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Fate of the Mountain Valley Pipeline?

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Kurt Holtz
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It wasn’t that long ago that Virginia was slated for not one, but two, new natural gas pipelines. Dominion Energy recently scrapped its plan for the Atlantic Coast Pipeline, citing high costs and a pivot to more renewable energy in its portfolio. And that has people wondering about the fate of the Mountain Valley Pipeline as construction delays mount and costs rise.

The pandemic has cut demand for energy and led to lower prices.  But utilities and private energy companies take the long view.  These projects are years in the planning and not easy to alter, for a myriad of reasons, once the ball is rolling.

“A lot of money has been spent on this one, ” says Roger Conrad, an energy industry analyst in northern Virginia.

He says it wasn’t clear, in Mountain Valley Pipeline’s most recent earnings call, exactly how close to completion it is. “But, previously we'd heard numbers like 93%, complete, implying that all they had to do is just overcome a couple of additional regulatory hurdles, procedural things, and then they could get this thing completed.”

But obstacles remain, from stream crossing permits in limbo to tenacious tree sitters protesting the pipeline in one small section of its path in Montgomery County. And perhaps the biggest hurdle of all: The mounting financial costs as time goes by.

Conrad says he thinks it's "kind of extraordinary" that the company did announce it's expected costs for completion.

"A lot of people would be familiar with these figures already: They increased the mid-point of what they thought their costs would be. But they also are now talking about a 2021 startup date, which of course is pretty amorphous as well.”

The initial plan had completion by the end of 2018, at a cost of around $3 billion. The new estimate is $5.8 to $6 billion.

Conrads sees  "a lot of uncertainty, the longer it takes to get the work completed and the pipeline open. The lesson has been pretty clear that, (the uncertainty  reduces odds that (the Mountain Valley Pipeline) actually does, eventually operate.” 

More confident that the pipeline will go into service as planned  is the Independent Oil and Gas Association of West Virginia. Executive Director, Charlie Burd, said in a statement: “The importance of the MVP to West Virginia, in terms of infrastructure investment, jobs, tax revenues generated at local county and state level, cannot be overestimated."

Conrad also believes there will be a strong market for gas from the Mountain Valley Pipeline; plenty of buyers, at potentially lower than normal cost.

But there’s been a shift in the wind on energy production during the time it’s taken to build the MVP.

“That of course, is the electric industry itself. Every year, the Edison Electric Institute has an annual meeting where they get together, it’s for financial analysts to interact. But what you hear there is, the emphasis on ‘energy transition,’ which means more renewables and (ESG) Environmental Social Governance. These are things you didn't hear about at all just a few years ago but now that the industry has made a full pivot in that direction.”

The state of Virginia has pledged to have a cleaner energy portfolio by 2050. And that also comes with potentially lower energy costs, says Conrad.

“Because if you switch to cleaner energy it's actually cheaper. And you can actually put that investment in your rate base. You can grow earnings while pushing down customer rates and keeping the environment cleaner. You make your company more attractive to younger people (who are) tech savvy. That's needed to run a modern system.  There are just so many positives.”

Just last year Conrad gave the Mountain Valley Pipeline better than even odds of making it through to completion, but now he’s not as certain.

“For the companies that are invested in it, I think it’s a good reason for people to be very cautious."

He says it's harder for investors to walk away from the MVP as Dominion Energy did  with the Altantic Coast Pipeline project.  There are more entities involved, some counting on the gas, others on the financial returns. As more time passes and new advances show promise for other modes of potentially cleaner energy, the potential for completion of the Mountain Valley Pipeline grows murkier.

"If this pipeline does go through it will be probably one of the last, maybe the last big one to come down the pike," says Conrad.

But  Conrad says, if the Mountain Valley Pipeline is completed and put into service, something very interesting might happen;  It could make the 303 mile natural gas conduit a more valuable asset than expected, as one of the last of its kind.