Gas Pipelines in Virginia’s Reconfigured Energy Future

The furor over construction of the Atlantic Coast Pipeline (ACP) and the Mountain Valley Pipeline (MVP) continues unabated this week. News reports have highlighted legislators in Richmond joining pipeline protesters outside the state Capitol and, more colorfully, the antics of a dissident known as “Red” who has ensconced herself in a tree to block clearance of the pipeline route. But the combatants and the media are overlooking the biggest story of all — how the pipelines fit into Virginia’s energy future defined by electric grid modernization and carbon cap-and-trade.

The immediate issue revolves around state regulation of pipeline crossings over mountain streams in the pipeline paths. Foes worry that construction on steep, erosion-prone mountain slopes in karst terrain marked by sinkholes and underground streams will cause sediment runoff to harm wells and other water supplies. State Sen. John Edwards, D-Roanoke, expressed the apocalyptic views of many when he said that the proposed 303-mile Mountain Valley Pipeline “could ruin our way of life.”

ACP spokesman Aaron Ruby reiterated the pipeline’s assertion that the 600-mile pipeline had received “the most thorough regulatory review of any infrastructure project in Virginia history.” In its 25-year history as an agency, confirmed a Department of Environmental Quality spokesperson earlier this month, DEQ has never conducted a project review on the scale of either pipeline.

But pipeline foes say that the regulatory views still aren’t rigorous enough and that DEQ should issue permits for hundreds of individual stream crossings to address the unique conditions at each site.

That line of argumentation led to what may be the best rhetorical flourish of the entire controversy (sympathize with him or not) by Dennis Martire, mid-Atlantic vice president of the Laborers International Union of North America. Martire termed the call for more intensive review of water crossings an attempt to “distort and politicize” the regulatory process. “No doubt,” he said, “the next thing they’ll demand is a pebble-by-pebble analysis.”

The battle over the pipelines has become a stand-in for the larger fight over national energy policy, sucking in the emotional energy of the global warming controversy. Foes say that there is no public necessity for either pipeline. Instead of building infrastructure that transgresses landowner rights and cuts ugly swaths through pristine mountain vistas, Virginia should be pushing measures to improve energy efficiency and install more wind and solar.

Proponents stand by their assertion that natural gas, while not a zero-carbon source of electricity, is a low-carbon source of electricity, a complement to wind and solar power, and a necessary part of Virginia’s energy future. Opposition to the ACP pipeline, says spokesman Ruby, “will slow down our region’s transition from coal to cleaner energy sources, delaying improvements to our environment.”

The ACP and MVP were launched in 2014 under very different political, regulatory, and market conditions than today. The Obama administration, which took global warming very seriously, looked favorably upon natural gas as a lower-carbon alternative to coal and upon nuclear power as a zero-carbon energy source. At the time, it seemed eminently reasonable for electric utilities to plan to further shift their generating portfolios from coal to gas and to increase pipeline capacity to serve their service territories.

But the environmental movement leapfrogged ahead of the Obama administration. The leading edge of the green movement ceased regarding natural gas as a benign fuel, arguing that if one included methane leakage from gas wells and pipelines, not just the combustion of gas in power plants, the fuel contributed as much to global warming as coal. They contended that Virginia lagged other states in embracing energy-efficiency and that the potential existed to bend the demand curve much lower, obviating the need to add new gas-fired generating capacity. Some environmental groups, but not all, went so far as to advocate that Virginia phase out its nuclear units as well.

The ideas expounded by green progressives, which once seemed radical in the Old Dominion, have gone mainstream. Virginia is in the process now of adopting carbon cap-and-trade regulations designed to reduce utility CO2 emissions 30% by 2030. Meanwhile, the Grid Transformation and Security Act enacted this year has declared it to be in the public interest for Dominion Energy Virginia to build 5,200 megawatts of solar energy, or roughly one quarter of its electricity generating capacity, and to invest heavily in energy efficiency. These regulatory developments have been amplified by the increasingly competitive economics of wind and solar.

Both the ACP and the MVP have gone so far down the regulatory path that there’s almost no chance that the projects won’t be built, so the point may be moot now. But I think it would be a useful exercise to take a fresh look at the pipelines in the light of current regulatory realities to see how they might contribute to the optimal balance of cost to rate payers, environmental sustainability, and electric grid reliability.

The least discussed of this triad is reliability. But reliability, arguably, is the most important — cost and environmental considerations fast become secondary when the lights go out. The East Coast successfully rode out an extreme cold weather event this January, but the so-called bomb cyclone did put enormous stress upon PJM electric transmission system of which Virginia is a part. PJM handled the challenge just fine, but only by calling heavily upon the surge capacity of fossil fuels such as coal and gas, while continuing to rely on the steady input of nuclear. The problem in the future is that coal and nuclear plants in many parts of the country are shutting down.

I have seen no analysis that tells us what reliability looks like under Virginia’s new regulatory regime of 25% or more of intermittent wind and solar, 30% fewer carbon emissions and a commensurate reduction in coal and/or gas, bigger investments in energy efficiency with a resulting bending of the demand curve, and a possible phase-out, desired by some, of nuclear power. Will Virginia burn more natural gas or less in its energy future? And looking back in that light, will Virginians be happy or unhappy that the MVP and ACP were built?

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30 responses to “Gas Pipelines in Virginia’s Reconfigured Energy Future

  1. There was a time when folks knew it was all too complicated to figure out, so they appointed a group of experts to figure it out for them, and they usually went along with the experts’ recommendation.

    Today, we are in the era of “every man decide for himself” — and since we don’t agree, every decision is polarized.

    And our politicians reflect this. They do not know how to compromise but stoke this polarization with their rhetoric, and override or ignore or even throttle the experts they themselves appointed once upon a time.

    Is it any wonder that your good questions are not being answered — after the fact, much less, beforehand when the answers might have affected the decisions made?

    • A big part of the “every man decides for himself” is Virginia’s ethically lethal combination of unlimited campaign contributions and no effective restrictions on politicians spending the campaign money on themselves rather than their campaigns. Those two points in combination constitute legalized bribery. And the biggest shoveler of money through campaign contributions and into the pockets of our state legislators is Dominion.

      My strong suspicion is that one or more of the pipelines will be extended until it gets to the vicinity of Elba Island, GA where a new LNG export terminal is being built. Dominion is lying through omission regarding the real future plans for that gas.

  2. Please list the projects and the quantity of gas each will use that require new natural gas sourcing in Virginia. Do not include any use that is currently supplied by existing infrastructure. I have not yet seen real evidence of verifiable new uses for gas in Virginia that would necessitate this construction.

    Your analysis ignores the facts that efficiency reduces demand and that storage is becoming more and more available every day. These are the answers to your reliability quandary.

    We now recognize that methane, for the first 20 years, is a far more destructive greenhouse gas contributor than is carbon. However, the industry refuses to allow rules to be put in place to measure methane emissions or reduce them.

    You also fail to consider the property rights of landowners. They are central to the values of this country and to the ability of everyone to have a fair chance to achieve the American Dream if they work hard. These pipelines do not even consider the existing use or the needs of the existing business on land they demand. Landowners not only don’t share in the benefits of the pipelines, but they have to accept permanent and severe limitations on their use of their own land. They have to live under the safety protocol determined by the pipeline, and since most are rural, get far less safety than do people in populated areas. Thinner pipe, cut off valves farther apart, and less frequent inspections are forced on rural people, and no consideration is made to increase protections in areas of high risk or areas close to compressor stations. Rural people are told that our air and water are so clean that we can “afford” the pollution of the pipeline. All of the things that compressor station neighbors have to live with are downplayed but in reality much more disruptive and dangerous than admitted.

    The process does not require that applicants provide all of the information up front and in fact, some is not provided to regulators until construction is underway. Information is constantly added, so decisions are never made on complete information. Companies can strategically withhold or underplay key information.

    The process allows FERC to ignore challenges to certification and allow the company to proceed with building using tolling orders. Those challenging certification cannot take additional steps until the agency responds to them so if it waits until the project is complete or nearly complete, the challenge becomes moot.

    Have you seen the license plates of vehicles driven by workers along the pipeline routes? Without exception, they are primarily out-of-state for both pipelines. It’s a shame that unions are representing their Virginia members so poorly. They accepted terms that mean that very few Virginians will get jobs from this process. Folks have been brought in from across the US to cut trees, ignoring the tree cutting expertise that exists in Virginia.

    As an affected landowner who cannot figure out how we will stay in business as this infrastructure tears through the best of our land and fails to consider the needs of our 116 year old business, and whose business needs have been ignored and assumed away, I cannot support these pipelines. I am not convinced there is a need and especially, that it is appropriate to use eminent domain. You can bet that I will be at the front of the battle to share with landowners any profits on natural gas that passes through my land via eminent domain that is ultimately exported. Eminent domain is not intended for export. Export is not public benefit.

    There is no way to fully debate this issue in this space. However, there is a strong need for balance and telling the whole truth – not just part of it, to give all citizens the same standard of safety instead of sacrificing rural people, and to respect landowner property rights.

  3. I’m of a similar view.

    You’d think that sharing the gas with the economically-depressed communities that are going be used for the path of the pipeline would be a no-brainer.

    Dominion and it’s supporters are, instead, touting the economic development benefits further east as if the western communities and property-owners who REALLY could use gas for economic development – are just chopped liver.

    Does Dominion acknowledge this and try to respond to the issue?

    Nope… they’re just gonna stuff it down the throats of those folks apparently.

    While the politics of the pipeline is on a bigger scale – this simple issue of fairness and equity stands out like a sore thumb and I’m surprised that the elected representatives in those areas are not bringing that issue to Richmond.

  4. Until recently we owned a house a couple of miles from the ACP route, and the value of that house was directly tied to the market reputation of the Wintergreen community. So I had a stake in this, although slight compared to others who lived closer to or directly on the route. The construction process will be ugly but absent chaos, it should be quick. I remain convinced that once these pipelines are built the furor will die down, and most people will remain completely unaware of their locations. Not my friend Consumer Advocate, however. That farm is getting hit hard.

    There are already thousands of miles of pipelines, including big ones, crossing Virginia and I doubt any of you know when you are crossing one (well, maybe when driving through Montvale on US 460 outside Roanoke, where the tank farm is located.)

    Thanks to others who write here I’m now much more sensitive to the utility efforts to shift the economic risk of these projects onto utility ratepayers, and that needs to be resisted. Those who profit should bear the risk. But at a macro level I remain convinced that there is value in bringing that gas to the southeast and I am not so parochial that I only recognize that value if if puts money directly into my pocket or my immediate neighbor’s pocket.

    Jim is correct that the Obama administration actively encouraged the use of natural gas as a replacement for more polluting fuel choices – coal and oil. I saw it happen at the shipyard, where the powerhouse just recently switched from oil to gas to comply with Boiler MACT, producing a massive drop in emissions. People who believe we can run this energy-intensive economy simply with solar, wind and “energy efficiency” are either naive or are fully aware they are selling snake oil to rubes.

    Now, are the landowners being properly compensated for their losses? I do not know. On that, elected representatives could change the rules. I have no objection to finding a way for the people hurt by eminent domain to share in the profits, especially any export profits. But the process of eminent domain was not invented for these lines, and will continue to be used into the future. We are seeing a combination of the anger over eminent domain and the anger of a subset of voters who oppose any additional use of fossil fuels. It is a potent combination, but the work seems to be proceeding.

    • I live about 200 meters from a gas pipeline and it’s clear as day that the pipeline is there. The land is cleared along the route which makes the route obvious since it is surrounded by forrest. There are 5′ tall yellow pipeline markers every 50 feet or so including one in the middle of one of my neighbor’s front yard. Once or twice a year there is a leak which we detect from the chemicals used to give gas a foul odor.

  5. I am with vaconsumer advocate and larrytheg on this one. Dominion has told us nothing about whether its own generating units will be using ACP gas. For all we know, the gas will end up and North Carolina and now, likely South Carolina, where Dominion is planning on buying the state’s largest utility.

    It is hard, if not impossible, to see how Virginia electricity consumers benefit from this project. As noted by previous commenters, it is likely that the pipeline workers will come from out of state with companies with more experience in building fossil fuel projects.

    As for Steve H.’s comment that the pipelines will be forgotten — not quite. When was the last time a pipeline was built? The 1950s? The 1970s? People knew a lot less then about the impacts of such projects.

    • I don’t think they’ll stop in South Carolina. There is only one LNG export terminal in operation in the US today – in Louisiana. However, five more are under construction including one in Elba Island, GA. I’m betting at least some of that gas ends up liquified and on ships headed to markets in Europe.

  6. In terms of the physical/scenic impact of pipelines – they are less so than highways (with tanker trucks) and high tension power lines – but they do mark the landscape. We all benefit from roads, electricity and pipelines – even those who live in rural areas .. perhaps especially so.

    And I have no problem, what-so-ever with any for-profit venture. That’s the name of the game in the USA. It’s what has made us one of the most powerful
    economies on the planet.

    And I too am a severe skeptic of a reliable grid powered only by renewables plus some kind of “storage” that I simply do not believe will be cost-effective but my mind can be changed with some proof.

    Obama DID promote gas and so did the Enviros – until knowledge about methane emissions soured it’s appeal as a “clean” fuel that would be a good
    match for renewables.

    However, we ALL make a big mistake when we classify “enviros” as all of the same view. They range from truly middle-of-the-road pragmatic enviros to the fringe wackos.

    For instance , this is from EDF: ” Aligning U.S. Natural GasandElectricity Markets to Reduce Costs, Enhance Market Efficiency and Reliability ”

    that hardly sounds like wack-a-doo world.

    Here’s another: ” Why We Still Need America’s Nuclear Power Plants — At Least for Now”

    I STILL do NOT understand WHY – we want to bring MORE gas to the East part of Virginia for economic development – while providing access to that same gas in western Va is no also just as beneficial .

    All this talk about economic collapse of rural Va and all the time and money spent on “incentives” to bring jobs …. if gas will bring jobs to Eastern Va – why not Western Va?

    • Re: “we ALL make a big mistake when we classify “enviros” as all of the same view. They range from truly middle-of-the-road pragmatic enviros to the fringe wackos.” True. It’s a matter of keeping a balance. I love the beauty of a pristine white water stream. And at the same time: Unless we are going to have Congress declare the entire State of Virginia an expanded Shenandoah National Park and de-populate the State by moving every resident south of I-66/US17 to out-of-State re-education camps, we have to promote a healthy local economy without bucketloads of cultural condescension to those just getting by. If we can’t manage that, we deserve the Donald Trump/Corey Stewart political scene that follows.

  7. Water Quality:

    Dominion calls the water quality review regarding the pipelines, “the most thorough review . . . in Virginia history.” This is more a commentary on the types of projects reviewed in Virginia thus far rather than an indication of the thoroughness of the process.

    Federal law under Section 401 of the Water Quality Act requires the assessment of impacts at each stream crossing. Virginia tried to avoid this by using the nationwide permitting process provided by the Corps of Engineers, but Virginia law requires these projects to avoid the “degradation of water quality”. This is by no means a “pebble-by-pebble” analysis. People are asking the DEQ to hold these large construction projects to the same standards that the DEQ requires local contractors to meet on projects all over the state. Why must a local contractor submit detailed engineering plans when a multi-billion dollar project is allowed to submit generic descriptions about what will occur? How can permits be issued without detailed descriptions of the activity so that a determination can be made about actual impacts and necessary mitigation measures?

    Dominion has already run afoul of the requirements that DEQ has established during pre-construction tree cutting. Tree cutting is prohibited within 50′ of streams and the overall construction corridor is supposed to be narrowed from 125′ to 50′ at stream crossings. These requirements have already been violated on a number of occasions.

    If the requirements are ignored this early in the process, what will happen when full construction begins?

  8. Energy and reliability:

    Dominion says that opposition to the ACP, “will slow down our region’s transition from coal to cleaner energy sources.” Even without more energy efficiency and renewables there is an ample supply of gas to our region.

    Existing pipelines serving our region have approved expansion projects underway that will provide more capacity than provided by the ACP (even if it expands to 2 Bcf/d). Information submitted by Dominion to the SCC shows that these existing pipelines will transport gas 3-8 times cheaper than the ACP.

    All existing gas-fired power plants in Virginia are served by long-term pipeline contracts (for capacity), including the Greensville plant that is under construction.

    Dominion says that not building the ACP will “delay improvements to our environment.” This doesn’t make sense. How can the damage caused by the unnecessary construction of this pipeline “improve our environment” when cheaper, existing sources of gas are readily available?

    Jim says that these new pipelines will contribute to:

    Optimal balance of cost to ratepayers –

    According to an industry expert, in testimony to the SCC, Dominion ratepayers will pay about $2 billion more to use the ACP over the first 20-year contract with the ACP compared to using existing pipelines.

    Virginia Natural Gas customers might pay about $1 billion more and utility ratepayers in North Carolina could pay perhaps $6 billion more. This is hardly an optimal balance of costs. Unfortunately this higher cost to ratepayers has yet to be evaluated in any federal or state regulatory process.

    Dominion’s study that projects a $377 million in savings per year in Virginia and North Carolina assumes that the cost advantage that currently exists at the supply zone in West Virginia will increase over time. This is contrary to the long history of gas development. Whenever, more pipelines exist to carry gas to new markets, the price equalizes with other zones. About a dozen new pipelines are expected to carry gas from West Virginia within the next 1-2 years.

    Even assuming the study’s cost savings for the price of gas of $1.65 mcf holds up, it is more than offset by the $1.88 mcf charged by the ACP to transport the gas. The ACP will be one of the most expensive pipelines on the east coast. There is no data that have been evaluated by a regulator that show it will save customers money. The report was filed with FERC, but they conducted no independent analysis of the information, nor did they address comments from others about the fundamental flaws in the study.

    Environmental Sustainability –

    A federal court has required FERC to analyze the GHG effects of pipelines. New studies show the leaks of methane are greater than assumed along the supply chain and that methane is a more potent greenhouse gas than we originally thought.

    We have a considerable surplus of generation now, with many new gas-fired plants coming online in the next few years. Do we need more without carefully assessing our long-term plans?

    Gas used to generate electricity was 7.7% lower in 2017 compared to the year before. We built 180 Bcf/d of new pipeline capacity in the last 20 years to serve a peak national use of 93 Bcf/d in 2017.

    How does constructing new pipelines contribute to environmental sustainability?

    Grid Reliability –

    This is the bogeyman that keeps being raised to support the development of new energy projects. According to PJM’s analysis, Dominion’s demand in its service territory will remain stable over the next 15 years, including the addition of new data centers.

    To meet demand that is not significantly increasing, Dominion plans to add 1600 MW of gas-fired generation (Greensville), over 5000 MW of new solar (the new energy bill), and perhaps a new 1600 MW gas-fired plant in 2025. None of these projects require a new pipeline for reliable operation.

    We have previously discussed that the old nuclear units could be retired after 60 years of operation using a long-term program of moderate improvements in energy efficiency that will increase reliability and reduce customer costs.

    Will Virginians be happy or unhappy if the ACP and MVP are built?

    Not built –

    Energy costs lower
    More vibrant state economy
    Unique Virginia lands and waters are maintained

    Built –

    Billions in higher charges to utility ratepayers
    Higher energy costs result in lower economic activity
    Irreparable damage to Virginia lands and waters that attract tourists and sustain our heritage
    The MVP has no customers. Only market willing to pay higher price is for exports. That will increase domestic gas prices faster.

  9. Good discussion, everyone! TH, don’t disagree with you but basically the ACP is a done deal now. LG says, “I STILL do NOT understand WHY – we want to bring MORE gas to the East part of Virginia for economic development – while providing access to that same gas in western Va is not also just as beneficial.” The answer is regulatory tactics. DE wanted to get the entire pipeline approved and in its regulated rate base. That meant the whole thing, not just the westernmost section, had to be shown to meet the FERC’s criteria for pipeline construction that’s “in the public interest.”

    So DE set out to show FERC that it reasonably forecasts a level of throughput to customers all the way to the eastern end of the pipeline, with expansion possibilities into NC and SC. DE basically ignored the customer potential along the way because that western growth is not the ‘main course;’ that growth, if/when it occurs, will simply be ‘gravy;’ and why antagonize nice people like VaConsAdv unnecessarily by articulating a vision of a string of industrial parks across that part of Virginia? But can western growth occur? Will it occur? In my opinion hell yes: 20 years from now if a new energy intensive industry wants to locate in Virginia, of course it’s going to find any location near a natural gas pipeline especially attractive. At that time the new industry is going to choose its location based on available labor, available transportation, available energy sources, and economic factors such as taxes. If the best combination of these happens to be located on the ACP but nearer Waynesboro than Suffolk, so be it. Can the folks in western central Virginia promote this combination for economic development? They’d be damned fools not to.

    • Acbar,

      Just a note. The ACP will not be included in the rate base. It is not owned by the utility. Through its subsidiary (Virginia Power Services Energy), Dominion Energy Virginia has signed a 20-year contract with the ACP to pay about $4 billion over 20 years to reserve capacity on the ACP. The $200 million per year payments (based on published rates) must be paid in full regardless of how much of the reserved capacity is actually used.

      Dominion has testified to the SCC, in last year’s IRP hearing, that it intends to ask for full recovery of these costs from ratepayers in the Fuel Factor proceeding, once the pipeline is in service.

      Dominion claims that the ACP will be a “portfolio asset” and should qualify for full compensation.

      All of Dominion’s major generating stations, including Greensville, have long-term capacity agreements with existing pipelines. The transportation cost of the ACP would be far higher than using the existing agreements and would provide no benefit to DEV or its ratepayers.

      The ACP is currently scheduled to be in service five years before any new power plant is planned that might require new gas service.

      Dominion expects the SCC to allow them to collect $1 billion from ratepayers for the ACP during this 5-year period when the ACP has no possible value to Dominion’s electricity customers.

      Even if a new gas plant is needed in 2025 (according to PJM it is not), it could be reliably served at a lower cost by existing pipelines.

      You have said the ACP is a “done deal”. I agree that it has been permitted by FERC and could receive a water quality permit from DEQ if they provide the minimum required information. However, if the policymakers realize what a bad economic deal this pipeline is for Virginia, the Virginia Attorney General could ask that the SCC provide advance guidance about how it would treat the ACP in a Fuel Factor case. This is what I have requested from the AG and the SCC the past two years.

      Virginia law says that a utility can recover a cost from ratepayers if it is charged at cost and is competitive with market alternatives. Whether the ACP is competitively priced with market alternatives was never considered by FERC when they issued their Certificate of Public Convenience and Necessity. If the Virginia utilities were limited to paying ACP the market price of existing capacity agreements, DEV could recover only a fraction of what it owes the ACP. This would certainly give Dominion Energy and Southern Company pause about whether building the ACP made sense.

      If the North Carolina regulators came to the same conclusion, the whole scheme of charging utility ratepayers billions in excess costs in order to enrich the parent companies would collapse. I have advocated that this be done in advance of construction. It is not fair to the project developers to invest $6.5 billion with the expectation that they will get the 20-year contracts paid in full and have that reversed at the first Fuel Factor case.

      It is also not fair to expect ratepayers to pay billions extra for something that offers them no value. This should have been evaluated by FERC but they failed in their legal responsibility under the Natural Gas Act.

      There is still an opportunity to protect ratepayer interests at the state level, but it needs to be done now.

  10. Jim, A very good and fair run down of both sides of the issue … until “reliability”. There you are right to ask for an analysis of what VA reliability would look like with greatly increased wind and solar, but I suspect you would get some very different conclusions.

    Vaconsumeradvocate has also written a sound and complete comment of the arguments against the pipeline. The projected need for gas plants to transition to renewable electricity, which was thought to be necessary to last many decades, has been supplanted by the fast decline in solar and wind prices.

    The arguments, by those of us who oppose pipelines across the US, are being responded to at FERC who is looking into how they judge the value of pipelines. Whether they will change their posture, in place since the early 1990’s, is another question. They do admit this is a different time.

    There is one thing I would like to add … the state of the Marcellus and Utica shale gas.
    “While politicians and the mainstream media tout an American energy ‘revolution,’ it is becoming clear that — like the housing bubble just a few years earlier — the American oil and gas boom spurred by fracking innovations may be one of the largest money-losing endeavors in the nation’s history. Wall Street Journal reported that “energy companies [since 2007] have spent $280 billion more than they generated from operations on shale investments, according to advisory firm Evercore ISI.”

    Up to this point, the industry has been drilling the “sweet spots” in the country’s major shale formations, reaching the easiest and most valuable oil first. Then as the sweet spots dry up the energy producers are forced to move to less productive areas, creating a Catch-22 as more drilling drives more debt.

    Bernstein Research has expressed doubts about the high levels of increasing debt and the Bank of America analysts doubt that worldwide demand will hold up. So should this industry really have the right to use eminent domain to build their potentially superfluous infrastructure?

    • The nature of shale reservoirs is that they decline quickly. Production from individual wells falls 70–90% in the first three years.
    • Continual investment in new drilling is required to avoid steep production declines as drilling moves to less productive areas.
    • Shale firms are on an unparalleled money-losing streak. About $11 billion was torched in the latest quarter, as capital expenditures exceeded cash flows. The cash-burn rate may well rise again this year.
    • EIA projections of production through 2050 are highly to extremely optimistic, and are therefore very unlikely to be realized, according to David Hughes’s analysis in SHALE REALITY CHECK. (
    • The smaller rate of growth projected by Platts and Range Resources will leave the projected pipeline capacity underutilized.
    • A false story of shale industry success is touted by Investors Business Daily and a free market-focused think tank funded in part by the oil and gas industry.
    • Dr. Anthony Ingraffea, Professor of Engineering Emeritus at Cornell University, outlined more precisely the role U.S. fracking is playing in changing the world’s climate. Not pretty.

    One final thing … The man that made the most money on shale actually just bought and sold leases ..a real estate boon, not a gas boon.

  11. Initially, Dominion said that the ACP was a “wholesale only” pipeline serving only major gas and electric utilities in high volume. Then they changed their tune and claimed it was an “open access” pipeline because they found that the prospect of having gas service to under-served rural areas increased support for the pipeline.

    Having greater access to gas supply for economic development sounds good in a press release, but it needs greater scrutiny.

    For example, Dominion signed a Memorandum of Understanding in Buckingham County that it would look into the possibility of connecting an industry in Buckingham to the ACP. This increased support for the pipeline and the huge compressor station in the area, but failed to provide accurate information about the true costs and likely success of such an endeavor.

    Dominion has said that a “tap” into the pipeline for industrial use or other development would cost about one-half a million dollars. Although this is accurate, it is very misleading. Not only is a tap required, but a large pressure reduction facility is necessary to bring the 1440 pounds per square inch pipeline pressures down to distribution levels. A gas company authorized to sell gas at retail in Virginia (the ACP is not) would have to build pipeline to the ACP connection and to the industry or end-users of the gas. In Buckingham’s case, the total cost might be about $5-$6 million dollars. Besides, the Transco corridor has existed in Buckingham for decades and provides much more gas at a lower cost than the ACP (that’s why Dominion’s compressor station is there).

    There is no way that this would be affordable for the local industry or the local gas company. This is rhetoric designed to sway opinion in support of the pipeline, without providing the full facts to inform that opinion.

    Just 3 miles of new pipeline and compressor additions will provide 1.3 Bcf/d of new capacity to the Columbia Gas system that serves West Virginia, Virginia and points north. One expansion project, currently underway, will add 1.7 Bcf/d to the Transco corridor that serves Virginia, North and South Carolina, with many more capacity additions already underway. Transco and Columbia Gas have a network of pipelines that currently serve Virginia.

    There is not a shortage of gas supply to our region. Some areas do not have access to gas supplies because the residential population is too dispersed and their small industrial base cannot support economic service to the area by the authorized Local Distribution Company. The ACP and the MVP will not change those dynamics, especially since their much higher cost of transportation will provide delivered gas at a higher price than what is already available, but still not economic to build a distribution network for.

  12. CA&W, your comments remind me of the boom/bust cycle that FERC oversaw, and many say caused, back when FERC regulated the well-head price of oil and gas with a direct impact on the amount of oil/gas production. They turned that role back over to the markets and competition; similarly, they pushed hard to deregulate electric generation and to promote independent ownership of generation with a “common-carrier” transmission grid (as opposed to the old vertically-integrated model that Dominion clings to).

    The problem with a competitive marketplace is, you must allow market participants to make mistakes. Sometimes, after all, they will prove right, and make a lot of money through their foresight. Sometimes they will make stupid investments. Sometimes totally unforeseen circumstances will thwart their best-laid plans. They are at risk, and they also get to keep the reward if there is one.

    All those companies investing in fracking in western PA and WV and OH and building their own storage and gathering and delivery pipelines are at risk, and they know it. I don’t have any problem with that. I have a huge problem with letting a regulated utility invest in associated pipeline infrastructure at a utility ratepayer guaranteed rate of return, with all risk of obsolescence on the pipeline’s ratepayers, not the utility’s shareholders. A regulated investment is subject to the “regulatory compact” which, to put it as simply as possible, says “a deal’s a deal”: if the regulator approves it, the utility will make it happen and will get paid fully for it at regulated rates. This contrasts with an unregulated investment, which is at shareholder risk, with unregulated rates and profits and no duration commitment.

    FERC should not approve a regulated pipeline based on the applicant’s projections of customer demand where those demands are so highly uncertain and the customer bears none of the risk. Dominion could have demanded firm gas transportation contracts in advance from a sufficient number of customers for a sufficient number of years to recoup much of its ACP investment, shifting that much of the financial risk to those customers; but instead it is building this pipeline “on spec” based on forecasts of just the sort of uncertain growth of fracking activity that you are questioning. That is the way these things have been done in the past, but you are right to ask the FERC to rethink the way they regulate new gas pipelines in future.

    • Thanks for the thoughtful post. I am new to FERC and regulatory history.
      Regarding those missing firm contracts … I believe that Dominion put up those ‘in house’ contracts as proof of need because of the eminent domain issue. Without community, at least Virginia benefits, the use of eminent domain goes out the window and construction might not have been approved at FERC.

  13. Here are what sounds like the key points against the pipelines:

    1. Virginia doesn’t need the additional gas pipeline capacity. There are plans in place to expand existing pipelines to feed electrical generation facilities in Virginia.
    2. Natural gas is no better than coal in causing greenhouse gas reductions once methane leakage is factored into the equation. This means that using the gas outside of Virginia doesn’t do the United States any good from a global warming perspective.
    3. The state could effectively block the pipeline by determining that some or all of the payments from Dominion to the pipeline owner cannot be included in the electrical rates.
    4. No provision has been made to help ensure that the jobs created by the pipeline in Virginia will go to Virginians.

    • “3. The state could effectively block the pipeline by determining that some or all of the payments from Dominion to the pipeline owner cannot be included in the electrical rates.”

      There is an upside down process around that idea, one that is before the VA Supreme Court. “The utility’s deal with Atlantic Coast Pipeline LLC underpins Dominion Energy’s claim that the ACP has enough customers to justify its construction. But under the Virginia Affiliates Act, public utilities like Dominion Energy Virginia are required to submit their “contracts or arrangements” with affiliated companies to the SCC for approval before they can take effect, something the utility failed to do”. An upside down process! Dominion’s contracts, verifying to FERC the need for the ACP, aren’t actual contracts because they have not been approved by the SCC, who won’t hear the case until after the pipeline is built.

      “Several years ago, Dominion purchased 20 years’ worth of capacity from Transcontinental to service the same power plants that it now claims must receive gas—at a much higher shipping rate—from the ACP. As a result, the utility’s arrangement with Atlantic Coast Pipeline LLC will very likely increase, not decrease, electricity prices in Virginia.” Sound like the public interest is being served?

      If the Court rules in favor of enforcing the requirements in the Affiliates Act, “Dominion would then have to file its agreement under the Affiliates Act, and the SCC would have to open a case docket and hold a hearing to consider whether the deal is in the public interest.” A case they could actually loose.

      Number 3 would then be a path to reject the ACP.

  14. yep.. I’m not understanding WHERE the 200 million annual money is going to come from if not ratepayers.

    Do we need any more gas plants in Virginia?

    Can Dominion build the pipeline, make ratepayers pay for it.. build more gas plants .. and sell the electricity to PGM?

    I think I’m starting to understand why they want the SCC out of regulating that end of the business…

  15. PJM does not agree that Dominion needs more new generation. Their forecast shows mostly stable demand over the next 15 years, even with the data centers. They are the ones that Dominion must convince to get into the generation queue. The SCC rules on where and whether it can be built in Virginia and will set the terms of the RAC, as it did for Brunswick.

    Dominion sells all of its generation to PJM. PJM determines which units are dispatched. A new combined cycle unit would likely clear the capacity auction and be dispatched regularly based on its cost of energy (it would be an efficient generator). But Dominion does not want to settle for just the payments from PJM. They do not like to leave their fate in the hands of a competitive marketplace. They want subsidies from the ratepayers, as guaranteed by a RAC.

    Even if PJM agreed a new combined cycle plant would be required in the next 7-15 years, a new pipeline would not be required in order for it to have an adequate gas supply.

  16. Based on what I am hearing – the pipeline is speculation and Dominion is essentially successfully exploiting regulatory seams between and across the regulating agencies.

    i.e. – FERC only cares about pipelines, not electric generation or rate payers.

    PJM only cares about grid reliability and availability of generators… no matter how the generators accomplish their efforts or how their plants get fuel.

    And the SCC neither does pipelines nor what PJM does – but they do care about what costs get put on ratepayers.

    If the SCC’s aim is to hold Dominion’s feet to the fire over new sources of gas that cost more than older – that looks like it might unravel the plan and might precipitate getting the GA to modify the SCC role.

    What we don’t know is how any of this would really come down to dollars and cents for ratepayers – unless the SCC does that analysis, IF they do that analysis

  17. Larry,
    You are right that “FERC only cares about pipelines, not electric generation or rate payers.”
    I raised the issue at the FERC hearing that the need for the gas from the ACP was a need to fill Dominion’s projected need for electricity, not for gas.
    I also included the discrepancy of projections for additional electricity between Dominion and just about everyone else!
    The guy taking my testimony thought that was a very good point. Think he is alone at FERC.

  18. I think the basic view of many is that more gas available in more places is always a “good” thing – apart from and in addition to it’s potential uses including electric generation.

    Steve and others here have expressed a similar point of view here in general – that it’s pretty much a no-brainer to have more gas available for whatever industry might seek it – ergo it’s pretty much always a legitimate “need” and justification for the infrastructure. It’s another way to attract industry and jobs.

    But Dominion knew that if it proposed the pipeline itself corporately to self-fuel new gas power plants that the SCC would require a more stringent analysis.

    However from a simple-minded point of view – in Dominions favor – one might ask if Dominion owned the transmission infrastructure – wouldn’t that potentially result in prices no higher than competitors who had older, cheaper pipelines but had to make a profit on the transmission?

    So a new pipeline would impose higher costs on gas flowing through it but the subsidiary may not have to make a profit or as much profit as competitor pipelines with depreciated capital costs but they still have to make a profit moving the gas.

    Not sure I’ve seen much about that aspect.

    I’d not be surprised at all if Dominion won’t make that kind of case – especially over a longer term contract ….. to the SCC.

    But if demand for electricity is more or less flat in Virginia – and there is no real profit in selling gas-generated power to the PJM auction market – then what’s the real purpose of the pipeline – in which the gas has to be sold and enough money made to recover the costs of the pipeline plus some acceptable ROI to investors?

    You almost have to believe that Dominion will sell that gas to any and all.. at whatever price they can fetch…. and that would include export…

    Somewhere in the middle of all of this – some State or Federal agency should have angst over exporting a finite – and depleting strategic resource that would ..later on… potentially hurt us economically and drive us back to relying on coal to power the grid.

  19. Sorry, I must take issue … When the ACP was proposed it made sense in many ways but scientists have since found out that methane is a very big problem. In 2011, a Cornell University research team first made the groundbreaking discovery that leaking methane from the shale gas fracking boom could make burning fracked gas worse for the climate than coal. That study has now been accepted throughout, which is why Obama in his final years put forward methane regulations.

    Now, In a sobering lecture released this month, a member of that team, Dr. Anthony Ingraffea, Professor of Engineering Emeritus at Cornell University, outlined more precisely the role U.S. fracking is playing in changing the world’s climate: the world may Hit 2 Degrees of Warming in 10-15 Years thanks to fracking.

    Certainly that is a projection, but it is based on the fact that methane is 85 times more potent than CO2 while it is in the atmosphere. On the positive side, methane only lasts 10-15 years so stopping its use will affect the heat trapping power of the atmospheric content very much sooner, changing climate effects sooner too.

    As you say let’s save the gas for other uses not so easily displaced. We have other ways to generate electricity and VA has one of the nation’s largest renewable backups in Bath County. The conclusion that the extra gas will be exported leaves the pipeline issue of ‘eminent domain for private gain’, as they say in Nelson and western Counties, and the need for FERC to rewrite their outdated processes, including their definition of “need”.

  20. CA&W, agree with you on that concern. If we continue to add heat to the oceans enough that the warmer water de-stabilizes those enormous methane-hydrate deposits on the continental shelf, the methane released from fracking and transportation leakage will be rendered trivial by comparison. Which is not to say trivial is harmless, if the methane from fracking is what pushes ocean temps over the tipping point.

  21. Larry,

    “I think the basic view of many is that more gas available in more places is always a “good” thing – apart from and in addition to it’s potential uses including electric generation.”

    Having more gas in Virginia does not require new pipelines. The capacity of existing pipelines is expanding in a greater amount than the ACP will provide.

    Dominion doesn’t need a new pipeline to fuel a new power plant.
    Columbia Gas is expanding the capacity of its existing pipeline by almost the capacity of the ACP. If it were economical to do so, it could extend gas service to more customers in Virginia without the ACP.

    Virginia Natural Gas could attach to the expanded capacity of Columbia Gas or Transco and have gas transported to southeastern Virginia at a much lower cost than would the ACP.

    Transco provided reliable supplies of gas to Virginia, North and South Carolina during the bomb cyclone and will continue to do so at a much lower cost of transportation than would be provided by the ACP.

    Even though the statement above is the favorite statement of developers, it does not follow that new pipelines are required to make it so. I will save the argument that it is not necessarily true for another day.

    “one might ask if Dominion owned the transmission infrastructure – wouldn’t that potentially result in prices no higher than competitors who had older, cheaper pipelines but had to make a profit on the transmission?”

    No! It is exactly the opposite. The transportation tariff is based on the depreciated value of the pipeline, times the authorized rate of return, plus operating and maintenance expenses. A new pipeline results in much higher costs to transport gas than do pipelines that have been mostly paid for by previous customers. This is what makes Dominion’s “we will save you money” argument so spurious.

    The profit is built into the transportation rate. The ACP has an authorized rate of return of 15%. That rate will be applied to a $6.5 billion pipeline. The current published rate assumed that the pipeline would cost just $4.5 – $5 billion. Within three years of beginning operation the ACP can file for a rate increase based on the completed cost of the pipeline.

    The utility subsidiaries have signed 20-year transportation contracts with the ACP. They have paid for rights to transport a certain amount of gas on the pipeline. Payments are due in full whether the full amount of gas is transported or not. Gas is purchased separately. The pipeline never takes ownership of the gas.

    The utility subsidiary makes no profit purchasing the gas or transporting it. They intend to be reimbursed by the ratepayers for exactly the amount they pay for the gas and to the ACP.

    The problem comes in when the gas delivered by the ACP costs consistently more (gas price plus transportation) than gas delivered using existing pipelines.

    If the state regulators approve these long-term contracts and pass the full cost through to utility ratepayers, the customers will pay $18 billion over 20 years to the ACP. Under these circumstances the ACP could recover $18 billion for a $6.5 billion investment even if it did not transport any gas.

    The Atlantic Coast Pipeline does not exist to lower the cost of producing electricity. It will not do that. It does not provide the utilities gas that they could not get more cheaply from existing pipelines. The utilities will not make a higher profit because they use the ACP. The ACP exists so that the utility subsidiaries can extract money from their captive ratepayers and pass it through to their parent companies, the owners of the ACP. The ratepayers pay billions more than they would to obtain gas using existing pipelines. This scheme has been approved by state and federal policymakers without evaluation of the effects it will have on the families and businesses in West Virginia, Virginia and North Carolina.

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