Hello again, long time no see (no pun intended), as some of you may know even though I went to school in Pennsylvania (GO STATE!!!) I’m a long time Virginia resident. The Commonwealth, as our politicians like to call it, has gone through a lot of changes since I moved here in 1995 and it’s going to go through a lot more in the years to come.
Also because VA is a swing state that just happens to be a stone’s throw away from our nation’s capital the politics here can get pretty intense, especially when it comes to energy and the environment. So I thought it would be worthwhile to report on some of the happenings here in the “Old Dominion” (which is Virginia’s less pretentious nickname)
Right now the local airwaves are dominated by the fight over the proposed Atlantic Coast Pipeline (ACP), so let’s start off by asking the most obvious question; what is it? Well as the name suggests it’s a pipeline, but to be more specific it is a proposed natural gas pipeline scheduled for construction, pending government approval, that spans across three states (WV, VA, and NC) and 600 miles of terrain.
The project is a joint venture between Dominion Resources, Duke Energy, Piedmont Natural Gas, and Southern Company Gas. Dominion Resources, typically just referred to as Dominion here in the commonwealth, is the lead stakeholder for the ACP and the target of most of the ire from activists & environmentalists.
Before we dig deeper into that fight, however, let’s focus more on the metrics of the pipeline as well as the stated purpose for its construction. According to Dominion, the diameter of the pipeline will be 42 inches while it runs through VA & WV, and 36 inches through NC. More importantly, the carrying capacity of the pipeline will be 1.5 billion cubic feet of Utica & Marcellus shale natural gas per day. The gas will be drawn from wells in West Virginia and the pipeline will terminate in Robeson County, North Carolina, which lies just above the North Carolina-South Carolina border.
The stated purpose of the ACP according to the environmental impact statement (EIS) issued by the Federal Energy Regulatory Commission (FERC) is “to deliver… natural gas to customers in Virginia and North Carolina.”
Now interstate pipelines are multi-billion dollar projects, so they aren’t welfare programs or economic stimulus packages. Pipelines are economic investments built for economic reasons.
Typically to be financially attractive a project like the ACP must fulfil one or both of the following conditions:
1) reduce day-to-day transmission costs when compared to other means of transportation or,
2) allow the parent company to access an otherwise inaccessible market of customers
Pipelines are not built to reduce your energy bills or create jobs, these are just peripheral benefits; and they are certainly not built to reduce carbon emissions. Natural gas pipelines only lead to reductions in carbon emissions if the power plants buying the gas previously generated their electricity using dirtier fossil fuels like coal.
Critically, however, if the proposed pipeline significantly increases the net-consumption of natural gas over the long-term then emissions will actually increase. Many proposed pipelines pass the first test but completely fail the second,
This is one of many reasons why activists & environmentalists are opposed to the construction of the ACP as well as any other interstate pipeline. When a pipeline is constructed the parent company assumes it will be able to service customers with the fuel running through that pipeline for as long as the pipeline is structurally sound. Thus interstate pipelines lock-in decades of future carbon emissions by making it harder to retire our ever-expanding carbon infrastructure down there line.
The pipeline’s investors also become incentivized to fight against environmental policies that may dampen natural gas consumption. So if some future politician or government agency wants to impose regulations that reduce the amount of fuel their constituents —and the company’s customers— use they will be lobbied relentlessly not to do so. The lack of regulation, in turn, encourages future fossil fuel investment.
It’s a vicious cycle that makes it extraordinarily difficult to decarbonize the grid, and a cycle many regulatory agencies don’t factor into their analysis when they permit these fossil fuel energy projects.
For example when the State Dept. issued its report on the environmental impacts of the Keystone XL it stated that pipeline was “unlikely to significantly impact the rate of extraction in the oil sands or the continued demand for heavy crude oil” and estimated the increase in emissions related to the projects were negligible (State projected a 0.02%-0.4% increase of U.S. annual GHG emissions as a result of Keystone’s construction)
This flies in the face of logic. How can you assume that the demand for heavy crude oil will be unaffected by the construction of the pipeline?
The world’s governments are marshalling their forces (though much too slowly) in a global effort to reduce fossil fuel consumption, and for fossil fuel companies that means reduced profits. So they are going to lobby like hell to keep pumping that oil out of the ground. Consequently, the continued extraction of those Canadian oil sand deposits is not compatible with a 2 degrees C or less world and thus the demand for this heavy crude must be reduced to zero.
So how can you square all of this with the findings of the State Dept. report that assumes an extraction rate of 830,000 barrel of crude per day over the Keystone XL pipeline’s lifetime.
You can’t. State’s analysis ignores the political factors that maintain the “demand” for heavy crude (i.e. the prevention of environmental regulations reducing carbon emissions) and only analyzed the market effects of the pipeline’s construction.
This same dynamic has played itself out during the debate over the ACP.
The National Resource Defense Council (NRDC) has pointed out that the EIS conducted by FERC also doesn’t factor in the political & economic incentives the construction of ACP would create for maintaining the status quo thus inhibiting the expansion of new clean energy capacity. Dominion can claim that the construction of ACP will reduce carbon emissions because under normal market conditions the demand for power would otherwise be met by dirtier fuels.
However, as we previously alluded to, these are not normal market conditions and the increasing demand for power in the Mid-Atlantic can & must be met with alternative fuels instead.
Additionally, the NRDC questions whether there is any demand for the natural gas that would run through this pipeline in the first place. Independent analysis published by the IEEFA (Institute for Energy Economics and Financial Analysis) in consultation with Kunkel Energy Research determined that according to demand projections made by the ACP stakeholders themselves 400 million-cubic-feet per day of the 1,500 million-cubic-foot daily capacity of the pipeline will no longer be necessary due to reduced energy consumption forecasts in VA & NC.
This is not an insignificant amount. So why are Dominion and its partners still pursuing the project? Well, when the company selling the fuel is also the company consuming and distributing the fuel there’s a third way to make money on a pipeline construction project: up charging customers.
Dominion is not only the lead stakeholder of the ACP but its affiliates —or “sister” corporations— are the utilities buying the fuel being transported by the ACP. So in the event that the demand for natural gas does indeed fall below the carrying capacity of the pipeline Dominion won’t lose any revenue.
How? Well, the Dominion affiliated utilities will just purchase the natural gas at a higher price and then those same utilities can just pass along those excess costs to its customers by increasing the end-use gas prices homeowners pay. In fact, expert analysis made available by the NRDC has calculated that this upcharging will cost Dominion customers an additional $1.6-2.3 billion in electricity bills.
So the Atlantic Coast Pipeline will increase electricity bills and lock in decades of carbon emissions. Doesn’t sound like a good deal for us Virginians, but what about jobs? Well yes according to Dominion 17,240 jobs would be created during construction and 2,200 operation jobs would remain permanent, but are these jobs worth the cost? Will they actually materialize at the size and scope Dominion is saying they will? And is there a better, cleaner alternative?
We will dive down this rabbit hole in the next series of the VA Slant, but for now, you should look at the ACP as more of a Faustian bargain and not the “win-win” these fossil fuels companies have been trying to sell it as.
