By Edward McAllister
NEW YORK (Reuters) - The bright lights of New York City may burn a little cleaner next year, when the first major natural gas pipeline in a generation is built to connect the largest U.S. metropolis to new energy-producing regions across the country.
Spectra Energy's controversial $1.2 billion pipeline, which received approval from the Federal Energy Regulatory Commission (FERC) on Monday, has met with stiff opposition from local communities, but is seen as a key to reduce New York's reliance on dirtier oil-based fuels.
The 20-mile (32-km) line, which will connect New York to neighboring New Jersey, will deliver about 800 million cubic feet of natural gas per day to homes and businesses across the city from prolific shale deposits in Pennsylvania and southern states whose rapid development over the last five years has transformed the U.S. energy outlook.
"This approval clears the way for a much-needed new natural gas supply in the New York City region," New York's deputy mayor for operations, Cas Holloway, said on Tuesday.
While the densely populated U.S. Northeast is the biggest heating oil market in the world, New York City is phasing out higher-polluting fuels in favor of the country's growing supply of natural gas.
One of the dirtiest grades of fuel oil -- No. 6 -- will no longer be used in New York by 2015, under city regulations. A halving in the use of fuel oil by 2013 could save about 120 lives a year, according to the mayor's office, but requires more infrastructure if natural gas is to take its place.
And while natural gas offers a potential reduction in pollution, it is also much cheaper, given rocketing shale production. On Monday, fuel oil was priced around $16.50 per million British thermal units in New York Harbor. Natural gas at the New York citygate was $2.70 per mmBtu.
"This project will enhance the reliability of our gas system, and help us meet a growing demand for natural gas," New York gas distribution company Con Edison said in a statement. "The project will also help improve air quality in New York City."
Con Edison is targeting 7,000 large buildings that burn fuel oil in the city to switch over to other fuels.
But Spectra's project is strongly opposed by residents and environmentalists wary of increased natural gas production that relies on hydraulic fracturing, or "fracking", a process to release gas trapped in shale by blasting the rock with chemical-laced water and sand deep below the surface.
Opponents say the process contaminates water supplies. Energy companies deny such a link.
"It's a very simple equation: The more buildings that switch to gas, the more hydrofracking will take place in NY state," New York resident Stephanie Low said in a letter to FERC this month.
The New York Department for Environmental Protection is mulling whether to lift a ban on fracking in the state and a decision is expected sometime this year.
Spectra's pipeline, which the mayor's office says will be the first "major direct" pipeline expansion to the city in over 40 years, will link to the company's Texas Eastern and Algonquin pipeline networks, sourcing gas from the Marcellus shale in Pennsylvania as well as other producing pockets in the Rockies and Gulf region. It is expected to be ready by November 2013.
(Editing by Dale Hudson)