Huge Dominion Pipeline Project Loses Partner

By Peter Galuszka

The delayed Atlantic Coast Pipeline is undergoing a major change due to rising costs and legal delays – The Southern Company, based in Atlanta, is backing out of the project as an equity partner.

According to an announcement late Tuesday, Dominion Energy will acquire The Southern Company’s 5% stake in the natural gas project whose cost has risen from $5.1 billion to $8 billion thanks largely to legal challenges by environmentalists and regulatory agencies. The new ownership structure will be 53% Dominion and 47% Duke Energy, based in Charlotte.

The Southern Company will be still related to the project as an “anchor shipper,” the announcement said.

Another surprise in the announcement is that the pipeline project will buy a small Liquefied Natural Gas plant in Jacksonville, Fla. Dominion will assume ownership of it from Southern. That raises questions because for years Dominion has vigorously denied that the 600-mile-long pipeline has any link to plans to export LNG. Dominion does own an LNG export facility at Lugsby, Md. on the Chesapeake Bay that exports LNG mostly to Asian utilities.

Dominion Chief Tom Farrell told analysts at a conference call yesterday that Dominion has explored using LNG to power merchant ships. More ships are being equipped with LNG because it is cleaner than using traditional bunker oil. The International Maritime Organization of the United Nations has instituted new rules calling for emitting less sulfur and other polluting chemicals beginning in  January.

According to S&P Global, The Southern Company bailed on the pipeline because of its concerns of delays and soaring costs.

Pipeline partners have also shifted their thinking to simply getting a basic pipeline completed rather than think about expanding lines from it, a Dominion official said during the conference call, according to S&P Global. The original plans called for the pipeline would run from West Virginia, through much of Virginia and terminating at the North Carolina-South Carolina border.

ACP partners now hope to finish construction at the end of 2021 and commission it in 2022. The original commissioning date was 2018.

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20 responses to “Huge Dominion Pipeline Project Loses Partner

  1. I was discussing Ware’s HB 167, the bill on SCC authority over how much to charge ratepayers for the pipeline, and how easily it was passing. Was that a sign the utility was abandoning the pipeline? That’s when someone told me about yesterday’s announcements, and in the investor presentation it was clear Dominion remained committed to the project. Dig on their website and find that presentation….

    So perhaps they are less worried about how the SCC will bill customers for gas because using most of the gas for electricity generation is not the plan anymore. Clearly it cannot be if the company is supporting this clean energy transformation package which rapidly phases out all the existing gas plants. I’ve been plowing through that text, now that engrossed bills are posted, and watch this space….

    I would hope that those folks who get their freak on over natural gas would recognize that using it as fuel for ocean vessels to stop burning oil is progress. Probably too much to hope. They want batteries the size of small buildings taking up the cargo holds….

  2. Interesting questions, especially if rate payers are required to shell out a dime if this is becoming a commercial play. Also, there are actually only a few lng powered ships at the moment and they are costly to build

  3. Actually clipper ships could do near 20’knots. Not bad even today

    • They are actually doing that in the North Sea!

    • Haven’t read about LNG powered ships … so I went looking. My conclusion … ACP has concocted a pipe dream to validate a continued use for the ACP now that it is clear VA doesn’t need the gas.

      Or, it could be a search for money. Last June RMi was as signatory and catalyst for The Poseidon Principals, an agreement among 11 banks representing approximately $100 billion to “redefine the role of banks in the maritime shipping sector and lay a clear path for the broader financial sector to make new, significant contributions to global de-carbonization. … The Poseidon Principles are the first example of financial players joining forces to drive greenhouse gas (GHG) emissions reductions in line with a climate target of 50 percent absolute GHG reductions by 2050.”

      Also last year Marsh and McClennan’s report’s survey results strongly indicate that the maritime industry is unprepared for zero-emission fuels and vessels entering the fleet in 2030. A major barrier to preparedness is the price differential between heavy fuel oil and low-carbon fuels such as biofuels, hydrogen, and ammonia. The goal is a 50% reduction by 2050, much of which will come from adopting the Carbon War Room’s initiative of saving $70 Billion per year on fuel and reduce carbon and other pollutants by 30 percent through efficiency.

      Don’t see anything about LNG. One shipper has tested a fuel blend of 20% biofuels, but believes 100% will be “problematic.” The M&M survey results strongly indicate that the maritime industry is unprepared for zero-emission fuels and vessels entering the fleet in 2030.

      Here are the possibilities listed in the report …
      • The first is based on large-scale availability of renewable electricity, with electric fuels consequently the dominant fuels in shipping. The majority of the fuel mix would come from technologies including hydrogen and ammonia produced through electrolysis, e-methanol, and improved energy storage.
      • The development of biofuels is a second path, assuming that a fundamental change in large areas of land use is acceptable and sustainable. Bio-gasoil and bio-methanol could cover a major share of shipping’s fuel mix.
      • Thirdly, energy could be supplied through a mix of electric fuels, biofuels, and hydrogen and ammonia produced from natural gas, with carbon capture and storage (CCS).

      So … what’s up with this plan?

  4. A “small” LNG plant would presumably not be a big export center. Presumably other uses such as trucks/ships/fuel. Don’t forget as of Jan_2020 no more high sulfur bunker fuels on the high seas,which I am hoping is major improvement of ocean health.

  5. Actually, you can use bunker fuel by adding scrubbers

  6. I ask the same question every time. If it’s economical to liquify natural gas and transport it via ship to Asia in order to generate electricity why isn’t it economical to liquify natural gas at Lugsby and transport it by ship to Hampton Roads to generate electricity? If the problem really is fueling Hampton Roads why do we need a pipeline when there already is a LNG terminal in Maryland on the Chesapeake Bay?

    I strongly suspect that these pipelines have never, are not and never will be primarily focused on providing the transport of natural gas for use in Virginia. They are designed to export fracked gas. They have no business impacting the rate base.

    • The Jones Act requires any ship that delivers from one American port to another be an American flagged vessel. None of the LNG tankers are American, so they can’t do what you suggest, even though it makes sense.

      That was the uproar about the Russian tanker delivering LNG to Boston during the polar vortex. It makes much more sense to pay a little extra for a few days of LNG deliveries during extreme weather compared to paying for pipeline capacity all year long. But the pipeline people found something they could raise a stink about.

  7. If the State Corporation Commission were allowed to do its job without legislative override, it would grant Dominion rate relief for Virginia’s portion of the ACP only to the extent that it represented a prudent investment. If that means Dominion doesn’t recover its full costs for the Virginia portion of the ACP, well, that’s too bad.

    • Agreed but the SCC is not allowed to do its job because Dominion has purchased most of the General Assembly including the leadership positions. As always, the unlimited flow of undocumented money through our legislature is the problem. Cut off the money and cut off much of the power of the special interests. Then, and only then, the SCC will be allowed to do its job.

  8. So we’re apparently well past the ruse that this was “needed” for electricity for Virginia and that’s what justified the use of eminent domain – i.e. A for profit company forcing private property owners to sell their land.

    And in terms of selling to the Asian market, consider this:

    ” Australia has become the largest liquefied natural gas exporter in the world, shipping an estimated 77.5 million tonnes worth A$49 billion in 2019.

    The record figure knocked Qatar out of the top spot, with the nation expected to produce 75Mt in 2019.”

    All I can say is that the profit potential for LNG must be quite large given the pipeline costs and the shipping costs to Asia with Australia already in the game and much closer.

    Is it possible that Dominion is using it’s profits in Virginia to finance the LNG venture?

    • “All I can say is that the profit potential for LNG must be quite large given the pipeline costs and the shipping costs to Asia with Australia already in the game and much closer.”

      It could only be better if those profits were guaranteed by holding a monopoly position on the provision of a life and death product to millions of captive ratepayers. Oh … wait a minute ….

  9. Profits from LNG?????

    Here is what Farrell said about that LNG project … “Beyond pipeline and electric utility operations, Dominion also operates the Cove Point LNG export terminal in Maryland. It sees growth opportunities in the LNG sector, particularly around providing LNG for use as a marine fuel.”
    “That was the impetus behind buying Southern’s stake in the Jacksonville facility, and it is the reason Dominion is working with one of its offtakers at Cove Point to allow a portion of the supply under the agreement to be used to provide fuel for marine vessels, CEO Thomas Farrell said on Tuesday’s conference call. Such an arrangement would not alter the terms of the 20-year offtake contract, Farrell said.”

    Now here is why a pipe dream is needed … from Oil Price Intel …
    “LNG stocks in freefall. LNG prices in Asia (the JKM marker) fell below $3/MMBtu, less than half the price levels from a year ago. “Prices are free-falling just within this week,”

    “China declares LNG force majeure. China’s Cnooc declared force majeure on some LNG shipments, deepening the crisis for oil and gas markets.

    Total SA (NYSE: TOT) rejected the force majeure. “There is a strong temptation from some long-term customers to try to play with the force majeure concept,” an executive with Total told Reuters. “To say I cannot take my cargo under the long-term contract, but I would like to buy spot is contradictory.” The global gas glut could spread, impacting U.S. LNG exports and ripple upstream to U.S. shale gas fields. “

  10. It bothers me greatly that apparently the profit motive is so great that we’d draw down our reserves of natural gas to export it now and then later deal with natural gas shortages and higher prices.

    That’s not in anyone’s interest except those that would profit from it.

    And even that would not bother me as much if they were operating as a true private venture and not relying on using the govt to enforce eminent domain takings of property from people to then enrich other property owners – the for-profit venture. That’s back to KELO and the idea that one property owner can take from another if the first guy can portray it as “in the public interst”.

    Dominion is going to make profits on the backs of private property owners and against their will. Virginia should not allow that.

  11. Larry,
    A few points. Natural gas is very cheap at the moment. Fracked wells are far more expensive than traditional ones and are useful for only a few years. Bringing U.S. gas more into the world market will put pressure on price rises.
    Also, don’t you find it ironic that maybe three or four years ago, Dominion was running TV ads showing “average” Virginians extolling the value of the ACP to their lives and pocketbooks? That’s all gone now. Now Dominion is promoting itself as the most renewable-minded carbon cutter in the country.

    • I’m conflicted by Dominion and it’s corporate behavior in part because like them or not, we need them and they are bound and determined to extract as much value as they can out of every opportunity.

      They are the 600lb gorilla that we simply cannot ignore.

      And the ACP is a primary example.

      ‘They had folks here in BR, convinced and supporting the ACP because it was “needed” for Virginians, first for electricity, then for economic development (but apparently only for Tidewater).

      Dominion is an agile critter and so, yes, they are evolving and morphing on this issue – as well as “green”.

      And yes… those ADs… as well as the long list of Virginia businesses
      who supported the ACP – even businesses that did not use natural gas but thought it was good for the Virginia economy.

      And I am concerned that Dominion has been involved with the neutering of the SCC – both parties.

      The state of Virginia itself is not protecting the legitimate interests of private property owners who are, in my view, essentially being preyed on by the inappropriate use of eminent domain for a purely private for-profit venture.

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