Above, grass grown over a section of the Atlantic Coast Pipeline beneath a restored corridor in West Virginia. UPDATE: The pipeline's death knell came over the July 4 weekend as utilities killed the three-state project, citing "legal uncertainty." Read more here.
By Vince Bielski, RealClearInvestigations
May 28, 2020
The embattled Atlantic Coast Pipeline begins its run in West Virginia. The steel tube built to ferry 1.5 billion cubic feet of natural gas a day weaves underground through mountain terrain toward its destination two states away in North Carolina. Then it stops, after only 30 miles but many millions of dollars into its journey.
The most expensive natural gas pipeline project in America was halted two years ago after a federal appeals court yanked a permit that allowed it to cross two national forests, but the controversy rages on. The central issue is climate change – but in a sign of how much the debate has changed, this is not a battle between believers and deniers. Almost everyone, including CEOs, lawmakers and Wall Street analysts, agrees on the need to transition to renewable energy.
The fight is about how long it’s necessary to burn natural gas – a comparatively clean but growing source of atmospheric warming – before wind, solar and other clean energy can power America. In the rapidly changing economics of power, cheap natural gas – once a wonder fuel enabling the shuttering of hundreds of dirtier coal plants nationwide – is itself being challenged by low-cost renewable energy, raising doubts in the minds of some over the need for the Atlantic Coast Pipeline at all.
The pipeline conflict is also a microcosm of the counteracting forces of litigation and political influence slowing or thwarting energy projects and potentially driving up consumer costs nationwide. And it illustrates the stakes for utility companies in their infrastructure, which is the source of their profits.
Dominion Energy and Duke Energy, two of the country’s biggest power companies and owners of the planned 600-mile pipeline, insist that the gas “bridge” to a renewable future must be decades-long. The companies say more fossil fuel is needed in Virginia and North Carolina to provide reliable power as they expand wind and solar farms – which don’t generate energy when the sun doesn’t shine and the winds don’t blow. Duke, which plans to add 14 gas plants in the Carolinas, says natural gas is expected to provide 39% of the power in the two states by 2034.
“Making substantial investments in renewable energy is a significant part of our plan to reach net-zero emissions by 2050,” Lynn Good, Duke’s CEO, told RealClearInvestigations. “Just as important, low-cost natural gas is critical to speed the transition and maintain reliability as we continue adding more renewables onto the system.”
Pipeline opponents – environmental and community groups as well as Virginia’s attorney general – call it an $8 billion boondoggle. The region doesn't need more natural gas, but the pipeline will lock-in dependence on the fossil fuel and slow the expansion of renewable power, says Greg Buppert, an attorney at the Southern Environmental Law Center that’s spearheading the legal challenge to the Atlantic Coast Pipeline (ACP).
But Buppert says Dominion and Duke have a financial incentive to build the pipeline. Power companies make profits by developing infrastructure like gas plants and wind farms, and one of the biggest payoffs comes from interstate pipelines. The Federal Energy Regulatory Commission, which approved the ACP, allows a return on investment of about 14% on interstate pipelines. The return, along with the principal investment, is paid over time by consumers.
“The pipeline is a $8 billion investment in fossil-fuel infrastructure at a time the region needs to transition rapidly away from coal and gas,” says Buppert. “And it doesn't matter to Dominion and Duke if the project isn’t necessary. The risk is shifted to consumers and the companies make an annual profit on the cost of the project.”
Virginia lawmakers have also grown skeptical as the ACP’s price almost doubled from initial estimates due to delays. A law approved in April requires Dominion’s utility to prove that the ACP is necessary for reliability of the grid before it can recover costs from consumers. Lee Ware, a Republican delegate who championed the bill, said it addresses the key question: “Is this necessary for the ratepayers?” Ware said in a statement. “Or is this entrepreneurial on Dominion’s part?”
The coronavirus pandemic adds a new wrinkle to the question of whether the two states need the pipeline. U.S. energy demand in 2020 is expected to suffer a record plunge due to the closing of the economy and a recovery could take years if companies shrink their office workforce and unemployment remains sky high. In this tough climate, wind and solar are the only energy sources forecast to grow this year because they are now so cheap compared with gas and coal. But Dominion says the ACP will still be needed to ease the transition to renewable power.
It’s rare that Dominion and Duke, which together serve about 17 million customers across the country, are stopped in their tracks. But they have been outmaneuvered, at least temporarily, by Buppert’s law center, which has focused on the immediate impact of the pipeline on forests and endangered species.
The companies say minimizing harm to the environment has been a priority. ACP planners spent three years developing its course, studying 6,000 miles of possible routes. They made 300 more course corrections after taking field surveys and talking with landowners. More than 95% of about 2,000 landowners agreed to allow the ACP to cross their property in exchange for compensation. A few have been taken to court to get use of their land under eminent domain for a court-mandated price. Once the pipeline is buried, the corridor will be narrowed to 75 feet, restored with native grasses and flowers to promote pollination, and available for growing crops, grazing cattle and hunting.
Nevertheless, the Southern Environmental Law Center (SELC) in Charlottesville, Va. has won a string of challenges to the pipeline in federal appeals court. Five permits from four federal and state agencies were tossed out and another was pulled back.
Two years ago, the SELC stopped the pipeline from bulldozing through 21-miles of the Monongahela and George Washington National Forests in the Virginias. While other pipelines enter national forests, Buppert says the ACP’s path across federally protected land recklessly engages some of the most pristine and steepest terrain in the region, adding to the risk of landslides. Two years ago, a landslide caused a new gas pipeline to rupture and explode in West Virginia. The law center won the case, partly because the Forest Service, in granting a permit, didn’t adequately examine less damaging alternatives to crossing the national forests. The agency declined to comment.
The U.S. Supreme Court is now reviewing only one of the four issues raised by the Fourth Circuit – whether the Forest Service has authority to permit the pipeline to cross the Appalachian Trail, which is administered by the National Park Service, 600 feet underground. A ruling is expected by June.
The deeper dispute is whether the Southeast states need the gas from the pipeline at all.
The ACP – designed to transport gas from the prolific Marcellus-Utica shale region to Virginia and North Carolina – would join the growing network of pipelines across the country stemming from the boom in natural gas production.
More than 300,000 miles of interstate gas pipelines crisscross the United States, six times the mileage of the interstate highway system. Another 26,000 miles of pipeline will be required to meet market demand between 2018 and 2035, according to an estimate by the Interstate Natural Gas Association of America. Natural gas now accounts for 38% of all the electricity generated in the country, up from 23% in 2009; coal’s share has fallen to 24% from 44% during the same period.
Dominion and Duke say the pipeline will relieve immediate gas shortages in a region now served by only one major pipeline, Transco. In Virginia, the ACP will provide fuel to the coastal Hampton Roads area, where federal and military installations occasionally experience interruptions in service and resort to stored propane. The pipeline will also tamp down spikes in Transco gas prices during cold winters like the one in January 2018, says Ann Nallo, a spokeswoman at Richmond, Va.-based Dominion.
“This is why we talk about the millions of dollars a year in cost savings that the ACP will provide customers,” Nallo says.
The eastern third of North Carolina also suffers from a shortage of reliable power and a corresponding abundance of poverty, with rates in some counties above 30%. A few times a year, during the coldest weather, manufacturers have to pause production for up to a few days because of energy interruptions.
Robert Van Geons, president of the Fayetteville Cumberland Economic Development Corp., says the power shortage discourages manufacturers from locating in the area. The mayors of six towns along the pipeline’s route in eastern North Carolina wrote an open letter in support of the ACP, scolding the “environmentalist elites” for blocking a chance to attract jobs to the struggling region.
“We have been a finalist and then cut simply because we can’t supply the energy,” says Van Geons. “The new pipeline would mean that billions and billions worth of projects, with high average paying jobs, would consider communities in the Southeast for new investment.”
The law center counters that these regional shortfalls can be fixed without the ACP. Buppert says the capacity of Transco and a second pipeline in Virginia has recently been significantly expanded to provide enough gas to the two states to cover any shortages – an assertion Dominion and Duke reject.
But the Federal Energy Regulatory Commission (FERC) didn’t consider this upcoming increase in supply in approving the ACP in 2017, according to another SELC lawsuit.
FERC based its decision that the pipeline was needed solely on agreements by utilities affiliated with the ACP owners to buy more than 90% of its capacity, according to the suit. Buppert says these types of cozy deals engineered by energy companies are unreliable indicators of demand. Utilities agree to purchase the capacity ahead of time because it helps win FERC approval of the pipeline.
The power companies and their foes are mostly fighting about whether the pipeline is needed in the effort to cut emissions by mid-century to net-zero -- capturing as much carbon as they emit.
Duke’s strategy leans heavily on expanding gas power, which releases about half the carbon of coal. The company has reduced emissions 39% from 2005 levels by closing some of its coal plants.
The sun is a strong resource in the region – North Carolina is the second largest solar state in the country. But Duke’s planned rollout of renewables is relatively modest – an estimated 8% of its energy mix in the Carolinas by 2034, and 36% systemwide by 2050.
“Duke wants to ensure its buildout of solar energy in the Carolinas maintains the same reliability and affordability its customers expect,” says Tammie McGee, a spokeswoman at Charlotte, N.C.-based Duke.
To try to meet its net-zero pledge, Duke is banking on a host of clean energy technologies still under development with uncertain arrival times: better and lower-cost carbon capture and sequester, battery storage, hydrogen fuel and small modular nuclear reactors.
The bar is higher for Dominion in Virginia, thanks to a Democratic legislature and governor who signed the Clean Economy Act in April. The most far-researching climate law in the South requires that all of the power from Dominion’s utility comes from renewables by 2045. It plans to make wind and solar energy 47% of its energy mix in 15 years.
But there’s a loophole in the Act. Dominion’s utility can keep burning gas beyond 2045 if reliability of the power grid requires it. And that’s what Dominion proposes in its recent integrated resource plan: it adds two gas plants to a large fleet that will run through 2045, providing an estimated 16% of its energy mix. Dominion, like Duke, is depending on technologies to come of age and cut the remaining emissions.
“It's entirely possible by 2045 battery storage capacity could increase, that small modular nuclear reactors could become much more cost effective,” says Rayhan Daudani, a Dominion spokesman.
Clean energy analysts are dismayed over Dominion’s plan to keep burning fossil fuel, saying the reliability threat is overplayed.
Under the Act, Dominion will significantly expand offshore wind and solar farms as well as battery storage. When this renewable energy is generated, it will likely be cheaper than existing gas and displace it, resulting in less fossil fuel use, not more, according to SELC attorney Will Cleveland, citing testimony before the Virginia State Corporation Commission (SCC).
"While saying more gas is needed to balance renewables makes for a pretty press statement, it's not true,” says Cleveland. “Even the SCC staff is very skeptical.”
Dominion’s energy-efficiency plan also falls short of the Act’s intent, says Harry Godfrey, executive director of Virginia Advanced Energy Economy who helped craft the law. Improved lighting, heating and cooling would signficantly reduce demand for electricity and the justification to build new gas plants in Virginia. But Dominion lags far behind other utilities nationwide in reducing demand through efficiency, according to a recent ranking by the American Council for an Energy-Efficient Economy.
Most utilities can accelerate their ramp-up of renewable energy to at least 30% in the next five years as wind and solar prices keep falling, according to Mark Dyson, a principal at Rocky Mountain Institute who researches the transition to clean power. For backup, they can buy the excess power that exists in almost every region of the country. But many energy giants prefer to own the plants that supply their power -- and investment returns -- and say relying on other regions for power can be risky.
"It's certainly possible for the utility industry, in every region of the country, to move faster towards decarbonization than is suggested by the targets they've set," says Dyson. "The barriers to doing so are largely institutional, not technical or even economic."
Xcel Energy, which serves Midwestern and Western states, transformed itself into a renewable power leader in a decade, taking advantage of improved technologies, data analytics and federal incentives. It expects 60% of its energy to come from wind and solar by 2030.
One of the ironies of clean power is that it’s more profitable than building gas plants. States allow utilities to earn a return of about 10% on infrastructure investments, less than the federal incentive for pipelines. But it doesn’t apply to the fuel. In building wind and solar farms, almost all of the capital is devoted to profit-earning hardware since the sun and wind are free, says David Pomerantz, executive director of the Energy and Policy Institute. With a gas plant, a large portion of the investment goes for fuel and operations, making it less profitable.
“That’s why renewables have been so attractive to so many utilities. It’s a pretty good deal for them,” says Pomerantz.
Even Wall Street is buying in. In January Morgan Stanley analysts called out Duke for a “slower than average pace in its decarbonization strategy” and said profit opportunities await utilities that move faster to renewables. The analysts also doubt that the ACP will be built due to legal risks.
Across the country lately, pipelines are encountering more opposition. A judge canceled a Keystone XL permit in April and New York blocked a Transco expansion in May.
While the ACP has several legal hurdles to clear to get its missing permits, it does have history on its side. Most pipelines do eventually get approved.
Dominion says the ACP should be in operation by early 2022. That’s the fifth new annual start date for a project that was supposed to be running in 2018 and is still hundreds of miles from its final destination.