Pipeline Politics; MVP and ACP Face Rocky Road

Jul 23, 2019

The long journey of the Mountain Valley and Atlantic Coast natural gas pipelines recently got longer. The U.S. Supreme Court is considering whether to hear the appeal of a case that denied the Atlantic Coast Pipeline permission to cross the Appalachian Trail.

Construction on the ACP is on hold, while work continues on the MVP. Several legal and environmental challenges have muddied the waters on pipeline construction in Virginia and one analyst says pipeline politics in this country are changing.

Credit Associated Press

Roger Conrad is a utilities investment analyst in Alexandria, Virginia.  “Pipeline Politics used to be quite simple," he says.  "Almost any pipeline, particularly natural gas, was approved by the Obama administration. But in the Trump administration things have gotten considerably more complicated.”

Conrad founded and ran the Utility Forecaster and Canadian Edge newsletters and now has his own publishing company, Capitalist Times. He calls the current landscape for the Mountain Valley and Atlantic Coast pipelines “full of uncertainty at this point.” He says, “It’s very hard to handicap. I see some people that are following the case giving it about a 50/50 shot.  I don’t know of any reason to have a different view than that. There’s just a lot of unknowns there.”

Conrad sees more opposition to pipelines than in previous years. One reason is that opponents are better funded than they were a couple of years ago, and a lot of the credit goes to one person.“ Certainly the President has been a far better fund raiser for a number of groups who would oppose these projects,”  than in previous years. In a commentary published in Forbes in March, Conrad wrote, Virginia’s Atlantic Coast and Mountain Valley ‘pipelines are in peril.’ Today, a couple months later, he stands by that pronouncement. “You’ve already seen these costs escalate from and initial estimates.  (For) The Mountain Valley, they anticipated 3.7 billion with an opening by late 2019.  The new estimate is 4.8 to five billion (opening in) mid 2020.  “The current cost estimate for the Atlantic Coast Pipeline project is $7 - $7.75 billion, and the project in-service date is late 2021,” according to Dominion Energy’s Aaron Ruby. “The longer these things get pushed off,” says Conrad, “the higher the cost goes."

The others side of the coin is the historically low cost of gas from the Marcellus shale formation in central Appalachia, a relatively new infusion that has helped change pipeline politics, and a huge incentive for pipeline companies to stay the course. But scenarios can change quickly in the energy sector. “It’s hard to believe,” but in the middle of the last decade “there were 106 new coal fired power plants on the drawing board around the country,” says Conrad. “Only two of those actually got built. And that’s primarily because natural gas got so cheap.” 

It’s a truth universally accepted that low cost energy will be in high demand. Several analysts have pointed out that there are not enough pipelines in service to transport it all. Ruby warns, “We don’t want to end up like the Northeast. Several pipelines have been cancelled in the Northeast in recent years, and it’s done a lot of damage to the economy and the environment. Local utilities are imposing moratoriums on new gas hookups, and they’re now importing natural gas from Russia during the winter just to serve existing customers. Some utilities and homeowners are stuck with higher-carbon heating and fuel oil because there isn’t enough gas infrastructure to convert older buildings. That means higher carbon emissions and more air pollution for the entire region.”

Conrad concurs with Ruby’s warning, saying, “There is no question that the Atlantic Coast and Mountain Valley Pipelines would be fully subscribed. And there’s tremendous demand from these utilities (some of which) are also the owners, Duke and Dominion for ACP being the major customers, that’s also incentive for them because they can utilize that gas.  They can shut the coal capacity that they have. Both those companies have big problems with coal ash.”   

“We need new infrastructure to grow our manufacturing economy and continue moving from coal to cleaner energy.” Says Aaron Ruby. Our current infrastructure is stretched too thin and is not keeping up with growing demand. Utilities are shutting off gas service to major industries during the winter, and they’re turning away new industries that want to locate here. If we’re going to grow the economy and continue moving to cleaner energy, we need new infrastructure.”

Natural gas is considered a bridge to a cleaner energy future by many. But it’s becoming clear that the road to lower energy costs and emissions is already being paved with solar panels. So, the companies are hedging their bets, says Conrad.  They’re hoping that pipelines will finally be approved and put into service and they are exploring renewable energy’s next leap, new techniques in battery storage of solar power, which would provide electricity night and day, rain or shine.

“That is the thinking in the industry now,” Conrad says, “that that’s inevitable, and that is going to happen at some point. It’s just a question of when.” These uncertainties raise tough questions for investors and for the pipeline companies; should they stay, or should they go?  “They’re not likely to walk away willingly” Conrad says, “but there is a point where the bleeding gets too severe.”

In an email Aaron Ruby wrote, Dominion Energy “remains committed to completing the project, and we’re confident we will. In spite of the delays, the project remains very important to our region’s economy and the environment." If the U.S. Supreme court agrees to hear the case asking for a reversal on the prohibition to cross the Appalachian Trail, no decision would be made until next year.

We asked for comment from the Mountain Valley Pipeline spokeswoman. She did not reply to our query.