Atlantic Coast Pipeline (ACP) in WV, VA & NC

A revised generation plan leaves Dominion’s case for its pipeline in shambles

Commentary by Ivy Main, Virginia Mercury, March 20, 2019

In December of last year, regulators at the State Corporation Commission took the unprecedented step of rejecting Dominion Energy Virginia’s Integrated Resource Plan. Among other reasons, the SCC said the utility had inflated projections of how much electricity its customers would use in the future.

On March 8, Dominion came back with a revised plan. And sure enough, when it plugged in the more realistic demand projections used by independent grid operator PJM and accounted for some energy efficiency savings, the number of planned new gas plants dropped in half. Instead of eight to 13 new gas combustion turbines, the revised plan listed only four to seven of these small “peaker” units.

Yet there is a good chance Dominion is still inflating its demand numbers. Although the re-filed plan is short and vague, it appears Dominion isn’t figuring in the full amount of the energy efficiency programs it must develop under legislation passed last year.

SB 966 required Dominion to propose $870 million in energy efficiency and demand-response programs designed to reduce energy use and the need for new generation. But Dominion has proposed just $118 million in its separate demand-side management filing.

Moreover, the company has concocted a theory whereby it can satisfy that $870 million requirement by spending just 40 or 50 percent of it and pocketing the rest. Dominion argues that since the Virginia code allows a utility to recover lost revenue resulting from energy efficiency savings, it can simply reduce the required spending by the amount of lost revenue it anticipates.

It’s a great theory, suffering only from being wrong. But it does suggest that Dominion’s demand figures in the IRP are based on plans to spend just a fraction of the energy efficiency money required by SB 966.

If the SCC decides Dominion can’t withhold hundreds of millions of dollars in efficiency spending, that additional spending will have to be factored into demand projections. Thus the IRP’s demand projection can only go down — and with it, the number of gas plants that might be “needed.”

And yet even the resulting number is likely too high. Several of Dominion’s large corporate customers have been trying to leave its fond embrace to seek better renewable energy offerings elsewhere. (The SCC recently rejected Walmart’s effort to defect.) If they or others were allowed to leave, how much would that further reduce the need for new generation?

For that matter, those customers and many others, including many of the tech companies responsible for what demand growth there is, say they want renewable energy, not fossil fuels. Dominion claims the renewable generation will have to be backed by gas peaker plants, but energy storage would serve the same purpose and further reduce the need for gas. The SCC will rule on that question when — and if — Dominion ever requests permission to build one of those peakers. It is possible the utility will never build another gas plant.

That’s bad news for Dominion Energy’s other line of business, gas transmission and storage. With demand for new gas generation here evidently falling off a cliff, Dominion’s ability to rely on its customer base as an anchor client for the Atlantic Coast Pipeline becomes increasingly doubtful.

Dominion may actually have conceded as much in its re-filed IRP. In response to the commission’s order that Dominion include pipeline costs in its modeling of the costs of gas generation, Dominion merely stated, without discussion, that it is using the tariff of the pipeline owned by the ACP’s competitor Transco, which supplies gas to Dominion’s existing plants.

This statement continues a pattern of Dominion attempting to avoid any mention of the Atlantic Coast Pipeline in commission proceedings, lest it invite hard questions. But Dominion can’t have it both ways. If it will use Transco, it doesn’t need the ACP. If it plans to use the much more expensive ACP and just isn’t saying so, it has lowballed the cost of gas generation and is misleading the SCC.

(NOTE: Dominion claims the Atlantic Coast Pipeline will provide supply diversity that will benefit customers, but critics argue that there’s no way the new pipeline gas will be cheaper than existing sources after factoring in construction costs and profit.)

This is unfair to customers, and it may backfire on Dominion. The ACP received its federal permit on the strength of contracts with affiliate utilities, but Dominion hasn’t yet asked the SCC to approve the deal. Leaving the ACP out of the discussion in the IRP year after year makes it harder to win approval. When and if the company finally asks the SCC for permission to (over)charge ratepayers for its contract with the ACP, it will not have built any kind of a case for a public need or benefit.

This is not just a risk that Dominion Energy chose to take, it is a risk of the company’s own creation. It defied the Sierra Club’s efforts to have the commission review the ACP contract early on, knowing it would face vigorous opposition from critics. But since then, its chances for approval have only gotten worse. Back then, the pipeline cost estimate came in at $3 billion less than it is today, Dominion Virginia Power was halfway through a massive buildout of combined-cycle gas plants, and the IRP included several more big, new, gas-hungry combined-cycle plants.

Now the ACP’s cost has climbed above $7 billion and may go as high as $7.75 billion, excluding financing costs, CEO Tom Farrell told investors last month in an earnings call. Meanwhile, the IRP includes an ever-shrinking number of gas plants, to be served by a different pipeline.

One investment management company told clients in January the spiraling price tag may make the ACP uncompetitive with existing pipelines. And Farrell faced a host of cost-related questions in his call with investors.

But Farrell downplayed the risk when it came to a question from Deutsche Bank about the need for SCC approval. Managing Director Jonathan Arnold asked, “On ACP, when you guys are talking about customers, does that include the anchor utility customers, your affiliate customers? Does whatever you’re going to negotiate with them need to be approved by the state regulatory bodies?”

Farrell’s answer sounds nonchalant. “In Virginia, it’s like any other part of our fuel clause. It will be part of the fuel clause case in 2021 or 2022 along with all the other ins and outs of our fuel clause.”

Oh, Mr. Farrell, it is not going to be that easy.


Liquified Natural Gas (LNG) Terminal at Cove Point on Chesapeake Bay

From tiny Cove Point on the Chesapeake, tankers take natural gas around the world. At what cost?

Extracted from an Extensive Article by Kevin Rector, Baltimore Sun, March 20, 2019

In a quiet pocket of Southern Maryland where beach bungalows line dirt roads to the Chesapeake Bay, the nation’s booming natural gas industry has established an unlikely multibillion-dollar foothold.

For a year now, natural gas pulled from ancient shale formations deep below the surface of Pennsylvania and other states has been piped across Maryland to a new $4.4 billion gas export terminal in the woods beyond Cove Point Beach in Calvert County.

From there, the gas is cooled through a complex industrial process to minus 260 degrees Fahrenheit, which liquefies it and makes it easier to transport. It is then piped through a tunnel to a platform a mile offshore and loaded onto massive tankers for shipment overseas — to Japan and India, the Middle East and Europe, and countries across Central and South America.

Lea Callahan says the increase in tanker ships in the waters beyond her beachfront home, about 65 miles south of Baltimore, has been shocking. “All of a sudden, it was like boom,” she said. “They come in at all hours, so you wake up in the morning and you see another ship.”

The new activity makes Maryland a global gateway for natural gas extracted from the ground through hydraulic fracturing, or fracking, even though the state has banned the controversial process within its own borders. It also puts Maryland at the vanguard of a growing global trade in liquefied natural gas, or LNG, that U.S. government leaders and energy executives are feverishly working to support by building similar facilities across the country.

Global demand for natural gas is on the rise, particularly in China and other growing Asian markets. The United States is expected to account for 40 percent of the new production needed to meet that demand through 2025, according to the International Energy Agency.

The Cove Point terminal began operations in early 2018 as just the second large LNG export facility in the continental U.S.; Cheniere Energy’s Sabine Pass terminal in Louisiana began exporting in 2016. But more than a dozen others are in the works — each of them eager to replicate Cove Point’s success.

“This is the golden age of gas,” said Nobuo Tanaka, former executive director of the International Energy Agency. He lives and works in Tokyo, where much of the Cove Point gas is heading.

The Maryland terminal, owned by the Virginia-based utility Dominion Energy, used to import gas — from countries like Norway and Trinidad and Tobago. But that business largely dried up with the rise of fracking and other drilling techniques in the United States, and the resulting surge in domestic shale gas production.

In response, Dominion decided to convert the Cove Point facility to exports, initiating what officials called the most expensive private sector project in state history. Construction to convert the terminal, completed last year, employed 4,500 people at its peak and used 800 miles of wire and fiber, 80 miles of piping and 20,000 tons of steel.

The result has been a boon to business and to county coffers. The revamped facility now handles about 770 million cubic feet of natural gas per day, enough to power millions of overseas homes. That business generated more than $500 million in export revenue for Dominion last year. And Calvert County will get more than $50 million in taxes and other payments from the company this year — a massive influx for a jurisdiction with a general fund of less than $300 million.

“Frankly, I think we are the envy of many counties who would like to have such an economic driver,” said Evan Slaughenhoupt Jr., former president of the Calvert County Board of Commissioners.

But environmental activists and some local residents say the terminal is a giant, glaring contradiction — making Maryland the only state in the country that has both a ban on fracking and an export terminal for sending fracked gas to international markets.

Natural gas is used in cooking, heating and electricity production. It also is used in industrial production of plastics and other chemical products. It generally burns cleaner than coal and other fossil fuels, but critics say the industry that produces it is far from environmentally friendly.

Kim Grosso displays a jar of water from her farm’s well in Dimock, Pa. Grosso says the well was contaminated by Cabot Oil and Gas, which was fracking for natural gas beneath her property.

In particular, environmental advocates say fracking — which blasts water, sand and chemicals into rock formations to release trapped gas — is associated with groundwater contamination, increased risk of earthquakes and emissions of potent greenhouse gases.

And they say the Cove Point terminal provides incentive for fracking in states like Pennsylvania, Ohio and West Virginia, undermining and reducing the impact of the Maryland ban that Gov. Larry Hogan signed into law in 2017.

They and some local residents also believe the facility represents a more immediate threat to the communities around it, though Dominion and federal regulators say it is safe.

Callahan, 62, who inherited her Cove Point home from her mother, said she fears an industrial accident could spew out fire, chemicals or toxic pollutants. And she complains the changeover of the terminal to exports has turned her quiet waterfront enclave into a heavily patrolled security zone, where sheriff’s deputies paid by Dominion harass residents as they go about their daily lives.

“It used to be so nice. All of us used to walk over there with our dogs. … I’d bring the kayak right up, look at the marsh, look for blue herons and all that stuff,” Callahan said.

“I wanted to retire down here. And now I’m not doing it. I refuse to live near a potential bomb.”

She and other homeowners have joined environmentalists to protest the facility, both in Cove Point and in Annapolis, accusing state and federal regulators of conducting inadequate threat assessments. But they say their efforts have been ignored by both sides of the political aisle.

The new export terminal was pushed through regulatory and permitting processes during the administrations of President Barack Obama and Gov. Martin O’Malley, both Democrats, and has continued to enjoy support under their Republican successors.

Hogan said it “is delivering economic benefits to Maryland and the nation, and creating jobs right here in our state.” U.S. Energy Secretary Rick Perry, appointed by President Donald Trump, called Cove Point’s expansion into exporting “an exciting and remarkable new chapter in America’s history.”

Maryland officials agree with federal regulators that the facility is safe, and say it is in line with both the Trump administration’s goal of reducing trade deficits and the state’s goal of improving the environment. They contend natural gas is an important bridge fuel between dirtier coal and cleaner renewable energy sources like wind and solar.

“One of the few things that President Obama and President Trump have agreed on is the benefit to the country of exporting clean energy — natural gas — to other parts of the world,” said Benjamin Wu, Hogan’s deputy commerce secretary. “It’s a trade priority for us.”

Others argue the economic benefits to the state and county, dwarfed by Dominion’s own windfall, do not justify the threats the project poses to the public and the environment. In Pennsylvania and elsewhere, they say, other small towns are being overrun by the industry as it churns out gas for distant mega-cities like Tokyo.

These critics see only downsides — and danger.

‘It has a lovely marsh’!!! At least since the 1930s, Cove Point Beach had been an escape.

Far from the bustle of Baltimore and Washington but near enough for weekend getaways, the spit of beach drew residents from both cities. They built bungalows as vacation homes through the 1960s, and many eventually moved in for good, creating a community mixed with year-round and seasonal residents.

By the early 1970s, Cove Point was prized as one of the Chesapeake Bay’s few beaches. So when the park plans were scrapped in favor of building the import terminal, the decision caused a dust up echoed today. Many residents and environmental groups were furious.

“The bay at that point [is] relatively pristine. It is a beautiful site. It has one of the last remaining beaches on the bay. It has a lovely marsh,” said Ronald J. Wilson, then an attorney for the environmental groups.

But faced with a lengthy and unpredictable legal battle, opponents in 1972 agreed to a deal that allowed Columbia to build the terminal. The company made concessions.

It agreed to build a tunnel out to its loading platform rather than a pier. It put a majority of the 1,100-acre property not used for the termina.

Josh Tulkin, Maryland director for the Sierra Club, said the group was concerned that construction of the export terminal would be harmful to the surrounding environment. But it also argued the operations would contribute to global warming by supporting the fracking industry.

“There is no climate model that suggests we can be burning gas, to the extent that this facility requires, 30 years from now — or this planet is baked,” Tulkin said.

The Sierra Club made similar arguments in an unsuccessful legal effort to block the Cheniere facility in Louisiana. In Maryland, the Sierra Club took Dominion to court, and again lost. But about 800 acres of the property still had to remain wooded under the original easement.

The trees are part of why the nearby town of Lusby retains a rural feel, and why Cove Point Beach remains quaint. They also help to obscure 130 acres of dense industrial activity — activity some residents say has led to disturbing changes in their community, and to the bay it sits on.

Living with a refinery!!! What’s behind the trees and a 60-foot sound wall is a high-tech refinery — a maze of piping and metal and massive white storage tanks, where raw gas is purified and cooled into a liquid. That is critical, because the liquid occupies just 1/600th of the space raw gas would take up, making LNG much easier to transport.

There are combustion turbines and gas compressors. The cooling and refrigeration process relies on something called a cryogenic heat exchanger, and on a mixture of chemicals that are stored on site. The process is not easy, and not exactly clean. But the facility is designed to capture as much emissions as possible.

All told, the operation was responsible for more than 1 million metric tons of greenhouse gas emissions in 2018 — three times more than before exports began, according to Maryland Department of the Environment preliminary data.

That makes the facility one of the largest stationary sources of such emissions in the state. But the output fell well within the 2 million metric tons it is permitted to release into the atmosphere each year, state officials say.

Mike Frederick, Dominion’s vice president of LNG operations during the project’s construction, said the company regularly monitors some 270,000 different valves, pipes and other industrial components at any given time, especially for any leaks of greenhouse gases like methane.

For all that, some residents say they pay little mind to the facility. The construction that converted it for exports was annoying, and caused traffic, but that’s over now. It also provided some 10,000 people with temporary work, about 30 percent of whom were from Calvert and nearby Charles and St. Mary’s counties.

And it doubled the permanent jobs on site to nearly 200. Besides jobs, the company provides funding for a local park and local charities. Plenty of people see Dominion as a good neighbor — something Frederick says the company works hard at and prides itself on.

Others, however, believe Dominion’s good deeds are simply its way of buying goodwill not otherwise earned. Rather than being a good neighbor, they say Dominion looms over the community like an illegitimate landlord.

Linda Morin lived about a mile from the terminal for nearly 30 years, but moved 20 minutes north to Prince Frederick last year because of the shift to exports. Morin said she fears the terminal’s expansion made it more dangerous. She and others worry that its densely spaced chemical and gas storage tanks might explode in a chain reaction.

The Federal Energy Regulatory Commission, which gave its approval to the project in 2014, says the plant is safe and the residents’ concerns are unfounded.

Residents have other concerns, too — from the tides of the bay to the men who patrol its shore. Some complain about an arrangement through which the Calvert County sheriff’s office patrols the area on behalf of Dominion — which pays the salaries, benefits, pension contributions and other costs for nearly a dozen deputies. It also buys equipment, including boats, for their use.

Some residents say they have been harassed by the officers, who carry Dominion identification along with their deputy badges. They flash whichever one suits their need as they confront people strolling on the beach and walking their dogs, critics say.

“It just feels really ugly and creepy,” said Leslie Garcia, who has been part of the Cove Point Beach community for four decades. “This is all collusion. Government and corporate collusion.”

Calvert County Sheriff Mike Evans dismissed that notion. He said the county has had agreements with Dominion and the U.S. Coast Guard to provide security around the terminal for more than a decade, with the goal of serving and protecting the citizens, not Dominion. “There is no collusion,” Evans said. “We are good partners in this agreement.”

“Our daily orders come from the sheriff,” said Capt. Steve Jones, who leads the team of deputies detailed to the terminal. “Dominion does not give us marching orders.”

Some residents also believe Dominion caused the tides to change around Cove Point beach — resulting in a deadly undertow — by dredging out the shipping channel to its offshore platform in 2010.

Dominion referred questions about such claims to the government. State and federal agencies told The Sun they do not have the data to confirm or deny a change in the tides or the creation of a heavier undertow.

Garcia and others said they are convinced, citing the drowning deaths of three men in two separate incidents in 2015, in the same waters where they taught their kids to swim. “I’ve kayaked for years out there. …My son and his friends would go to the point and body surf. …You could step way out there and collect sharks’ teeth and do whatever, and you just can’t do that now,” Garcia said.

Tulkin contends that no one knows the full environmental impact of the Cove Point operation because federal regulators didn’t consider the ill effects of the fracking that harvested the gas nor of the greenhouse gases emitted when it is liquified, transported and burned throughout the world.

The Federal Energy Regulatory Commission, which approved the project after studying the issue for two years, determined it was “in the public interest” and would not significantly affect the “quality of the human environment.”

The regulators required Dominion to take various steps to mitigate local environmental concerns. But they also held — and state officials and a federal appeals court affirmed — that they were not required to consider concerns associated with the fracking industry at large.

Critics argue that in supporting the facility, state and federal regulators abdicated their responsibility to people and the environment not just in Maryland, but communities hundreds of miles away. See the Comment(s) to this Article below.

David Goldwyn, the U.S. special envoy for international energy affairs from 2009 to 2011, worked to pitch U.S. shale gas to foreign investors alongside then-Secretary of State Hillary Clinton. Now an international energy consultant, Goldwyn says Cove Point is “very well-positioned” to maintain its place in the market for many years to come given its proximity to the near-boundless Marcellus Shale.

Environmentalists should welcome that, he said, particularly given that coal-dependent developing countries are among Dominion’s customers.

Goldwyn argues the world should be moving from coal and diesel to natural gas as fast as it can — even if that means one day abandoning LNG plants like Cove Point once technological innovations make wind and solar a truly viable alternative.

“In the meantime, I will take every short-term [greenhouse gas] reduction I can get,” Goldwyn said.

Cove Point critics vehemently disagree, arguing the government should be trying to shutter the plant as a significant contributor to greenhouse gas emissions and move immediately toward renewable energy.

“I’m very, very concerned about our future, and not just here in Cove Point,” Garcia said. “I mean, we will be extinguished before everybody else, but we are a canary in a coal mine. …

“This is not the future. This is not the way to go. Period.”

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