Pipeline Foes Appeal to FERC

This map shows approximate routes of four proposed natural gas pipelines running through Virginia. Image credit: Dominion Pipeline Monitoring Coalition

This map shows approximate routes of four proposed natural gas pipelines running through Virginia. Image credit: Dominion Pipeline Monitoring Coalition. (Click for larger image.)

by James A. Bacon

A coalition of pipeline opponents has called upon the Federal Energy Regulatory Commission (FERC) to conduct a comprehensive review of the need for four natural gas pipelines running through Virginia rather than reviewing them on their individual merits. The coalition, which includes numerous environmental and landowner groups, was joined by two Virginia state legislators: Sen. John S. Edwards, D-Roanoke, and Del. Joseph R. Yost, R-Giles.

Foes have raised a host of issues regarding the impact of the proposed pipeline projects on the environment and landowners. While the pipelines would be buried, their rights of way would be maintained clear of trees and brush, they argue, creating erosion issues, disrupting wildlife habitat, despoiling view sheds, and harming local agricultural, craft and tourism economies. Wider impacts from bolstering the consumption of natural gas would include an increase in the greenhouse gases implicated in global warming (CO2 and methane) and environmental damage caused by fracking.

Of the four pipeline projects, the Atlantic Coast Pipeline (ACP) and the Mountain Valley Pipeline (MVP) have been actively mapping of routes, and both have filed applications with FERC. Both MVP and ACP say demand for natural gas is increasing as electric utilities switch from coal to gas, and both companies have lined up customers to purchase most of the gas that would move through their pipelines. The public need, they say, is demonstrated by the fact that the pipelines have hard contractual commitments for the gas.

FERC has not accepted previous requests for comprehensive reviews, and the response of a FERC spokesperson did not suggest than any re-evaluation of its position was imminent. “The commission’s stance has been that we don’t develop infrastructure, that we process the applications that come through FERC,” spokesperson Tamara Young-Allen told the T-D.

But pipeline foes are giving it another try. The details of their arguments can be found in a letter to FERC addressing the Atlantic Coast Pipeline specifically.

Pipeline foes say FERC is required to determine whether a pipeline applicant has made efforts to minimize adverse effects upon landowners, communities, existing pipelines and their captive customers. “To demonstrate that its proposal is in the public convenience and necessity, an applicant must show public benefits that would be achieved by the project that are proportional to the project’s adverse impacts.”

The Atlantic Coast Pipeline, states the letter, does not provide any benefit that existing pipelines could not provide. Central to their argument is that new pipelines are not needed to meet the market’s growing demand for gas.

Evidence shows that significant existing pipeline capacity may be available to serve the South East and Mid-Atlantic markets. … Gas pipelines nationwide on average utilized only 54 percent of their capacity between 1998 and 2013. FERC has similarly acknowledged the underutilization of pipeline capacity and found that improved scheduling of natural gas deliveries would make “more efficient use of existing pipeline infrastructure.”

ACP would tap bountiful Marcellus shale gas deposits in West Virginia and Ohio, creating a supply alternative in Virginia and North Carolina to gas originating in the Gulf of Mexico. But foes argue that existing or already-approved pipelines to the north can move gas from Marcellus to the existing Transco superhighway pipeline, which serves Virginia markets. In the past Transco moved gas only from south to north. But by 2017 it will be able to move gas both directions, providing a way for Marcellus gas to reach Virginia markets.

Utilizing the existing infrastructure to the maximum extent possible, foes argue, would minimize the disruptive impact of building new pipelines.

For an in-depth discussion of the four Virginia pipeline projects, see “A Plethora of Pipelines.”

Update: Dominion, managing partner of the ACP, has provided a more detailed response than appeared in the T-D article: FERC will assess the cumulative effect of ACP and other proposed projects within a three-state region. ACP anticipates minimal impact due to “implementation of specialized construction techniques, the relatively short construction time frame in any one location, and carefully developed resource protection and mitigation plans.”

While critics have called for a programmatic Environmental Impact Statement — “a much broader, speculative regional analysis” — FERC has said in recent rulings and statements that an EIS  would not present “a credible forward look and would therefore not be a useful tool for basic program planning.”

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24 responses to “Pipeline Foes Appeal to FERC

  1. Of course – this is yet another opportunity to discuss whether or not FERC regulation is needed instead of the free market – as we are NOT talking about the govt nor health and safety – purely commerce.

    So what say you?

    why should FERC be regulating in the first place?

    here we have a perfect example of incompetent govt interfering with the free market, killing jobs, increasing the cost of something, etc, etc.

    So for the guy who says he’s libertarian and favors free markets whenever health and safety are not at issue – what justifies FERCs ham fisted, incompetent and bureaucratic involvement?

    • Larry, for the cluster of energy & environmental issues I’m covering under the Dominion sponsorship, I’m trying to stick to news reporting and analysis, which means not engaging in ideological crusades. I’ll have to sit this one out.

  2. It’s okay – but I’ll bring it up again the next time you choose to discuss regulation… which you do – do.

    right?

    the “reporting” here really does go to WHY Dominion has the “right” to seek the govt”s approval to build a pipeline.. and HOW – other companies CAN ALSO do the same thing.

    And given the controversy and opposition – I think it’s certainly germane as to WHY they have the apparent “right” to build a pipeline on land they do not own.

    isn’t that every bit as much “reporting and analysis” as anything else?

    I point out that some pipeline companies obtain their right-of-way largely by willing seller/willing buyer transactions.. leaving only the small number to be done with ED.

    Seems ODD to me the same folks who talk about the abuse of Govt in regulating – seems to have no such qualms over the govt granting the right of eminent domain to private companies…

  3. I sat through a Friends of Wintergreen anti-pipeline presentation Saturday before last at a neighborhood meeting. No one in support of the pipeline got a chance at the podium and once they spotted me as basically in support, they wouldn’t even recognize me for questions. It got kind of humorous how they ignored my raised hand. No matter.

    Their best argument is that Dominion did not consider the alternative routes. This is the same argument that the SCC recently accepted when rejecting a Dominion solar proposal, but in that case state law requires a consideration of alternatives. I’m not sure what the standard is with FERC. And to support the opponent’s point, and to some extent Larry’s, I am getting the impression that FERC is far more hand’s off than the SCC.

    The FoW group states it is not opposed to pipelines or fracked gas but is only upset about that choice of route, when other options – using existing right of way – are available. This is a rational argument but I’m not sure it will wash with FERC. Likewise it is rational that FERC might weigh all of the pipeline proposals and develop a comprehensive view. I can’t argue with that. But again, as I’m learning, FERC is not the SCC….I am in no way advocating for the current route and would be happy if somebody other than the utility was the final decision maker on that.

    Their weakest argument against the pipeline is their scare tactics about safety. Transporting gas by pipeline is the safest method by far. As a Wintergreen owner I get fuel from propane trucks and one of those trucks could wreck and start a major fire – far more likely than a pipeline rupture.

    And I learned something that should calm people down, if they can be calmed down. The pipeline will cross under the Blue Ridge through a long tunnel, and there will be no right of way with a big wide swath of cut trees going over the mountain at all. The cut will start where the tunnel terminates, of course, but there are other right of way cuts through the area. Plenty of them.
    I asked one of the opponents how wide a ski slope is, since that is a big treeless cut down the mountain and she said – “that’s different.” I think it will look very much the same.

    The argument about how these rights of way are obtained by public service companies is apparently settled law. Mostly federal law. And without that law, arguably, none of these projects would ever be built for a reasonable price. If you think this will be disruptive, if cultural attachment will be destroyed, I suggest you read a little history of the Blue Ridge Parkway itself and the hundreds or even thousands of families who lost their homes and farms and majestic views just so tourists could drive that road.

    A growing season after the construction crews leave, most people will forget the pipeline is there. If they are allowed to.

  4. I still think when folks blather on about nasty govt regulations and then turn around and support govt giving Eminent Domain to for-profit companies is a bit perverse.

    I guess they like their govt when it does things they like and they hate their govt when it does things they hate, eh?

    regulations are bad – eminent domain is good

  5. Unfortunately, FERC has a very low need threshold. If enough firm commitments exist for gas flow in a pipeline, FERC usually considers that the “need” for the project is met. The owners of the Atlantic Coast Pipeline project have committed to about 85% of its capacity. That normally suffices for FERC approval. However, the same commitments for supply could be transferred to other projects to smooth their approval.

    As Jim has noted, four projects are vying to serve the Virginia/North Carolina market. All of this capacity is allegedly required to meet the increased demand for natural gas to burn in power plants and for LNG exports. The long term projection for the traditional use of natural gas is essentially flat.

    All of the natural gas-fired combined cycle plants that Dominion has proposed through 2030 will be connected to existing pipelines. Proposed expansions to the two major pipelines serving Virginia, Transco (Atlantic Sunrise) and the Columbia Gas (WB XPress) pipelines, will provide over 3 billion cubic feet per day (Bcf/d) of additional capacity. These expansions will bring gas supplies from both the Gulf Coast and the Marcellus regions, and require 186 miles of new pipeline construction costing about $3.5 billion.

    The Atlantic Coast Pipeline will bring 1.5 Bcf/d of gas from the Marcellus over 550 miles of pipeline at a cost of $5 billion.

    Expansion of the existing pipelines will provide 100% more capacity than the Atlantic Coast Pipeline, at a 30% lower cost, while requiring 66% fewer miles of new construction. The other proposals such as the Appalachian Connector and the Mountain Valley pipeline would also be unnecessary with the expansion of the existing pipelines.

    One can understand Dominion’s and Duke’s desire to pay themselves rather than someone else to transport the gas. However, they will do so at a higher cost to the ratepayers and a much more severe impact on Virginia’s environment and recreational and historical resources.

    If this was not an interstate endeavor, but rather decided by the SCC, it is unlikely that they would meet the requirements to show that the ACP is the best alternative, providing the lowest cost and the greatest public good. Because better alternatives exist, they would be building the Atlantic Coast Pipeline solely for their own gain and not to serve the “greatest good” and thus would likely not meet the standards to qualify for eminent domain in Virgina. The federal standards for the FERC to award eminent domain rights is much more lax, to the detriment of landowners in Virginia, who would rather not have their property disrupted by the many impacts associated with the pipeline.

    Perhaps the SCC or the Attorney General should weigh in with FERC on the adverse consequences suffered by Virginia landowners and ratepayers in order to provide more profits to shareholders of the holding companies.

    • In theory the landowners will be compensated, and there are going to be at least some who are both landowners and shareholders. Lots of Virginians own D stock. The compensation received is supposed to be fair market value and I thought a year ago that the opponents, if they really wanted to make a difference, should focus on changing state law to require better compensation. There will be a price at which the utility goes away.

      That would pose a very interesting dilemma for the government, of course, since it has its own uses for eminent domain and its own vested interest in controlling the level of compensation.

      Watching this debate I’ve recalled there are many people still hoping for a new interstate highway which would follow a very similar route across the Blue Ridge and would be far, far more destructive to “cultural attachment.” Could any interstate be built today in the Realm of NIMBY?

      In this state, for a utility to build a power plant, it must go through a certificate of need process. That process is in a bad light these days in the medical arena, but in my view it is vital when dealing with a monopoly utility facing no retail competition and enjoying a statutorily-dictated profit margin. I suspect the rules that make it easier to build one of these pipelines go back for decades and again, given the Realm of NIMBY, I’m not sure what the alternative would be now.

      • One of the shortcomings of eminent domain is that it presumes that all values can be reduced to money. In Jim’s article on cultural attachment, he notes that no amount of money can compensate for the attachment many people feel to their land, community and way of life. Courts often cannot see much beyond awarding a bit more than market price and calling that “justice”. We have strayed far from our original principles of a fair market being a willing buyer and a willing seller. Organizations have bent laws, tax policy and regulations to favor the interests of a few over the interests of the general public.

        The federal law that created FERC requires them to promote the development of natural gas infrastructure as well as to regulate it. In most other circumstances we would consider that a conflict of interest. Perhaps that is why their evaluation of need and alternatives is so much less stringent than state requirements. Yet their rulings supersede the states’ authority.

        People are looking for common sense and fairness in these proceedings. Anything less continues to erode our confidence that we have a government which is of the people, by the people, and for the people.

  6. fundamentally – does any pipeline company need FERC approval if they secure their own right-of-way via willing seller-willing buyer transactions?

    what exactly is FERC “approval” needed for?

    what exactly is FERC “regulating”?

    • Any energy project such as a pipeline or transmission line that crosses state boundaries comes under FERC’s oversight rather than the state’s.

      FERC is required by law to promote the development of natural gas resources and to regulate them (COPN, rates, etc.). At this time, FERC does not see their job as one of determining the optimal development of projects to serve the public need. They look at each project on a case by case basis. If the project developers can show that they have firm contracts for most of the gas carried by a pipeline then FERC believes that “need” for the project has been established.

      This approach quite often produces poor results and saddles consumers with unnecessary expenses. In 2006, FERC approved applications for 11 LNG import terminals for a need which never materialized. Dominion is now taking one of those facilities (Cove Point) and adding export capabilities.

      When Australia started exporting their plentiful natural gas it caused domestic prices to increase 300-400%. Many foresee the same outcome in the U.S. FERC does not believe that its role is to evaluate the strategic and economic consequences of these energy projects. Since they have shut the states out of the process – then whose job is it? It is left up to the applicants to pursue their own self-interest and they are granted the power to seize property from unwilling sellers to further that end.

      • Tom, you are correct as to FERC’s jurisdiction over interstate natural gas lines, but not as to its jurisdiction over interstate transmission lines. The states retain construction and siting authority over all electric transmission lines.

        FERC regulates (after a fashion) the commerce that flows over those electric transmission lines, but not their approval for construction purposes.

        I agree with you that FERC rarely sees a project that it fails to approve.

  7. Musing … wonder if any of the proposed routes traverses either Steve’s or Larry’s property.

    • nope… I just feel strongly that eminent domain should not be granted to for-profit ventures…

      any for-profit venture that needs assets – needs to look for willing buyers… stockholders, partners, etc….

      I think NO – NADA – for-profit venture should EVERY get land via eminent domain – period.

      that should be the very first question on ANY application to use ED –

      question #1 – is this a for-profit venture?

      question #2 – is you answered yes to question 1 – go away.

    • I have a house in Nelson County about three or four miles from the route. Another route change could bring it through my neighborhood. I certainly have a financial stake in the viability of the entire Wintergreen property and its brand, but I remain convinced that the impact will be minimal — AFTER the construction is complete. The construction process will be disruptive. No question.

      • The landowners wish that would be the case, but that probably won’t be so. Cities in the Shenandoah Valley are very concerned about long-term disruption of their drinking water supplies as a result of the pipeline as are individual landowners. The blasting required to trench in the karst formations very likely will disrupt the ancient aquifers with unknown consequences. This is high quality freshwater whose damage would be difficult to remedy.

        Farmers will be permanently cut off from much of their land as it is prohibited to drive many farm vehicles and implements over the right-of-way. People’s evacuation routes are also cutoff, in case of an accident on the pipeline, depending on how the pipeline is situated on their property. Organic farmers will lose their livelihood as the right-of-way passing through their property is regularly sprayed with herbicides. Intentional communities, based on the unspoiled natural beauty on which they are sited will no longer have the same character that made the community possible. Yogaville, a world renowned meditation center, will be plagued 24 hours a day with the noise from the compressor station which may cause the closing of the facility. I could go on, but you get the idea. This is not just a short term minor inconvenience for these people. They are not just posturing to get a better price from Dominion. Life as they now know it will be forever changed as a result of the pipeline. Surely, we are intelligent enough to find a better solution.

  8. OABTW, that map’s a stunner. If all those lines are built it would be instructive to know what their average combined facility utilization percentage would be. Can the market by any stretch of the imagination be THAT underserved?

    • The Department of Energy published a report in 2014 that stated that sufficient capacity is present in existing pipelines.

      The report explains, “Another reason that pipeline capacity additions in the Reference Case are not greater is that, in many regions, existing pipeline capacity is not fully utilized during many parts of the year. Average capacity utilization between 1998 and 2013 was 54%.” “For comparison, projected pipeline utilization for the top 200 pipeline segments by projected flow volume in the Reference Case in 2030 is 57%.”

      Even if more coal-fired and nuclear plants are retired than expected, there is sufficient capacity in the existing system to handle the demand. The DOE report states, “Projected pipeline utilization for the top 200 pipeline segments by projected flow volume in the model in 2030 rises to 60% in the Intermediate Demand Case and 61% in the High Demand Case, compared to 57% in the Reference Case.”

      Several independent studies report that production of affordable gas ($4 mcf) from the Marcellus will peak about 2018-2020. After that, production will drop off significantly or prices will rise substantially to provide more supply.

      Does it make sense for Dominion to build a $5 billion dollar pipeline to serve two plants that will already be adequately served by an existing pipeline?

      Within 5-6 years, solar will be less expensive than a gas combined cycle plant (even more so as gas prices increase). Even Dominion recognizes that in their Integrated Resource Plan describing new expansion. No new large gas fired plants are projected after 2019 (just after the Atlantic Coast Pipeline is projected to be in service). Why build an 80-100 year pipeline to serve a need that is already accommodated.

      Some organization must be willing to see the big picture and protect the interests of the general public. There are many alternatives that are less expensive, cause far less environmental degradation, and provide a greater boost to the economy.

      • thanks Tom..

        the big unknown – at least to me is how long at what rate of use can we expect the supplies to be ample enough to not escalate in price?

        and then I have my other question –

        which is – what fuels do we have to “top off” base-load and “complement” renewables?

        I only see natural gas. If we run out of gas – what fuel replaces it that we can use for “peaker” generation?

        If the answer is – it’s the only one – then I think all this discussion about pipelines and “serving the public interest” needs to address the criticality of the purpose and role of natural gas.

        we should not be using it to export or generate base load – if we have finite reserves that won’t last forever.

        • Larry,

          Two independent studies have concluded that supplies of affordable gas ($4 mcf) from the Marcellus will begin to decline beginning about 2018-2020 (just when the pipeline is beginning operation). More gas could be available at a higher price. We have seen that new technologies have made drilling cheaper and more productive, but the studies show that they are reaching diminishing returns.

          Dominion’s studies conclude that most of their new generation after 2019 will come from solar. They project that additional peakers will be required to balance the variability in supply. Although, the cost of running peakers is contributed mostly by capital costs (since they only run about 10% of the time), higher gas prices would increase those costs too.

          You are right in suggesting that natural gas is an important strategic fuel and should be used wisely. Several decades ago its use was prohibited in new power plants because of supply shortages. I suspect that as natural gas prices increase and storage costs decline, batteries, flywheels, etc. will contribute a good share of the peaking and supply smoothing duty since they respond much faster than gas-fired peakers.

          Natural gas is not a solution to CO2 emissions, only a stopgap measure. Yet we are embracing gas-fired power plants as a long term solution.

          The big question is what happens when solar coupled with storage is cheaper than the combined cycle plants. This could happen as early as 2020 – 2025. As you recall, this is exactly what is happening in Kauai now, and they are saying it is cost effective to mothball their combined cycle plant after only 12 years of operation.

          What would happen if the new Dominion combined cycle plants could no longer be economically dispatched 80% of the time after only 5-10 years of operation? I guess they first would be used to displace more old coal plants more rapidly than planned to keep creating revenues. But there is a real chance of them becoming stranded costs for a substantial portion of their projected life span. The SCC needs to take a longer more strategic view of this to protect Dominion and the ratepayers.

  9. I doubt seriously all routes get built. It’s probably whoever gets approval first…

    but here you have a govt agency that is apparently going to decide winners and losers – at expense to the public they’re intended to serve.

    I need to go back and look at specifically what FERC is doing on this beyond “deciding” a route for each applicant.

    The fact that FERC “does not “normally” do comprehensive reviews is hilarious. after all the fru fru over the EPA stuff.

  10. This has been a good discussion around the edges of Larry’s initial question: “why should FERC be regulating in the first place?” But TomH poses an issue that worries me: “If this was not an interstate endeavor, but rather decided by the SCC, it is unlikely that they would meet the requirements to show that the ACP is the best alternative, providing the lowest cost and the greatest public good. Because better alternatives exist, they would be building the Atlantic Coast Pipeline solely for their own gain and not to serve the “greatest good” and thus would likely not meet the standards to qualify for eminent domain in Virgina. The federal standards for the FERC to award eminent domain rights is much more lax, to the detriment of landowners in Virginia.”

    I agree, there’s a self-serving aspect to this that leaves a bad odor. Why do we need all this gas pipeline capacity? Interestingly, the amount of oil moving by rail in the immediate past has skyrocketed, with huge consequences to public safety and the environment, yet we don’t see much interest in building interstate oil pipelines (putting aside Keystone — which really ought to be built). Yet gas pipelines are being proposed all over the place — why only gas? Why both Dominion and Duke? Why won’t FERC demand answers to questions the SCC would ask? Yes, at least, the SCC should intervene at FERC and ask those questions there.

    But Jim and Larry ask a more fundamental question: why have CPCN requirements at all? The problem with any CPCN law is, finding the “public interest” is so subjective its determination amounts to blatant political approval, nothing more nor less. In this country, we developed CPCN as a process to complement regulation of a monopoly such as a public utility — the theory you always hear is, who wants to have two sets of utility wires down the street when one can do the job, provided, when you allow only one provider to use the public space, you don’t let that one provider demand monopoly rents from customers. We worked through all these economic theories in the context of canal and railroad regulation: shades of Upton Sinclair and the great agrarian revolt against monopoly rail shipping rates. We even said, so long as the one allowed provider accepted all the regulatory consequences including regulated profits, we would grant it the power of eminent domain (because, if the one provider was performing a truly public service, in the place of government, why shouldn’t it have the same right to take private property as government?).

    The concept of a “regulated monopoly” hangs together conceptually, but it gets really messy when the same entity is a regulated public utility for some purposes, a private investment vehicle for some others, a holding company embracing unregulated enterprises that provide goods and services to the regulated ones, a set of utility functions regulated in isolation by different jurisdictions that refuse to look at the whole enterprise comprehensively.

    I don’t share Larry’s knee jerk rejection of eminent domain for private companies per se, but that right must come with conditions, and if the FERC isn’t applying those conditions fairly and consistently it, and the DC Court of Appeals, should be told so by the SCC. Otherwise, Larry is right, the private company should have no right to condemn property.

    But could we envision a world with utilities and without CPCN laws entirely? I’m not persuaded that works. We need to build public infrastructure and the way government does things is not an inspiring success story or a proven cost-effective way to go. Private, regulated “public utilities” have a better track record for efficiency than government. On the other hand, there is no justification whatever for imposing CPCN requirements on a private business which is NOT a regulated monopoly. As for hospitals, who knows what they are today: monopoly or not, private or not, regulated or not, public service or not? If the situation for public utilities is merely complicated, our health care infrastructure is absolutely Byzantine.

    • Acbar,

      You and others have raised many excellent points. It begs a re-evaluation of whether the ways we have done things for the past 100+ years are the best ways for the future.

      Several states are looking at making utilities just a “wires” company that is open to connecting generation from multiple sources including residential and commercial distributed generation. Utilities could continue to compete in the generation market, but solely in the competitive ISO (PJM) marketplace without a rate of return guaranteed by regulators.

      This would probably be a hard sell in Virginia since it requires utilities to be open to a more competitive marketplace. Currently, with Dominion’s influence over the GA and SCC they can maintain a more protected business climate that moves in the direction they desire. The only drawback is that stifles innovation and increases customer costs.

      If we shift our attention away from “cost of service” rates which repay utilities for what they build, and replace it with an evaluation of the best way to serve the ultimate need: heat, cooling, light, comfort, etc.; we may find that many of these issues decline in importance. A well researched study showed that by 2050 we could support an economy 158% larger than today’s with our present energy consumption, without using coal or oil. That would avoid the need for more pipelines, transmission lines, etc. and would reduce the need (for utilities at least) for eminent domain.

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