National Fuel Gas Company plans to expand its natural gas pipeline operations to serve new markets in New York and the Northeast by extending the Empire State Pipeline.

This extension project will provide an upstream supply link for the Millennium phase I pipeline and will transport natural gas supplies to downstream customers, including KeySpan Energy Corp.

National Fuel hopes to begin the regulatory and environmental permitting process after June. The preliminary cost for developing the project is estimated at $140 million and the targeted in-service date for this pipeline expansion is late 2006.

National Fuel owns and operates the Empire State Pipeline, a 24-inch diameter natural gas transmission pipeline that originates at the Canadian border at the Chippawa Channel of the Niagara River. The pipeline runs 157 miles east to near Syracuse.

The extension project will involve building a pipeline south from the existing line near Rochester to connect with the Millennium pipeline near Corning. Empire will build about 83 miles of 24-inch diameter pipeline and two compressor stations along this route to collectively produce 23,000 horsepower.

"We believed that the acquisition of the Empire State Pipeline would provide us with strategic growth opportunities, and today's announcement supports that," said Philip C. Ackerman, chairman, president,and CEO of National Fuel. "We are now poised to expand the Empire system to create a much-needed supply path for natural gas to reach customers in New York State and the Northeast."

The pipeline extension will be designed to move at least 250 million cubic feet of natural gas per day and will provide customers on Empire with access to a number of underground storage facilities and local distribution companies' pipeline systems in New York State.

KeySpan, the largest distributor of natural gas in the Northeast, plans to subscribe for at least 150 million cubic fee of natural gas transportation service per day on Empire and the Millennium pipeline system, National Fuel said in a release. KeySpan, which serves more than 2.5 million gas customers in the Northeast, is also New York's largest investor owned electric generator and operates the Long Island Power Authority electric system, serving 1.1 million customers.