Pipeline proposal ultimately failed because of greatest weakness
EDITOR’S NOTE: This was submitted by John D’Angelo, chairman of the Amherst Pipeline Task Force. It is said that victory has a thousand fathers, but failure is an orphan. Now that the Northeast Energy Direct project has (apparently) been slain, "fathers" are coming out of the woodwork in droves.
At the risk of being accused of "joining the crowd," I would like to share some thoughts on the NED project. For what it’s worth, I do believe that the cumulative weight of the opposition in Pennsylvania, New York, Massachusetts and New Hampshire took its toll on the project. However, I also believe Kinder Morgan when they say they are shelving the project due to a lack of committed customers.
The FERC has never approved a pipeline that had only 40 percent of its capacity "booked" before construction, and given the record-setting volume of (mostly unsupportive) comments the NED project drew, I doubt the FERC would have made this pipeline the first one approved in that condition. The lack of demand for the NED has always been its greatest weakness. In the Amherst Board of Selectmen’s second letter to the FERC, we leaned hard on this issue, as well as on the comforting delusion that if only there was more gas pumped into New Hampshire, somehow, local electricity rates would fall. New Hampshire produces almost twice the electricity it uses and exports the rest, so the mechanism by which more gas in New Hampshire would translate into lower-cost electricity in New Hampshire never made sense to me.
Amherst (and the other New Hampshire towns) made the case for a lack of demand pretty well. That, plus the fact that 80 percent of the committed volume of gas would have been unloaded from the NED pipeline before it entered New Hampshire made the entire 71- mile route through New Hampshire nonsensical.
In the BOS’ first letter to the FERC, the BOS argued that there was insufficient demand for the 2.3 BCF/day pipeline, and that suggestions, or "trial balloons," that electric distribution companies (EDCs) should be allowed to or forced to levy a tariff on electric rates to help fund the NED were just wrong – the theory being that access to low-cost gas from the Marcellus shale would (eventually) result in lower-cost electricity, thereby allowing customers to recoup the funds that they would have "advanced" KM to build the pipeline.
There were a number of issues with this trial balloon, including the obvious one that customers hit with a tariff this year may or may not be the customers who would benefit from the hypothetical lower gas prices 10 years down the road. It was offensive to the Pipeline Task Force and the BOS that electricity consumers could be conscripted into supplying the capital to build a privately owned pipeline they had not asked for and did not want, with the return on – and for that matter, the return of – their involuntary "investments" so doubtful.
Reality has proven the whole idea to be a terrible one, since gas prices have collapsed and the benefit of having access to low-cost Marcellus shale gas is now negligible. Our first letter to the FERC drew a very indignant response from NESCOE (elibrary.FERC.gov/ idmws/file_list.asp?accession_ num=20150626-5211) on the subject of the tariff. However, the KM press release issued on April 20 (www.kindermorgan. com/content/docs/NED_ Project_Statement-April_20_2016. pdf) includes the following:
"The insufficient contracted capacity is due to several factors. They include the fact that the New England states have not yet established regulatory procedures to facilitate binding EDC commitments, that the process in each state for establishing such procedures is open-ended, and that the ultimate success of those processes is not assured."
I interpret that to mean that a tariff on EDC’s customers was always Kinder Morgan’s backup plan if they could not find enough committed customers before the issuance of a certificate. To the extent that our raising the issue and provoking NESCOE to disavow the proposal helped crush KM’s backup plan, well, we are happy to have helped! At the end of the day, a lack of paying customers, combined with the inability to force electricity customers to become unwilling participants in the project, led to the business decision to shelve it.
However, KM has spent tens of millions of dollars on the work to date, and they will not discard this work, they will file it away. And maybe someday, if the circumstances and economics change, the NED might "rise from the grave." However, I expect that we are all safe from that for at least a generation. And by then, perhaps solar, wind, geothermal and nuclear will have made burning fossil fuels for electricity generation obsolete. We can hope.