Energy giant Kinder Morgan Inc. has pulled the plug on its controversial natural gas pipeline proposed through parts of Massachusetts and southern New Hampshire, after failing to sign up enough utility customers and facing stiff consumer and political opposition.
Kinder Morgan said on Wednesday that its Northeast Energy Direct project didn’t receive the commitments from big customers that it needed to proceed with the $3.3 billion plan, which would involve building a 188-mile pipeline from a point west of Albany, N.Y., to Dracut.
The company’s withdrawal represents a huge victory for its array of opponents, ranging from grass-roots organizations to established environmental groups to powerful politicians. They also included residents of the many towns that would be affected by pipeline construction and activists who worried it could make New England overly dependent on natural gas.
And the decision could provide a big boost to the other large pipeline construction project proposed for New England, Spectra Energy Partners’ Access Northeast, which has the financial backing of utilities Eversource Energy and National Grid.
“There was probably room for only one of the two competing projects,” said Paul Flemming, director at ESAI Power, a research and consulting firm in Wakefield.
Kinder Morgan had submitted plans for the project to federal regulators in November, and needed their approval before starting construction.
Kinder Morgan’s initial decision to proceed with the project, through its Tennessee Gas Pipeline subsidiary, was based on existing contracts it had with some gas utilities, as well as the expectation that others would sign on to buy gas from the line. Executives at the Texas company were also counting on an unprecedented shift pursued by state regulators in New England that would allow electric customers to be charged for pipeline construction costs.
That change, driven by Governor Charlie Baker’s administration and top officials in other states, is aimed at curbing New England’s relatively high electricity rates by bringing in cheaper natural gas to fuel power plants. Their theory: the cost of new pipeline construction would be more than offset by savings in electric rates because more cheap gas could flow from Pennsylvania’s Marcellus Shale. Roughly half of New England’s electricity comes from natural gas power plants.
“This was our big chance to pay lower energy costs, like everybody else,” said Anthony Buxton, general counsel for the Coalition to Lower Energy Costs, a group of industrial and commercial electricity consumers. “That opportunity is gone. ... For the short run and the medium run, there are going to be manufacturers in the Commonwealth who are going to be saying, ‘Whoa, wait a minute, what does this mean for us?’ ”
In a statement, Kinder Morgan suggested it did not have enough business to justify moving ahead with the project, saying “there are currently neither sufficient volumes, nor a reasonable expectation of securing them, to proceed with the project as it is currently configured.”
One of the main risks the company cited: it’s far from certain that New England states will succeed in establishing rules that would allow electricity customers to be charged for gas pipelines.
In Massachusetts, the state Department of Public Utilities last fall approved rules to allow electric ratepayers to be charged for pipeline expansion, to ease supply constraints in the region. National Grid then sought state approval to charge electric ratepayers for the Kinder Morgan and Spectra projects, while Eversource wants to do so for the Spectra project.
But the Conservation Law Foundation sued and the case is scheduled to be heard by the state Supreme Judicial Court on May 5.
“We said all along that we didn’t think there was a need for a big new pipeline across the state,” said David Ismay, a staff attorney at the Conservation Law Foundation. “We feel somewhat vindicated that the board of Kinder Morgan is now seeing what we argued.”
Kinder Morgan’s statement hinted at the uncertainty caused by the legal challenge, but didn’t mention the project’s many opponents.
“Kinder Morgan is stopping the pipeline because it is both expensive to ratepayers and simply not needed,” George Bachrach, president of the Environmental League of Massachusetts, said in an e-mail. “Massachusetts has the capacity to develop its own energy in solar, wind and hydro. In the process, we can create new industries and jobs here, rather than exporting our dollars and jobs to fossil fuel states.”
State Senate President Stanley C. Rosenberg, one of a number of Western Massachusetts officials who opposed the project, called Kinder Morgan’s decision a “game changer” that will simplify the broader discussion about how to meet the state’s energy needs. Lawmakers on Beacon Hill are expected to soon debate an energy bill that likely will focus on attracting more hydropower from Canada and spurring construction of offshore windmills in waters south of Massachusetts.
But politicians in Western Massachusetts, the area of the state that would have been most affected by Kinder Morgan’s project, weren’t the only ones to raise concerns.
Attorney General Maura Healey last year commissioned a report that showed that increased natural gas capacity isn’t needed to guarantee a reliable electricity supply. She said on Wednesday that she considers the Kinder Morgan project to be “too big and too costly for Massachusetts ratepayers.”
Meanwhile, US Senator Edward Markey praised Kinder Morgan’s suspension, saying the pipeline could have turned New England into a “throughway to export U.S. gas to overseas markets” without benefitting residents here, by sending the gas to Canada for export.
While environmental activists celebrated on Wednesday, they said their sights remain on the Spectra project.
“Kinder Morgan recognized that their deep pockets were no match for grassroots power,” Emily Kirkland, director of organizing for the Cambridge-based Better Future Project, said in a statement.
“It’s only a matter of time before other fossil fuel companies come to the same realization. Spectra Energy, you’re next.”
Jon Chesto can be reached at email@example.com. Follow him on Twitter @jonchesto.
Foes elated that hated gas pipeline suspended; Berkshire Gas moratorium remains
Wednesday, April 20, 2016
A company statement issued this afternoon blamed “inadequate capacity commitments from prospective customers,” on Kinder Morgan Inc. and its subsidiary, Tennessee Gas Pipeline Company, pulling the plug on the estimated $3.3 billion project that would have cut through eight county towns on its way from the shale gas fields west of New York to Dracut.
Reaction from grassroots anti-pipeline organizers and state government officials who had been stocking the opposition for months was immediate and elated.
One resident, Holly Lovelace, whose home was to be near a major gas compressor station on the pipeline route in Northfield, said this evening she was looking forward to using an anti-pipeline banner to cover her wood pile this fall.
“This is what I've been hoping and praying for, for more than a year, that this might actually happen,” said a jubilant Lovelace. “That they would go away.”
But Lovelace received the news she and hundreds of other area residents had been hoping to hear for the better part of two years.
Since the project has been suspended, many county residents said they remained concerned that it could rear its head once more in the future, but for now, they lauded the news.
Debate about whether the state Constitution’s Article 97 protection for certain conservation lands could stand up against a federal pipeline approval remains an open question, and might still be played out in the courts in connection with a different proposed pipeline in the southern Berkshires.
The pipeline suspension won’t help customers of Berkshire Gas Co., which enacted a moratorium on new hookups months ago, arguing it needed the NED pipeline supplies to meet any new demand.
The company said this evening that the moratorium will remain in place as it seeks other ways to boost its fuel supply.
In July 2015, Kinder Morgan’s board announced that it had authorized TGP to proceed with the project’s “market path” segment from Wright, N.Y., to Dracut, “designed to help alleviate New England’s uniquely high natural gas and electricity costs caused by severely limited natural gas transportation capacity currently serving the region.”
That assumption has been challenged by critics – including the attorney general’s office – who have said there are other ways to meet the region’s fuel demands for generating electricity and providing heat.
“Unfortunately, despite working for more than two years and expending substantial shareholder resources, TGP did not receive the additional commitments it expected. As a result, there are currently neither sufficient volumes, nor a reasonable expectation of securing them, to proceed with the project as it is currently configured,” the company said.
In addition, innovations in production have resulted in a low-price environment that, while good for consumers, has made it difficult for producers to make new long term commitments.”
“Given these market conditions, continuing to develop the project is not an acceptable use of shareholder funds,” the company said.
Kinder Morgan attributed the lack of contracted capacity to the lack of “regulatory procedures in the New England states to facilitate binding commitments” and the "open-ended" nature for establishing those procedures in each state.
TGP plans to "continue to work with customers to explore alternative solutions to address their needs, particularly local distribution companies that are unable to fully serve consumers and businesses in their areas because of the lack of access to abundant, low-cost domestic natural gas," Kinder Morgan said.
Asked earlier in the day whether Kinder Morgan and other pipelines developers should be able to pass along the cost of construction to consumers, Gov. Charlie Baker said:
"I'm not paying too much attention to the Kinder Morgan project, primarily because most of that is driven by federal policy and not by state policy. What I've said all along is the best way for Massachusetts and New England to ensure that people here in the Commonwealth get the best price they possible can on their electricity and their thermal piece is to have a proactive approach to this and my hope and my anticipation is that that pro-active approach will look like a bill that comes out of the House at some point during this session and gets debated and enacted and includes what I've talked about before, which is a combo platter of the two I'm particularly interested in which is hydro and wind," Baker said.
Energy industry stakeholders - from natural gas to offshore wind and solar and hydro producers - are jockeying for a piece of the region's supply mix as lawmakers contemplate major energy policy legislation and the looming 2019 shutdown of Pilgrim Nuclear Power Station in Plymouth, a major source of carbon-free power.
"Kinder Morgan is stopping the pipeline simply because it is both expensive to ratepayers and simply not needed," Environmental League of Massachusetts President George Bachrach said.
"Massachusetts has the capacity to develop its own energy in solar, wind and hydro and create new industries and jobs here, rather than importing energy and exporting our dollars and jobs."