island, KeySpan also manages a portfolio of service companies. They include: KeySpan Energy Delivery, the group of regulated natural gas utilities; KeySpan Home Energy Services, a full-service energy company for residential and small commercial customers; and KeySpan Business Solutions, a full-service energy company for business customers. KeySpan also has strategic investments in natural gas exploration and production, pipeline transportation, distribution and storage, as well as Canadian gas processing and fiber-optic cable. For more information about the company, visit KeySpan's Web site at: www.keyspanenergy.com.

Duke Energy Gas Transmission (DEGT) is a North American leader in the long-haul transportation and storage of natural gas. For more than a half-century, DEGT and its predecessor companies have developed the critically important pipelines and related energy infrastructure that connect natural gas supply sources to premium markets. Based in Houston, Texas, the company's assets include more than 18,500 miles of transmission pipeline and more than 250 billion cubic feet of storage capacity in the U.S. and Canada. DEGT also has natural gas gathering, processing and distribution assets and natural gas liquids operations that are among the largest in Canada. More information can be found at: http://www.degt.duke-energy.com.

Duke Energy is a diversified energy company with a portfolio of natural gas and electric businesses, both regulated and unregulated, and an affiliated real estate company. Duke Energy supplies, delivers and processes energy for customers in the Americas. Headquartered in Charlotte, N.C., Duke Energy is a Fortune 500 company traded on the New York Stock Exchange under the symbol DUK. More information about the company is available on the Internet at: http://www.duke-energy.com.

Contact: John Sheridan
Phone: 617-560-1444
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