AEC: New Gas Pipeline Projects Face Headwinds

For various reasons, some natural gas pipeline projects have been blocked, writes Thomas J. Tubman executive director of the American Energy Coalition, a group that promotes heating oil in comparison to other fuels .

The Keystone XL Pipeline has been in the news for many years now; and more recently, the Dakota Access Pipeline headlined the nation’s newspapers. These pipelines, designed to transport liquid petroleum products, have been viewed more favorably by the Trump Administration than they were by the Obama Administration. In fact, the Dakota Access Pipeline was completed since Trump took office and is shipping oil today; and the Keystone XL project is expected to move forward under a more favorable view from Washington.

Several proposed natural gas pipeline projects have also experienced opposition over the last year or so, but did not get the same press coverage as the oil pipeline projects. One of the more high-profile projects, at least in New England, was the Kinder Morgan, Tennessee Gas, North East Energy Direct (NED) pipeline that was proposed to transport natural gas from Wright, N.Y., to a major gas distribution facility in Dracut, Mass. This project encountered very stiff opposition from environmental groups and landowners along the route who opposed the taking of their land by eminent domain.

Kinder Morgan announced their decision to abandon the project in April of last year, citing the lack of firm gas contracts as their reason.  But the more likely reason was the announcement two days later by the State of New York’s Department of Environmental Conservation to deny a Section 401 Water Quality Certification needed for a second pipeline, the Constitution Pipeline, to proceed.  The Constitution Pipeline would have transported natural gas from the Marcellus shale fields in Pennsylvania to Wright, N.Y., and presumably feed the Northeast Energy Direct Pipeline.  Without this source of gas from the Constitution pipeline, the NED pipeline would have nothing to transport.

The demise of the NED put more focus and more priority on a second proposed project, the Spectra Energy, Algonquin Gas Transmission’s Access Northeast pipeline.  This project also faced very stiff opposition from environmental groups and others including Boston Mayor Marty Walsh.  But the proposed funding mechanism for the pipeline stirred the strongest opposition.  Spectra Energy proposed that ratepayers and not the company’s stockholders should pay for the project.  New legislation passed in Connecticut allowed for an assessment on Connecticut ratepayers to do just that.  But a court challenge in Massachusetts eventually made its way to the Massachusetts Supreme Judicial Court, which ruled that ratepayer funding, dubbed the “pipeline tax,” was unconstitutional. And opposition in New Hampshire resulted in a decision by that state’s Public Utilities Commission to disallow an assessment on ratepayers.

The decisions in Massachusetts and New Hampshire forced Connecticut to rethink its legislative action to allow ratepayers to be assessed a portion of the cost to build the Access Northeast pipeline.  Then in turn, Eversource Energy and National Grid, two of the larger local utilities, backed away from their petitions for capacity on Access Northeast.  This prompted Spectra Energy to notify the Federal Energy Regulatory Commission of its decision to place the project on hold.  It is unlikely this project will move forward despite the need for additional gas supplies in the region. This is good news for heating oil and propane retailers in New England.

Meanwhile here are updates on other proposed natural gas pipelines:

-Atlantic Reliability, also known as the Pinelands pipeline, proposed by South Jersey Gas, is facing stiff opposition.

-The New York State Department of Environmental Conversation has denied a required water quality certificate to the National Fuel Gas Company, killing its plan to build a Northern Access pipeline. This pipeline was intended to bring Marcellus shale gas from McKean County, Pa., to upstate New York and on to Canada.

The story is the same with numerous other natural gas pipeline projects as the industry tries to move its newly found gas to market.

The Mariner East 2 project under construction in Pennsylvania has moved concerned parents to force a “safety summit” between Sunoco Logistics and Homeland Security officials to address the pipeline’s proximity to local schools. The parents have identified as many as 40 schools that are within the “blast zone” of the pipeline.  The parents fear that evacuation plans are inadequate and are demanding reevaluation.

As these natural gas projects have been opposed and in many cases blocked, and the price of crude oil has dropped, the outlook for heating oil retailers has changed in a very positive way.