Natural Gas Shortage? What Natural Gas Shortage?

Chickahominy LLC’s natural gas-powered generating plant would dwarf Dominion Energy’s Greensville facility (shown here), currently the state’s largest gas-generating plant.

by Peter Galuszka

Historic and quaint Charles City County southeast of Richmond is home to a number of restored plantations, Native American tribes and, its centerpiece, the placid, marsh-lined Chickahominy River. Yet, quietly and without much media attention, Charles City is on its way to becoming a fossil fuel powerhouse as two proposed natural gas plants move forward.

On June 21, the Air Pollution Control Board voted 6-1 to grant Chickahominy L.L.C. a permit to build a 1,650-megawatt natural gas generating station. If built, the plant would be the largest fossil fuel generating station in the state, surpassing Dominion Virginia Power’s 1,640-megawatt Chesterfield power station that is largely coal-fired. Also planned for Charles City County is a 1,100-megawatt natural gas generating plant planned by Michigan-based NOVI Energy.

The plants will tap a Virginia Natural Gas pipeline linked to the giant Transco pipeline that runs through from the Gulf Coast to the Northeast. The electricity will apparently be supplied to the PJM grid that runs from Illinois to the East Coast.

Company statements claim that the Chickahominy plant will help serve Virginia, which is collecting new data centers that demand great gobs of power.

The two plants, however, raise important questions about permit-letting and natural gas markets.

Critics have claimed that the Chickahominy plant flew in under the public’s radar screen and some residents didn’t know it was being proposed.

According to the Virginia Mercury, the only news outlet in the state that has provided extensive coverage of the story, emails obtained under the Freedom of Information Act show that state Department of Environmental Quality officials were at one point taken aback by how little information the company provided.

At the June 21 permit hearing, one resident, Wanda Roberts, said she didn’t know of the meeting until a few days before, according to the Mercury. DEQ officials said that the plant will be the “cleanest facility of its type in the country, the Mercury reported.

Environmentalists are concerned that the plant will pump large amounts of carbon dioxide into the air. Glen Besa, the former head of the Virginia Chapter of the Sierra Club, wrote on his Facebook page: “Another Air Board meeting, another Dirty Fracked Gas power plant and 6 million more tons of GHGs (green house gases) approved in the middle of a climate crisis.”

The projects raise other questions about what the true situation is with natural gas demand. Dominion and its partners cite high demand as the reason for the controversial, $7.5 billion Atlantic Coast Pipeline billion pipeline that would stretch from West Virginia through Virginia and on to North Carolina.

The idea is to take plentiful fracked shale gas from the Marcellus field in West Virginia and Pennsylvania to the Southeast. Backers of the Charles City County facilities have the same idea. They plan on tapping a Virginia Natural Gas pipeline that connects with the Transco pipeline that runs through Virginia from southwest to northeast and supplies much of the gas the state uses.

The plan begs a question. If gas is supposedly in such short supply to require Dominion’s pipeline, why, then, does Virginia Natural Gas apparently have no problem supplying two giant natural gas generating stations?

According to news accounts, Virginia Natural Gas has complained in the past about the difficulties in supplying the South Hampton Roads area with natural gas. Opponents of the Atlantic Coast Pipeline have said that there’s actually plenty of gas available and more pipelines are not needed.

The fix appears to be in for more expansion, however. The Air Pollution Control Board recently came under fire for approving a gas compressor station for the Atlantic Coast Pipeline near an African-American community in Buckingham County.

Two air board members had questions about the plan but they were replaced by Gov. Ralph Northam before a vote was taken approving the station. The governor’s office said the terms of the two members had expired and the replacements were routine.

One wonders how many other natural gas plants are planned but not widely known.

Peter Galuszka is a free-lance writer based in Chesterfield County.

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18 responses to “Natural Gas Shortage? What Natural Gas Shortage?

  1. Good article Peter! And it raises all kinds of questions not the least of which is why we did not read this in BR already!

    So these are pretty good sized plants sited – it looks like – inside of Dominion’s service area.

    I suppose in theory Dominion generates what it needs from it’s own gas plants and potentially goes to PJM when they need more – which may well be electricity generated by these 3rd party folks.

    The same thing seems to be going on with solar and wind.

    Oh Dominion has their own proposals for new plants, wind, solar but one does wonder if 3rd party (which presumably also makes a profit) can generate for less than Dominion does… what does that mean?

  2. re: natural gas and GHG.

    You have to have gas in order for solar (and wind) to work because you have to have “something” that can generate on demand 24-7 and especially so when solar/wind are not available.

    So you build solar and wind – you build enough of it that on a normal day it covers most of the demand – which means you burn less gas.

    Then when demand exceeds wind/solar – especially at night – you burn the gas.

    The goal is to burn MORE wind/solar when you can and to not use gas until you have to.

    Sometimes it seems like neither the Greenies nor the anti-solar folks can see that ….

    The greenies keep saying that SOME DAY there will be batteries – I say “fine” – tell me what we do right now.

    The anti-solar folks keep harping on the idea that Solar/wind are not “reliable” because sometimes they just can’t generate. But if you have gas as a backup – you just “burn” the renewables whenever you can and over time – we may well cut our gas consumption considerably – by some estimates to 20% of what we burn right now.

    Both sides keep letting perfect become the enemy of good.

  3. TomH has been making the case that Transco had plenty of capacity for Virginia for some time, right here in the comments routinely, which these developments highlight. And these new merchant generating plants also deeply undercut Dominion’s claims that it needs new generating capacity, financed in the most expensive way by forcing the cost on captive ratepayers.

    “Both sides keep letting perfect become the enemy of good.” One of your better observations, Larry, one I can second. That happens on many issues.

    https://www.baconsrebellion.com/wp/merchant-power-plant-proposed-for-charles-city-county/ And Jim has written about this, long ago…..He ended that 2016 piece with exactly the right question – if these companies are building these plants on their own, does Dominion need to build more?

  4. Thanks for the link where Jim did talk about it.. must have missed it…

    The other day I thought that Tom said that Dom COULD sell power to PJM and in effect is competing with these 3rd party merchant plants in doing so – except that the merchant plants are not guaranteed an ROI (as far as I know) whereas – if Dominion apparently can build more generation than is needed – AND turn around and sell it to PJM – at a price lower than the 3rd party merchants can?

    I don’t know the answers…perhaps Tom or Acabar do.

    Obviously the 3rd party merchants have to include the capital costs of their plant as well as the cost of gas needed to generate. Does Dominion have an inherent advantage because of it’s monopoly? It just seems wrong for Dominion to have a monopoly then use that monopoly to compete in the PJM market ..

    Oh and yes… if the 3rd party folks can already get enough gas to run a large gas plant – what is the ACP about AND why has Bacon not asked that question also?

    😉

  5. Well, the price they both get when selling to PJM is the same, I think. A fascinating bidding process based on supply and demand hour by hour. Perhaps the utilities can offer a lower price, but perhaps not. Perhaps the merchants can have higher ROEs than the investor owned companies….That is the issue which has come up in the RGGI debate, as Dominion complains that it would need to collect the RGGI tax as part of its price bid into PJM, and thus would not be selected.

    One wrinkle often forgotten, to the extent there are profits to Dominion from off-system sales, we ratepayers benefit on what I think is still a 75-25 split, 75 percent to us. It comes back through the fuel factor. Dominion ratepayers don’t share of course in the profits at the merchant plants.

    There has been plenty of debate on Bacon’s Rebellion about the need for those pipelines, and long ago my thought was that only one would ever be built. I haven’t abandoned that thought.

  6. The Chickahominy plant is a 1,650 MW combined cycle unit that was just permitted by the Air Quality Board. It is about a mile away from a 1,100 MW gas-fired plant being developed by C4GT that had previously been permitted in Charles City County. The C4GT facility intends to connect to the same pipeline as the Chickahominy plant.

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    A Virginia Natural Gas generating plant that runs on landfill gas is also in the vicinity.

    All of this energy infrastructure is located in a county where the majority of the population are minorities (46% African American, 7% Native American) raising the Environmental Justice issue (as with the ACP) of whether areas of low income and minority populations are being singled out to endure the concentrated effects of energy production. But supporters note that such development contributes significantly to the county’s tax base.

    The developer of the Chickahominy plant claims the need for its output is being “driven by data center development” such as the Facebook site in Henrico County.

    See: https://www.richmond.com/news/plus/williams-does-charles-city-have-too-much-energy-for-its/article_bce883c8-eaca-5b3c-ac2a-54ceb999a546.html

    There is no shortage of available pipeline capacity in our region. FERC knew it, because they approved all of the expansions to the existing pipelines that are now in service. Dominion was also aware of the available capacity. They contracted for a chunk of it to supply Cove Point. And have since told FERC that Transco has enough free capacity in the region to meet the demands the ACP intends to serve in southeastern Virginia and North Carolina. They just want to take the gas from Transco and transport it with the ACP at a much higher cost.

    But Transco and Columbia Gas have pipelines throughout Virginia already. VNG can connect to the expanded existing pipelines much less expensively than paying $2 billion just for 20 years of capacity from the ACP.

    Adding two huge merchant generators in Virginia complicates the carbon/GHG issue and could cause the utilities to shut down inefficient coal and gas plants earlier than expected, but still paid for by ratepayers.

    I made those comments to the Air Quality Board but it is still unclear how the carbon emission issue will proceed in Virginia.

    Thanks, Peter, for highlighting the inconsistency in Dominion’s position about gas supply. They used a sleight of hand argument with FERC (that the Commission went along with). The ACP claimed that the expansions to existing pipelines were fully subscribed, making it sound as if no additional capacity was available.

    The expansions were fully subscribed, but by gas producers and marketing companies looking for customers. By having agreements for capacity, the marketing companies were indicating that they had a means of transporting the gas to customers.

    The projected new power plants in Virginia and North Carolina were a large share of the intended market for the expansion projects. FERC took that market away when it approved the ACP. And added billions to the energy costs for utility customers in Virginia and North Carolina.

    It is FERC’s job to determine that a new pipeline provides a net public benefit, otherwise they are not supposed to issue a certificate. The ACP is unnecessary for us to have the gas we need, as evidenced by the new plants in Charles City County. And using the existing pipelines will save families and businesses billions compared to using the ACP. It is hard to find a “net public benefit” in that scenario.

  7. Quick comments as I am tied up at the moment, in general I am in favor of smaller more distributed power plants. Utilities like to do everything world’s largest for their profits.

    The article title was confusing apparently trying to say new pipelines are not needed if the existing pipelines can do this.

  8. Peter raises an important issue: On the one hand Virginia Natural Gas, a partner in the Atlantic Coast Pipeline, has argued that the ACP is necessary to address the constrained natural gas supply in Hampton Roads. Yet now VNG seems able to supply a huge new natural gas-guzzling power plant in Charles City County. How do we explain the discrepancy?

    Perhaps an enterprising journalist should pose the question to Virginia Natural Gas.

    I suspect the answer has something to do with the fact that Charles City County lies north of the James River, while the natural gas constraints affect mainly Hampton Roads south of the James. I don’t know that for a fact. But I think we should nail down basic facts before jumping to conclusions.

    Also, this story seems to support the pipeline narrative that future demand for natural gas is greater than the current supply. Dominion is not the only one making this claim. Chickahominy LLC appears willing to bet $1 billion or more to build a plant to serve the wholesale electricity market. It is willing to put its own capital on the line — without rate payer guarantees. If Chickahominy LLC is willing to put skin in the game, its analysis needs to be taken seriously.

    • I think you drew the opposite conclusion about the supply and demand for gas and pipeline capacity. The Chickahominy project demonstrates that pipeline supply in the region is adequate to support more gas use without the ACP.

      I have mentioned before that in the first 20 years of this century, we have added twice the capacity in gas transmission pipelines than what we needed to meet our peak national use (in 2017). That does not include all of the pipelines built in the 20th century or under development now.

      Not only do we have a significant surplus of capacity, we also have a surplus of supply. Growth in domestic use of gas remains flat. Only LNG and pipeline exports are growing. Over the past few weeks, demand has been flat in the 75-80 Bcf/d range. Production has been relatively stable too, at about 86-87 Bdc/d. It is normal for production to be higher this time of year. Summer is when gas is injected into storage for use during the next heating season.

      See: https://www.forbes.com/sites/judeclemente/2019/06/23/u-s-natural-gas-prices-have-collapsed/#5082aaa1286e

      We have consistently produced more gas than we need over the past ten years. This has driven prices down and caused Wall Street and the energy industry to export our cheap gas overseas in order to increase prices.

      Gas exploration and production companies have lost billions since the shale boom started. The market is trying to tell us that we have too many pipelines and too much gas production, we should slow down and follow the market signals.

      I would think this would be encouraged by a Libertarian viewpoint. The government has skewed our energy policy by interfering at both the state and federal level to facilitate development of gas infrastructure: fracking, pipelines, gas-fired power plants, LNG export, etc. in amounts far greater than what the market requires, in order to favor a powerful special interest group (the energy industry).

      It would be far wiser to slow down this development and keep it within the boundaries that the market and our environment can tolerate. It makes sense for our producers to develop as much supply as they can sell profitably. If the market needs more (it doesn’t now) the price will go up and they can sell more profitably.

      It is nonsense to build so much excess pipeline capacity. Someone has to pay for it, and it is usually families and businesses.

      Things that we said were clear 3-4 years ago are now being noticed by more people. We don’t need the ACP or the MVP. Our land, water, and economy would be better off without them. Why are so many people who normally argue for less government interference so strongly supporting projects, imposed by the government, that are not good for our citizens, their property rights and their pocketbooks?

  9. The social justice argument is a smokescreen for simple opposition to fossil fuels. Those plants, and that earlier ACP compressor station, are sited where they are because they are near the gas pipelines and near the transmission lines, which were sited years ago through lightly-populated rural areas. In Eastern Virginia along the rivers a lightly-populated rural area is going to have a higher than average African-American population, whether it Buckingham, Charles City, Prince George County or others you could name. That’s where their ancestors settled after emancipation, close to their previous enslaved locations. If you think some injustice was done, go back to when the pipelines and transmission lines were placed.

    • Haha! It’s really racist when a company invests a billion dollars in a power plant that generates millions of dollars a year in tax revenue for a poor rural county. It’s really racist when that county uses the money to bolster spending for its predominantly African-American school population.

  10. It can certainly be seen as racist, when the VA DEQ contrives to use inappropriate dsta to characterize a well known African American community in Union Hill as 65% white, while being shown an honest, door to door count, scholarly report demonstrating that the community is 85% African American, all to ignore the additional impact review required for the targeted community. Additionally, having “Black face” Gov. Northam manipulate the Air Board at the last moment to avoid the concerns of particular board members by removing two of those concerned, doesn’t elicit trust in DEQ or this administration for a fair hearing or just treatment.

    Certainly the high Return on Equity rate of 14% granted by FERC for pipeline building projects also drives the risk taking and contrived submissions that are apparent to many of us studying the weak justifications for domestic need for the proposed regional pipelines. A ROE of 7-10% is a more standard rate for a U.S. utility. Thanks for the discussion.

  11. Steve and Jim,
    There’s no question in my mind that race and income levels play a big role in where companies locate projects that are either dangerous or big nuisances. Take Appalachia where I lived for several years and was the subject of a book I wrote a few years ago. Why do coal companies locate strip mines in poor places? True, because there’s coal but imagine if they tried that in white and wealthy Fairfax or Henrico Counties.

    • My main point was, having put the pipelines and transmission lines there decades ago, it was inevitable these new generation facilities would be adjacent. Certainly the coal companies were going where coal was abundant, people were few, far between and under great pressure to take whatever price was offered. I wouldn’t be surprised if the same was true of the pipelines (and before them, the railroads). We’ve all got our coal ties on this blog – my grandfather was a banker and his brother a lawyer in Tazewell County with plenty of business ties to that industry. I still have $2 bills my grandfather gave me because his bank would stock them and the coal companies would use them in pay envelopes, so the miners while shopping made sure the merchants knew where the money was from.

  12. There was an interesting piece last week on eco social justice on the CNN show United Shades of America. Apparently Philly area has become trash incineration center (eg; for New York trash). I need to verify. First we had New Jersey as the dump grounds, then we had Virginia, and but it sounds like Philly area has built incinerators (which I thought was what Virginia should do for the out-of-state trash). I believe trash incinerators should strive to be squeaky clean so as not to contaminate anyone, The CNN show conflated serious lead poisoning issues in Philly with the trash inhauls, but I do not think that is true.

    In the case of trash, New Jersey tried to say each state should be in charge of their own trash, but the US Supreme Court has consistently ruled that trash is interstate commerce and can be dumped anywhere in any amount. That’s where I have a social justice problem,

  13. re: ” I suspect the answer has something to do with the fact that Charles City County lies north of the James River, while the natural gas constraints affect mainly Hampton Roads south of the James. I don’t know that for a fact. But I think we should nail down basic facts before jumping to conclusions.”

    so……… why did Dominion have to put those power lines over the James at Jamestown if there was already gas up there to generate electricity? Is that the “flaw” they are now talking about?

  14. Don’t ya’ll think it INTERESTING that we talk about social justice for pipelines and gas power plants but not solar or wind panels?

    How about pump storage dams where imminent domain, no doubt, would be used to force people off of their land for a dam/reservoir boondoggle for Dominion and not a single “conservative in the VA GA has talked about the merits of using Eminent Domain for pipelines or pumped storage – while solar is purely a willing buyer/willing seller proposition and not a single one uses eminent domain…….

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