Mountain Valley Pipeline Benefits vs Impacts & Issues

by Duane Nichols on October 13, 2015

Blast Zone 2000 feet for 42 inch MVP

Study refutes positive local effects of natural gas pipeline

From an Article by Pamela Pritt, Beckley Register-Herald, October 8, 2015

An 18-page study released (last week) by the Greenbrier River Watershed Association says that economic benefits of the Mountain Valley Pipeline, a natural gas pipeline slated to bisect Nicholas County and cut through portions of Summers, Greenbrier and Monroe counties, have been inflated by gas companies anxious to get their product to a market.

Dr. Stephen Phillips of Key-Log Economics, Charlottesville, Va., firm, wrote the study. Key-Log provides research “supplying rigorously developed ecological-economic information to shape and advance policy campaigns, as part of expert testimony, and for public education efforts,” according to its Linked-In account.

In addition, Key-Log is involved in program development by creating and delivering pilot programs to “help clients demonstrate and prepare to take full advantage of positive relationships between human and natural communities through such strategies as certification and labeling programs, payments for ecosystem services and nature-based marketing partnerships” and organizational development through low-cost-high impact strategy development,” the company’s Linked-In account says

EQT, the pipeline’s owner, released its own study in December 2014. The study says expenditures on goods and services during construction would “translate into job creation; economic benefits to West Virginia suppliers, their employees and the overall economy.” Further, the FTI said the MVP would bring operational benefits, requiring a skilled workforce for continued maintenance and generate annual property tax revenues. FTI’s study said both the state and the MVP passes through would be benefited from the “potential direct use of gas from the MVP project.”

The FTI study projects EQT will spend $712 million on equipment, materials, labor and services in West Virginia, creating nearly 4,000 jobs at the peak of construction in 2017 (560 of those “indirect jobs”). “Cumulatively, the MVP project would create more than 8.250 job-years over the course of construction,” the FTI study said. Once the pipeline is in service, the MVP would employ 54 people across the state “with average annual wages and benefits of almost $65,000.” Also, annual property taxes would amount to $14.6 million, or 16 percent of the total 2013 combined budgets for the 10 counties the MVP will pass through.

“(T)he MVP project could provide significant fuel cost savings to the residential, commercial and municipal sectors of Monroe, Summers and Webster counties through fuel switching,” the study said.

Key-Log’s study refutes each of those claims, saying the benefits to communities are overstated. Just as important, the Key-Log study said, “a full accounting of the likely costs (negative economic effects) must be developed, and its results must be compared to more realistic estimates of benefits.”

“Benefits during construction are overestimated due to inherent issues with the models used and the choice of the size of the study region,” the Key-Log study said, “in part due to overly optimistic assumptions about whether and to what extent” MVP would induce businesses and individuals too switch to natural gas from other fuels.

The Key-Log study said:

• Input-output analysis is inappropriately used to estimate long-term impacts, “resulting in bloated estimates of jobs ‘created’ by the ongoing operation and maintenance of the MVP.”

• Fuel-switching estimates are dependent on the level and volatility of future natural gas prices, and assuming because businesses and households could use gas, they would use gas

• Tax revenue projections do not take into account “downside financial risk” such as shale gas prices, competition, rising export costs and a reduction in surrounding property value because of the pipeline.

The Key-Log study said FTI “assumed a static economy,” meaning no pricing or labor changes or changes in consumer taste and preferences.  “Due to these restrictive assumptions, economic base models have a dismal track record when it comes to predicting economic growth in the real world and in the long run,” the Key-Log study said. “The ‘long-run’ is more than a year into the future

The Key-Log study said FTI’s study largely ignored “public and external costs that would attend the construction, operation and presence of the MVP. “This nearly exclusive focus on benefits means, at a minimum, that the jury is still out on whether the MVP is good or bad, at least economical, for the citizens and communities it will affect in Virginia and West Virginia,” the Key-Log study said.

Consideration of the public or external costs of the MVP should be thoroughly covered in the FERC (Federal Energy Regulatory Commission) Environmental Impact Statement (EIS). “To date, MVP LLC offers only vague assurances that the proposed MVP would impose no or only minor costs on agriculture, recreation and other economic activities. It also claims that there would be no impact on property values,” the Key-Log study said.

“In the meantime, other entities, including local governments, citizen groups and businesses would be wise to conduct their own independent assessment of these costs to better ensure that all of the relevant information can be brought to bear on the permitting decision,” the Key-Log study continued.

The Key-Log study said local entities in counties where the MVP is forecast to go should consider:

• Lost eco-system services. Surface and subsurface disturbances, alteration of watercourses, impacts on groundwater, fragmentation of habitat, visual blight, creation of travel corridors for invasive species, lost timber production and other changes are all likely.

• Higher community service costs. Some 90 percent of the workers who build the MVP will be transient, and may increase the need for social services, law enforcement, drug abuse treatment and other services. “All of these add to the local costs, and added tax revenues or other fees paid by energy companies might or might not cover the added bill,” the Key-Log study said.

• Reduced property values. Properties within the earshot, blast radius, leak plume and other physical contact with the pipeline right-of-way and compressor stations will suffer the greatest loss in value, the K-L study said. Even properties farther away become less desirable,the K-L study continued.

• Diminished economic development opportunity. Natural gas development and operations can upset the economic apple cart in these communities by reducing quality of life, the K-L report said. Not only will other economic development opportunities shy away from pipeline areas, but those already in place may not perform as expected, the report said.

“It is impossible to say at this point what the net effect, positive or negative, of the MVP would be,” the K-L study concluded. “We can be certain, however, that more careful estimates of expected benefits would be lower than those presented by MVP LLC via the FTI studies to date. We can also be certain that the costs — that is the negative economic impacts — of the proposed MVP (if constructed) will be higher than zero, which is the level stated or implied by the studies reviewed here.

“Further stronger and more comprehensive research is needed to determine how well more realistic estimates of benefits compare with the likely costs.”

EQT spokesperson Natalie Cox said her company remains confident in the results of the FTI study.

“Opponents of the MVP project have been challenging the results of our economic benefits analysis since its initial release in December 2014; therefore, the findings that are outlined in a critique that was funded by opponents are to be expected,” Cox wrote in an email. She said FTI took a “conservative and reasonable approach” in its study of the MVP.

The process of estimating annual pipeline property (ad valorem) taxes, once in operation, were discussed at length with Virginia and West Virginia state tax officials and thus are in-line with how the states would determine the property taxes owed by MVP, Cox said. For state taxes, the model estimates taxes based on historical state tax revenues and the sources for those revenues, she continued. The state tax analysis reflects taxes generated mainly from one-time construction and commissioning spending.

Cox said the studies in both West Virginia and Virginia were reviewed by economists in both states.

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