Gas Pipeline puts Virginia in Race for Three Prospects

Gas pipeline puts Virginia in contention for three industrial prospects.
Gas pipeline compressor station.

Virginia is in the running for three economic development projects that would rely on natural gas,  and one is “mammoth,” Governor Terry McAuliffe told a group of manufacturers yesterday.

“The only reason I’m in the hunt is because of the pipeline,” he said, referring to the proposed Atlantic Coast Pipeline. The 600-mile gas pipeline would bring new supplies of cheap natural gas from the Marcellus shale basin to Virginia and North Carolina.

Speaking to the Infrastructure Roundtable held in Richmond by state and national manufacturing associations, McAuliffe said that nondisclosure agreements prevent him from revealing the identity of the prospects, reports Richmond Times-Dispatch.

However, Sen. Frank Wagner, R-Virginia Beach, a prominent pipeline backer, told the Times-Dispatch that he knew of a large industrial prospect that would convert natural gas feedstock into other products such as fertilizer and “would like to be located along deep water.”

The eastern part of Virginia — roughly from Interstate 95 east — has such limited supplies of natural gas that the region cannot accommodate a new large industrial customer. But several localities along the path of proposed Atlantic Coast Pipeline have said that access to low cost gas would make them eligible for projects that would have eluded them in the past. McAuliffe’s remarks are the first public indication that access to the gas pipeline had put Virginia in the running for tangible industrial prospects.

While 92% of the Atlantic Coast Pipeline capacity is  reserved by electric and gas utilities, 8% is unreserved and potentially available to large industrial customers.

“We are actively marketing to potential industrial projects and potential utility customers,” said ACP spokesman Aaron Ruby.

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25 responses to “Gas Pipeline puts Virginia in Race for Three Prospects”

  1. LarrytheG Avatar

    re: ” Virginia is in the running for three economic development projects that would rely on natural gas, ”

    The Virginia Eminent Domain Amendment, Question 1 was on the November 6, 2012 ballot in the state of Virginia as a legislatively referred constitutional amendment, where it was approved.[1]

    The measure prohibited eminent domain from being used for private enterprise, job creation, tax revenue generation or economic development, thereby restricting it to only being invoked to take private land for public use.[2]

    Result Votes Percentage
    Approved yes 2,661,547 74.45%
    no 913,201 25.55%

    1. Washington Post, “McDonnell signs off on property rights referendum,” April 6, 2012

    2. 2.0 2.1 Associated Press, “Va. Farm Bureau seeks eminent domain limits,” November 28, 2011

  2. CleanAir&Water Avatar

    Wow! What is behind curtain 1, 2 or 3? Well, our Governor tells us we can find out down the road if we only agree to allow the pipeline to cut through neighbors property, using eminent domain if necessary. He says we can find out if we just say yes to a destruction of our property values out here in western VA, and, along with that financial loss, we agree to put ourselves in danger of pipeline leaks and blow-ups from this supersized pipeline.

    The thing is … there actually is only a chance that there are prizes behind the curtains. The prizes are ‘possibilities’ that may not materialize. Truth be known … we may not even want those prizes. Updating our energy system promises lots of the same kind of economic benefits, benefits we can see, without the negative risks.

  3. This is more misleading media hype. As stated previously, in Virginia we have access to many times the capacity of the ACP using existing pipelines without the need for the ACP. The cost of transporting natural gas in new pipelines is several times higher than with existing pipelines. As shown by tariffs filed with FERC, the cost of transporting gas to the Brunswick and Greensville plants is three times higher with the ACP than with the existing connection to Transco.

    The idea that Virginia does not have access to abundant supplies of natural gas without the ACP is not supported by the facts or by government studies. Media announcements such as this continue to confuse Virginia citizens as the need for the ACP is becoming more widely questioned.

    Fertilizer plants are part of the rush to use what is now “cheap” natural gas. Industrial facilities are much like power plants in that they take decades to pay off the initial investment. Gas prices increasing 3-4 times within 10-15 years would disrupt the business case for these types of industries just as it will for gas-fired power plants.

    This is just another example of short-term 20th-century thinking that could well lead to stranded costs and a boom-bust economic cycle. Why are our policy makers not interested in modern energy projects that have a fixed cost of energy and a much higher employment to investment ratio?

    There are much better investments than this type of project that serve all of Virginia’s interests not just a few of them.

  4. LarrytheG Avatar

    I don’t have a problem with the pipeline nor the potential of over-supply as long as this is a legitimate for-profit venture where they assume responsibility for the costs, profit and loss in seeking a profitable enterprise.

    In no way, shape or form should a for-profit company be using the power of eminent domain.

    In this case – we’re actually talking about a true for-profit venture of a subsidiary of Dominion and they are claiming that because they are supplying gas to Dominion that therefore they are entitled to use eminent domain in the acquisition of property.

    And you KNOW how wrong this is BECAUSE the other pipeline project which is also a pure for-profit venture is also claiming it can use Eminent Domain.

    I do NOT want to stop either project. I see some merit in an effort to provide more gas to Virginia but there is risk in doing that – in that if they are wrong – the gas will not be near as much in demand and they could face a loss. That’s what entrepreneurship in a market economy is all about – the investors have to make a calculation as to the ROI of an investment.

    The only way either pipeline project should be allowed to use eminent domain is if the sales are regulated like any monopoly would be.

    What you’re doing is having Va directly supporting actual speculation on gas – that would ostensibly provide jobs and economic benefits – by depriving other property owners of a fair free market transaction price for their property.

    We’re back to the days of robber baron ethics.

  5. Steve Haner Avatar
    Steve Haner

    How many robber baron stocks in your portfolio, Larry? Railroads are profit making companies running on rights of way obtained by eminent domain. Airlines operate at airports built through eminent domain. Trucking firms run on highways and make profits subsidized by eminent domain. Pipelines have been built using eminent domain from the beginning, certainly since JD Rockefeller used them to break the rail monopoly. That argument is specious. Almost as funny as your deep concern that Dominion might not actually be able sell all that gas after all and this is dangerous speculation – I’m sure the company appreciates your looking out for them. Believe me, my support for the project is not based on any deep fondness for that particular quite profitable investor owned utility (which uses eminent domain to build transmission lines, Larry….)

    I was in the room as the Governor dropped those bold hints about economic development prospects. I too discount that to some extent, since details are lacking and companies go where they want to go and our Governor is noted for his exuberance. But his basic point is correct – companies look at the availability and cost of energy, increasing the supply of gas will make Virginia a more attractive competitor for decades to come, and if there is an overabundance of supply, well, there is this law of supply and demand and price and I like what that does to my price….

    Likewise companies will notice if the NIMBY’s succeed in killing the two pipelines, the Skiffe’s Creek transmission line, high speed rail to DC, and all the other development projects under attack.

  6. Steve Haner Avatar
    Steve Haner

    Oh, and I am 100 percent confident that if the renewable power advocates got the massive building rush that they wanted, a true crash program, they would lose no sleep if the utilities or other developers used eminent domain to assemble the land for the solar and wind farms and for the grid connections. Nope, then they would LOVE the process.

  7. CleanAir&Water Avatar

    Those of us who are urging Virginia to move our energy production to renewable sources do not expect 100% generation to occur in the immediate future. Changing the system takes a long time and I for one just don’t understand the state’s acceptance of the lack of a plan, and a willingness to commit $5Billion to a fossil infrastructure project that is not currently needed, and that will be paid for by us, the ratepayers.

    The pipeline project has a 40-50 year useful life. That will take us to the 2060’s and for it to actually be useful we must build more demand for gas since our current demand can be met with today’s pipeline capacity. How is this part of a long term plan to de-carbonize?

    Two other questions … Some suggest that Marcellus shale is peaking and the projected output is way off base. Who knows, but declining output is certainly a risk. Secondly, corporations that use large quantities of energy, like Google, are seeking renewable energy and are partnering with utilities to build and buy solar and wind. Many are committed to sustainability and like the idea of the long term fixed energy budget that renewables can provide.

    So …. why do you want to make this huge and risky investment?

  8. Peter Galuszka Avatar
    Peter Galuszka

    Just saw a replay of “The Blues Brothers.”

    I am reminded what Jake said:

    “Our next gig. It will be HUGE. You’ll see.”

  9. LarrytheG Avatar

    @Steve – I think the same rules should apply – across the board whether it’s a utility , a pipeline company, wind, solar, etc.

    and there is a difference between the govt condemning the land directly and regulating it for the public versus a private sector company – using the condemnation power of government to secure property from others for themselves to use to sell products and services for whatever they can charge.

    This is why Dominion can use the govt to condemn right of way but then have their prices regulated.

    Solar, by the way, does not want eminent domain – they just want the right to sell power on an even playing field … and another company is using their govt-granted monopoly to prevent competition.

    Pipelines that will charge whatever the market will bear – like the Rockies Express – even though approved by FERC – acquired virtually all the right-of-way via market transactions between them and property owners rather than condemnation.

    In the case of the ACP – there IS another competitor for a second route and rather than combine into one consortium which would use existing rights of ways when possible – they are seeking separate rights-of-ways. The govt should require that as a condition of condemnation. We should not be condemning land for two different routes – when some claim that no new routes are needed.

    I’m opposed to NIMBY – and would like to see a 3rd rail as well as ONE new pipeline that uses existing rights of ways where possible and for Skiffes Creek – we should have honest alternatives.

    If the Chesapeake site is going to be a gas turbine why can’t power for Hampton come from there?

  10. LarrytheG Avatar

    re: ” partnering with utilities to build and buy solar and wind.”

    okay – so the question is – where are they getting their power from at night?

    how does that work?

    it seems like a bit of a bogus concept… because they’re using grid electricity that is likely being generated by fossil fuels at night.

    it’s not like they can say – “we’re 100% wind and solar and we don’t need no stinking electricity at night”, eh?

    slightly less bogus would be to have on-site solar – then buy fossil-fuel-generated grid power at night.

    pure as the driven snow honest injun 100% renewables would be 100% wind/solar during the day which also goes to storage battery that then will carry them the night and their only need for grid power would be if they have an on-site failure.

    how many Google and Apple’s are doing that?

    I’m a tough critic of Dominion, the pipeline, Skiffes creek – but also bogus concepts for renewables.

    we have a gulf between what the realities are for power generation and what advocates want – that does not yet exist.

    how do we agree on what has to be – right now?

    If you cannot operate 12 hours a day on stored solar and wind – then what will you realistically use? I say it will be grid power and likely generated by fossil fuels.

    I cannot wait for a reality where we don’t need fossil fuels – but I also think we have to be honest and responsible about what we advocate for – right now. And right now – 100% wind and solar with excess put on storage and reused later at night – is simply not a reality except for some islands where grid power costs 40-50 cents a KWH – which is 4 times what it is here in Va right now.

  11. Mr. Haner,

    You make some interesting points and have a viewpoint that is probably shared by many. I would like to address a few of your points to show how this situation might be a bit different than you suggest.

    “Pipelines have been built using eminent domain from the beginning”
    This is true, but the principle underlying eminent domain includes two tenets 1) does the project meet a need that is not currently served, or 2) if not, does the project provide a significant cost savings.

    In the case of the ACP, project developers have successfully controlled the public narrative so that it is widely believed that the only way for Virginia to have a greater supply of natural gas is to build the new pipeline. In fact, the existing transmission pipeline system in Virginia has 3-4 times the available capacity of the ACP and is being expanded with projects (WB XPress) that provide nearly the capacity of the ACP with just three miles of new pipeline and added compressor stations. Transco plans to add projects in the Marcellus as well as compressor upgrades along its 1800-mile corridor that will add nearly 10 Bcf/d to its system capacity; much of which will be available to Virginia and the Carolinas.

    Tariffs filed by the ACP with FERC show that the cost to transport natural gas with the ACP will be 3 times higher than the cost of using the connection to Transco. Rates are based on the depreciated value of the pipeline. Using new pipelines is much more expensive than using pipelines that have been mostly paid for by previous users.

    Every subscriber to the ACP is either a natural gas distribution company or a supplier for utility power plant use. Ultimately, their ratepayers will subsidize the higher cost of the ACP compared to using lower cost existing pipelines to deliver the gas. This will be done without the ratepayers’ previous knowledge or consent.

    “deep concern that Dominion might not actually be able sell all that gas after all”

    The flattening of growth in demand for electricity has driven many utility holding companies to move into the natural gas business in a big way. FERC grants rates of return that are 50% higher than these companies receive for other projects such as transmission lines and power plants. This greatly distorts investment decisions. Dominion expects natural gas prices to be 4 times higher than today’s prices within 15 years. This affects the use and profitably of their gas-fired power plants and their investment in pipelines used to support them. Someone needs to take a longer view beyond next quarter’s stock price. It should be our policy makers and regulators, but they have accepted the story that the ACP is “the only way” to have adequate supplies of natural gas to meet our needs, without in in-depth review of whether that is true or not. The ultimate owners of the ACP are huge utility holding companies that are 3 of the 4 largest in the U.S. It is similar to the big banks, “heads they win, tails we lose”. There has not been an even-handed review to balance the interests of the ratepayers (they unnecessarily get higher costs) with those of the utilities (they get higher profits). And it is likely not going to be done. FERC does not pay attention to ratepayer interests. The SCC, who does, has said the whole issue is up to FERC, so the ratepayers are unprotected in this process.
    This is not the fault of the utilities. Until we create a better formula for them to be financially healthy and serve the interests of the ratepayers, they will use the current rules to increase shareholder value.

    “companies look at the availability and cost of energy, increasing the supply of gas will make Virginia a more attractive competitor for decades to come”
    This is true, but a new pipeline is not needed to increase the supply of gas and will only make the price of that gas higher compared to using existing pipelines. Creating a more modern energy system will have a higher percentage of its generation coming from low-cost renewables where the energy cost does not increase over time. This would create energy costs that would be more attractive to new businesses. Heavy reliance on natural gas-fired power plants preordains us to fate of increasing energy costs and the potential heavy burden of stranded costs.

    “if the NIMBY’s succeed in killing the two pipelines”

    My background is in the electric and gas utility business. I have spoken to many people concerned about the new pipelines proposed for Virginia. Of course, they don’t want a pipeline in their community. It is hugely disruptive. Not just the right-of-way itself but the equal amount of access roads and material staging areas. Many thousands of properties are in the right-of-way, in the blast zone or in the evacuation zone of the pipeline.

    But a consistent theme that I have heard from many is one of stewardship. They are aware that water might be one of the biggest issues of the next 50 years. The area that will be severely disrupted by the pipeline contains the headwaters of watersheds that provide clean water to millions of people over several states. The people in the small communities in the mountains and valleys of Virginia are protecting the future of millions in the higher populated areas of Virginia.

    These concerned citizens have an understanding that there are better and cheaper ways to create the jobs we want and the energy we need than these pipeline projects that cause so much destruction. This needs to be more widely known throughout Virginia. There is no need to pit the people who want more jobs against those who want to preserve the land, water, and communities of Virginia. A modern energy system is in everyone’s best interest.

    As an advocate of such a system, I am not a supporter of the rush to put utility-scale solar all over our countryside and displace existing land uses. Smaller, distributed solar projects have benefits to the grid that the large central station solar projects do not provide. We should also use less energy. That is a sign of innovation and a vital economy. Growth in electricity demand is no longer the sign of economic progress that it was in the 20th century. Other states produce up to twice the economic activity per unit of energy consumed compared to Virginia. We have a long way to go. Extending the old methods well into the 21st century is not the best way to do it (pipelines actually last 80-100 years).

  12. Peter Galuszka Avatar
    Peter Galuszka

    Dead right! If you take Steve’s logic to his implied conclusions, you could use eminent domain for ANYTHING — building a new WaWa, putting a garbage dump next to a school, etc.

    I don’t see why it is so terribly essential for the public’s interest to use ED for a gigantic and destructive project to provide natural gas for yet-unidentified customers. Or perhaps for export overseas. Is the United States rally a Third World extraction state?

    Last night I was on a panel in DC after the showing of the documentary “Blood on the Mountain,” about the toxic cultural links between the coal industry and the people and culture of West Virginia.

    The audience was alert and interested, but I was surprised they all thought that all the coal in West Virginia went to mine coal to keep electric lights on. I explained that at Massey’s Upper Big Branch disaster that killed 29 men in 2010, all of the coal was metallurgical coal for export to make steel in South Korea, or China or Brazil. In other words, these men died not for the patriotic cause of serving America with electric power, but for the sake of a profitable commodity used in building construction in countries far away. Would one want to die for cobalt, or titanium or nickel?

    Mountaintop removal is the same. Why destroy thousands of acres of land just to get at a 12 inch seam of high grade coking coal that’s going to end up in a skyscraper in Shanghai?

    Where’s the “War on Coal” there? How is the EPA going to screw everything up with onerous regs? Why, after Upper Big Branch, there has been no significant reform in mine safety rules?

    The answers are that the War on Coal and the EPA don’t apply to Chinese steel mills. As for mine safety, the anti-reg types in Congress, many bankrolled by the coal industry, killed reform.

    With Trump’s spectacularly awful cabinet picks, and GOP domination of Congress, the future is very bleak.

    Funny how Trump never gets discussed on this blog. It’s as if he doesn’t exist. I believe that Jim Bacon is in total denial over Trump’s win.

    1. LarrytheG Avatar

      Peter – good to hear your panel went well.

      Could it ALSO be the case that coal mined in WVA went to CHina to then take away steel jobs in the US?

    2. I have criticized Trump a number of times on this blog, and probably will again. But this blog focuses on state/local issues, so commenting on Trump, Obama, Bush, whomever at the national level has never been a priority.

      1. LarrytheG Avatar

        well.. given the GOP control of Congress and the likelihood that Trump has stated plans for such major changes – Virginia will likely be dramatically affected.

        he clearly plans to neuter the EPA and kill the CPP

        he has promised to kill Obamacare and the GOP says they
        are going to kill the MediAid expansion in January

        he’s promised and the GOP agrees to give mo money to DOD which ought to help Hampton.

        he’s promised to bring coal back

        he’s promised to bring manufacturing back

        he’s promised to deport illegals of which Virginia has more than a few and many in Va resent paying to educate their kids or provide them with medical care or access to college.

        he’s promised to fix the inner cities and give low income kids better schools and get rid of NCLB and Common Core.

        I think if he accomplishes even 10% of what he has promised that the Congressional GOP has also promised – Virginia will see HUGE changes!!

        It’s going to be like Christmas in January for Conservatives!

  13. I am concerned about greater divisions occurring across our state and nation. But we have a solution that should appeal to everyone in Virginia regardless of political persuasion.

    Those who want more jobs and lower energy costs will be much more fulfilled by the long-term jobs and lower energy prices provided by an energy system that includes more energy efficiency and renewables. These methods are established as long-term job providers, especially to the building trades.

    The conventional energy projects such as power plants and pipelines, while promising thousands of new jobs, actually result in a moderate amount of jobs for residents of Virginia. And these jobs last less than 10 months.

    More solar in Virginia provides energy at a fixed cost and each new facility will be cheaper than the one before. Energy from the new gas plants will be more expensive every year.

    The good news is that the cheaper and greater job producing option is also much friendlier to the environment. It is a bit of a puzzle why we all cannot agree that this is the way to go. I guess the old story has not yet been overcome by the new information. Old conditioning is hard to overturn.

    The obstruction must come from utilities that earn far less from solar and energy efficiency than they do from conventional plants. That’s why we need to give them a profitable way for joining in with the modern system too.

  14. LarrytheG Avatar

    re: ” In fact, the existing transmission pipeline system in Virginia has 3-4 times the available capacity of the ACP and is being expanded with projects (WB XPress) that provide nearly the capacity of the ACP with just three miles of new pipeline and added compressor stations. ”

    The problem is that Dominion does not want to acknowledge the alternatives or as in the Skiffes Creek project just claim there are no alternatives because then doing so would undermine their preferences.

    But in a project that requires a NEPA study – that study REQUIRES the complete and accurate documentation of alternatives and gives the public the right to submit factual data about alternatives not considered and to challenge claims about preferred alternatives being the only practical or least expensive.

    A lot depends on how rigorous FERC will be in their review and they’ve already been attacked for not doing a programmatic review of the two pipeline proposals together to determine if BOTH are needed and would be approved.

    NEPA does not require a particular decision UNLESS formally recognized resources – historic, natural, etc are impacted and the claim is there is no other way – that allows the opponents to become directly involved in the generation of facts and information and to rebut claims by the applicant.

    So the NEPA process has to be conducted and completed and the way that most go to court is if the lead agency refuses to allow information into the NEPA document – and the opponents go to court – and the court decides what information must be part of the record. At the end, it still does not require a particular decision – only that the record is “complete” so that an “informed” decision can be made EVEN IF it does impact more resources than a less impactful alternative.

    So basically it becomes a money and delay game. Money if the opponents are going to legally challenge – and delay in that as long as they are able to challenge – the project does not get approved.

    Some proposals just die because they were bogus to start with and the information provided by alternatives painfully exposes it while others, delay introduces uncertainty which in turn causes logistical and financial impacts to the applicant.

    The problem with both pipelines – the ACP and Mountain and Valley is that some heavy-hitters have become involved and they have significant uber-experienced legal resources and if money is available and they do commit their resources – it’s going to be a long slog .. several years.. with the only way of shortening it for Dominion to alter the parts of it’s proposal that are challenged.

    In the end – if Mountain/valley and Dominion formed a consortium for ONE pipeline that utilizes existing rights-of-ways and infrastructure – the opposition would withdraw.

    Steve does not like NIMBY – I do not either but I also do not accept that we have no choice but to do what Dominion wants to do and they need to have their feet held to the fire for projects that have impacts to resources, people, property owners, ratepayers and taxpayers.

    In a true NEPA process – Dominion will have to conclusively demonstrate that there are no viable alternatives – and the opposition is unable demonstrate any either. That’s a pretty high bar and portends a long drawn out process that will be out of FERCs hands if the opponents assert themselves legally.

  15. Peter Galuszka Avatar
    Peter Galuszka

    The steel jobs left long ago. There are few fully integrated blast furnaces left in the U.S. The industry converted to rolling mills to melt down scrap 30 plus years ago.

  16. “In the end – if Mountain/valley and Dominion formed a consortium for ONE pipeline that utilizes existing rights-of-ways and infrastructure – the opposition would withdraw.”

    I’m not sure about this. No additional pipeline is needed for us to have all of the gas we need. As a new pipeline, this combined project would still be several times more expensive than using existing pipelines to transport the gas and cause ratepayers to pay more unnecessarily.

    There is no existing right-of-way over the mountains from West Virginia. The destruction of these unique habitats and the threat to our clean water would be the same.

  17. LarrytheG Avatar

    Tom, maps seem to show, there are quite a number of existing right of way Crossings of the mountains, power lines, roads, railroads and even pipelines!

  18. Not at the size (125′ wide) required or at the grade required or that also provide for the access roads and staging areas which are equal in size to the right-of-way.

    I agree that using existing ROWs wherever possible makes sense, but it is possible in fewer places than most people think.

    Look at the first picture in my post above. Double that for the access roads, etc. and you can see that most highway rights-of-way could not accommodate a pipeline of this size.

    Most transmission line ROWs are reserved for extra lines. Pipelines do not allow anything to be built over them so those ROWs are often ruled out. The existing towers also significantly complicate the construction of pipelines.

    This gives a better understanding of the disruption caused by pipeline construction and how much land is affected. Dominion shows a 75′ grassed over corridor to represent what a natural gas pipeline looks like. That is true after the fact. Most people have no concept of what it will take to construct the ACP over the terrain that has been selected. Especially now that Dominion has said that construction will occur over the winter too.

  19. LarrytheG Avatar

    TomH – there are good places and bad places to bring a pipeline across the Appalachians.. and I agree just having an existing ROW does not mean you have enough or the right terrain… but there is one type of corridor where you DO – and that is train ROW .. which cannot be in steep terrain and there is a rich irony – these are the very same routes that bring coal to power plants in Virginia!

    And – Dominion would have to deal with the rail companies and would not be able to use eminent domain…

    1. The MVP is using some co-location with Railroad ROW. Not much though. I would think it would be too narrow in many places unless it was abandoned ROW. The steep terrain is not an issue with RR’s as they have already established a gentle slope.

      It might be hard to find to find room for the access roads and staging areas though. This is 1-2 times the area occupied by the pipeline ROW. Development has grown up over time near many RR ROWs.

  20. […] support and commitment of industries is already there. Bruguiere said that 92 percent of the natural gas has been spoken for and the pipeline has not even begun construction or passed […]

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