Oil Change International and Friends of the Earth U.S.

March 2019

The Atlantic Coast Pipeline (ACP), a proposed fracked gas pipeline owned by Dominion Energy, Duke Energy, and Southern Company, faces some of the stiffest community and environmental opposition in the country today, comparable to that faced by TransCanada’s ill-fated Keystone XL project. Seventeen months after the project was granted certification by the Federal Energy Regulatory Commission, construction has barely progressed due to this opposition and other sources of risk.

The ACP, if completed, would be a 600-mile, 42-inch-diameter pipeline carrying fracked gas from the Appalachian Basin in West Virginia through Virginia to North Carolina.

First announced in 2014, the project is two years behind schedule and substantially over-budget. The latest update from Duke Energy estimates the project cost at between $7 to $7.8 billion – 37% to 53% higher than the original estimate of$5.1 billion – with the latest date for full operation now pushed back to 2021.

The ACP is facing a triple threat of challenges that combine to present serious obstacles for the project to reach completion:

• Extensive legal and regulatory challenges that are delaying construction and raising costs, which may lead to cancelation;
• Fundamental challenges to its financial viability in the face of lack of growth in domestic demand for methane gas and increased affordability of renewable energy options; and
• The Pipeline Compliance Surveillance Initiative, an unprecedented citizen initiative positioned to ensure strict compliance with environmental laws and regulations, even in remote locations, if construction proceeds.

These challenges and the accompanying risk are likely to further delay construction and raise the project’s price tag even higher. If completed, state utility regulators in North Carolina and Virginia are unlikely to justify passing the full cost of methane gas transportation contracts onto ratepayers.

It would be prudent for investors in Dominion, Duke, and Southern to question whether pursuing the ACP further is a good use of capital. As the transition to clean energy gathers pace, the risks and growing costs of this major methane gas pipeline project look increasingly unwise to ratepayers, regulators and investors alike.

What You Can Learn from this Story

By John McFerrin

The story on this page is a summary of a longer report that was produced by a group called Oil Change International.  To see the whole report, go to http://priceofoil.org/research/.

Reading the whole report will have several benefits. First, your head will stop spinning. The project is so big and crosses so many hills, streams, forests, communities, National Forests, etc. that there are bound to be lots of controversies.  Many of these controversies have been covered in The Highlands Voiceas they developed. There are so many controversies that it is hard to keep up with them all.  If you try, your head starts spinning.

The longer report lists all the controversies and their current status.  With everything there in one place it is possible to see what all the controversies are and their status.

Second, there is a discussion of the economics of the pipeline. A wise man (Tom Rodd) once said, “More decisions about whether coal mines go in are made by banks than are made by regulators.”  Although he said it about coal mines, the principle applies to pipelines as well. When the investors determine that they cannot make money, the project is over.

The discussion of the economics of the Atlantic Coast Pipeline is not definitive.  The bankers would no doubt do additional analysis before deciding that the game is not worth the candle.  The report does, however, give a taste of the economic difficulties that the pipeline faces. There are footnotes that would lead to more in-depth discussion.

Third, it gives an insight into the work of the Compliance Surveillance Initiative, a project in which the West Virginia Highlands Conservancy is a partner.  In late 2014, Rick Webb observed, “My view is that Dominion, its investors, and its contractors will only pursue this project if they can count on the relaxed implementation of environmental laws that they have grown used to. Our job is to make it clear that the “business-as-usual” model does not apply.”  Rick is the chair of the Compliance Surveillance Initiative.

Now, largely through the efforts of the Compliance Surveillance Initiative (CSI), we are about to find out.  It has developed a system of monitoring the construction of the pipeline.  If it is not being constricted in according to the law, CSI presses for enforcement action.  CSI opposes illegal corner cutting.  If Rick was right, and the pipeline cannot proceed without corner cutting, then it will not go ahead.

The report gives an overview of the work of the Compliance Surveillance Initiative and places it in the context of the future of the pipeline.