RISKS ASSOCIATED WITH NATURAL GAS PIPELINE EXPANSION IN APPALACHIA

Report of the Institute for Energy Economics & Financial Analysis, April 2016

[EXECUTIVE SUMMARY]

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:

 · Pipelines out of the Marcellus and Utica region are being overbuilt. 

· Overbuilding puts ratepayers at risk of paying for excess capacity, landowners at risk of sacrificing property to unnecessary projects, and investors at risk of loss if shipping contracts are not renewed and pipelines are underused. 

· The Federal Energy Regulatory Commission facilitates overbuilding. The high rates of return on equity that FERC grants to pipeline companies (allowable rates of up to 14%), along with the lack of a comprehensive planning process for natural gas infrastructure, attracts more capital into pipeline development than is necessary. · FERC’s approach to assessing the need for such projects is insufficient.

 · Industry leaders recognize and acknowledge that current expansion plans will likely result in overbuilding.

· The arguments for the Atlantic Coast Pipeline have not been adequately scrutinized. While the pipeline developers have asserted that some of the gas supplied is needed by Dominion Resources for its new Brunswick and Greensville natural gas plants, Dominion has told the Virginia State Corporation Commission that it can supply those plants through the existing Transco pipeline. 

· While ratepayers of the utilities (largely Duke Energy and Dominion Virginia Electric and Power) that have contracted to ship gas through the Atlantic Coast Pipeline would be burdened with the costs of building the pipeline (which would include a profit to the developers, largely Duke and Dominion), they will probably not realize the economic benefits promised by the developers. 

· Communities along the Mountain Valley Pipeline face the risk that EQT Corporation (which owns the largest stake in that pipeline and has contracted for the largest volume of capacity on the pipeline) will continue to be harmed financially by weak natural gas prices and will not be a long-term, stable partner for these communities. 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: 

· That the applications for the Atlantic Coast and Mountain Valley pipelines be suspended until a regional planning process can be developed for pipeline infrastructure;

 · That FERC lower the returns on equity granted to pipeline developers; and 

· That an investigation be conducted into the relatively high failure rate of new pipelines.

NOTE —  ”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).”

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Global Warming and “Belief”

Commentary by S. Tom Bond, Resident Farmer, May 2, 2016
 
A majority of Americans say global warming is occurring. Pew Research, using the words “solid evidence that the earth is warming,” get 67 percent, and Gallop gets 54 percent saying “solid evidence that the earth is warming.”  A CBS poll found only 11 percent saying global warming did not exist.  Other advanced countries are far ahead of United States citizens in accepting global warming.

If you look up those references, however, you will find the situation considerably more dicey.  In addition to the denial industry mounted by the likes of Exxon and Koch brothers,  sloppy thinking is easily applied to observations, and there are many people paid to cultivate it.
 
Let’s begin with authority.  Science is unequivocally supporting the idea that earth temperature is rising.  It explains why: the accumulation of gases that absorb radiation energy from the sun and turn it into increased vibration of molecules of air.  This is the very definition of additional heat energy.  Anyone who has had a decent 7th and 8th grade science class knows that heat is the vibration of molecules.  Unfortunately, many haven’t, and many more have forgotten the connection.
 
Secondly, the temperatures given for global warming seem ridiculously small.  Limiting the change to 3 F degrees seem small compared to the daily change in temperature in the Temperate Zone, where we live.  And more so when the range of temperatures on earth is considered.  A better comparison would be with the change of body temperature, where three degrees is significant.
 
Probably the worst nonsense is the idea that scientists are engaged in a conspiracy.  Many people, no most, have the idea that science speaks with a single voice.  They think there is a hierarchy, when in fact, science is a great debating society.  As anyone trained for a higher degree knows, there are many out there looking at your work and trying to find errors in it.  Consensus is arrived at by finding and eliminating errors.  True, some opinions count more than others.  Experience in the area of research, personal contacts, insight, all count.  But Science is a great debating society, not amenable to conspiracies.
 
Even if you are not willing to accept the authority of 97 percent of scientists, but are willing to acquaint yourself with common sense level evidence, there is a lot of it. Pictures of retreating glaciers,  river banks and shorelines thawing and slumping in the arctic, change in habits of arctic animals mean something is going on.  Disappearance of the arctic ice pack over time is clear evidence. 
 
In the temperate zone there are pictures of flooding due to sea rise when storms drive sea water inland.  Glaciers are retreating and winter ice pack in mountains that provide water in many areas all summer is disappearing.  These are well documented by pictures.  Forests in the western United States and north in the boreal zone are experiencing invasion of insect species adapted to the increased temperatures and are drying out so forest fires are more common and far more severe, particularly at higher altitudes. 
 
All these are abundantly pictured on the net.  All of them point in one direction, warmer temperatures.  The global warming denier could use the famous line by Chico Marx, in Duck Soup (1933), “Who you going to believe, me or you own lyin’ eyes?”
 
If you don’t like pictures, there are figures.  Figures for sea rise, figures for cubic miles of glaciers melted, figures for disappearance of the arctic sea ice.
 
Southern California, India, Pakistan, and elsewhere are calculating the years until the old sources of water disappear.  The ocean is rising, and water pumped out of aquifers along the coast are experiencing intrusion of salt water, not suitable for human use or for irrigation of crops.  In some  parts of Florida this reaches as much as six miles inland.  Still, the governor, Rick Scott, won’t allow mention of it in state papers or planning for it. A few small ocean island nations are at risk of disappearing in a storm. 
 
Measures of spring, such as when plants begin to leaf out, along with drying out and warming of the soil comes earlier in the spring and leaves later in the fall.  Species after species show longer growing seasons.  Unfortunately, this doesn’t necessarily mean greater yields.  Other changes such as amount and timing of rain, and higher temperatures in mid-season may result in less food, fiber and timber for human use.
 
We need to prepare, but the powerful fuel industry lobby is against any change, along with much of the business community that is closely allied to it.  Will human society have to collapse before anything substantial is done?  We shall surely see if there is no catastrophic war in the next few decades.  If there is, we will end that way instead.

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US Extractive Industries Transparency Initiative: Webinar May 3rd, 2 – 4 PM

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Natural Gas Contributes to Climate Change and is a Bridge to Nowhere

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Marcellus Shale Activities are Extending Historical Oil & Gas Leases in WV

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There is an Implied Right to Pool an Oil and Gas Lease <??? – DGN> From the Jackson Kelly Law Web-Site, Oil & Gas Leases, April 20, 2016 In a case of first impression in West Virginia, on April 15, 2016, Judge David W. Hummel, Chief Judge of the 2nd Judicial Circuit (Marshall, Wetzel and [...]

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Huge Islands of Plastic Wastes Observed in the Ocean

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Solar Impulse Pilot: ‘I Flew Over Plastic Waste as Big as a Continent’ From an Article by Lorraine Chow, EcoWatch.com , April 25, 2016 As the Solar Impulse 2 made its historic 62-hour flight from Hawaii to California without fuel, pilot Bertrand Piccard personally saw the horrific amount of plastic in our oceans. While flying above [...]

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Up-to-Date Analysis Requires Severe Global Temperature Limit

April 25, 2016

Scientists Share Why Keeping Warming Under 1.5 Celsius Degrees Is Crucial (Under 3 Fahrenheit Degrees) From an Article by Alex Kirby, Climate News Network, April 22, 2016 With the possible prospect of the world warming dangerously and uncontrollably, half of one degree Celsius may sound like a negligible temperature change unlikely to make much difference [...]

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