The Federal Energy Regulatory Commission is considering applications for construction of two major natural gas pipelines that would run from West Virginia into North Carolina and Virginia: the Atlantic Coast Pipeline and the Mountain Valley Pipeline.
In October 2014, Moody’s Investors Service characterized the proposed pipeline build-out from the Marcellus and Utica shale region as “the start of a once-in-a-lifetime build-out cycle.”
A coordinated planning process for natural gas infrastructure could serve as a check on the tendency of individual pipeline developers to overbuild.
Major utilities, pipeline companies and natural gas producers are proposing construction of two new natural gas pipelines into Virginia and North Carolina from the Marcellus and Utica shale region of West Virginia.
Developers of the Atlantic Coast Pipeline and the Mountain Valley Pipeline, which would cost a total of nearly $9 billion to complete, have applied to the Federal Energy Regulatory Commission for approval.
The pipelines are proposed to go into service in 2018. They would be part of a larger expansion of natural gas pipeline infrastructure from the Marcellus and Utica shale region in Appalachia that has been described by Moody’s Investors Services as an “once-in-a-lifetime build-out cycle” driven by the recent boom in natural gas production.
Some participants have openly acknowledged the likelihood of overbuilding, as when Kelcy Warren, CEO of Energy Transfer Partners, said in an earnings call last year that overbuilding is part-and-parcel of the industry (“The pipeline business will overbuild until the end of time,” Warren said).
This report shows how the Atlantic Coast and Mountain Valley pipelines are emblematic of the risks that such expansion creates for ratepayers, investors and landowners.
Among its conclusions:
This report notes also that much of the $9 billion costs of the projects—aside from the costs embedded in the price of any natural gas that is exported—would ultimately be either added to the price consumers pay for natural gas or absorbed as a loss to project investors.
And it points out that regulators have not considered whether these pipelines are the best use of ratepayer dollars. None of the economic interests within the natural gas industry have any incentive to seriously consider whether alternatives to natural gas - energy efficiency, renewable energy or other forms of power generation - may be cheaper.
Given all of these circumstances, IEEFA recommends the following:
Please view full report PDF for references and sources.