Vermont Business Magazine Vermont Gas Systems CEO Don Rendall issued a statement today saying the cost of the Addison Natural Gas Project will increase more than $11 million and is now estimated to be $165.6 million. Rendall said "virtually all" of the cost increase for the pipeline construction will be borne by the company, not ratepayers. He said the increase essentially will be offset from profits. Rendall said that a ratepayer cap agreed to last year of $134 million is still in place and that Vermont Gas is committed to finishing the entire project by the end of this year. He said some costs related to several construction disruptions from protesters and issues with the last few rights of way could add about $525,000 to the ratepayer costs.
Vermont Gas Systems CEO Don Rendall. VBM file photo.
"We're going to live by that cost cap," Rendall told Vermont Business Magazine. He said additional construction costs of the project "will not be passed through to customers in any way, shape or form."
In response to those who have questioned the cost of the project and the impact on existing ratepayers, Rendall said natural gas rates have gone down in recent years and that, "This is an important infrastructure project for our state."
AARP Vermont, which has been a consistent opponent of the pipeline for financial reasons, issued this response from Greg Marchildon, AARP Vermont State Director: “AARP Vermont is not surprised to hear today that another cost increase – nearly $12 million -- has been announced by Vermont Gas Systems and that ratepayers are once again going to take a direct hit for a portion of it. This is a project that company officials have repeatedly assured the public will come in “on time and on budget.” Clearly this is not the case. Costs continue to pile up and the company now expects customers to pay for right of way access delays and protests. On behalf of our members and all ratepayers, AARP Vermont calls on our regulators at the Department of Public Service to give close scrutiny to this proposal and step up to protect Vermont ratepayers from paying even more for a project that is clearly being mismanaged.
“AARP Vermont feels strongly that the 50,000 customers in Chittenden and Franklin Counties should not be paying for a pipeline to serve only 3,000 potential customers in Addison County. The system expansion will only benefit the company’s bottom line – not the ratepayers who are bearing the ever-rising cost.”
More rock ledge and more horizontal drilling are largely responsible for the new cost increases, Rendall said. He said the pace of the construction is also more deliberate, which raises costs.
Vermont Gas has eminent domain filings before the Public Service Board, one with a landowner in Monkton and one with the town of Hinesburg. Agreements with 162 other landowners have been reached. There also is a dispute with a landowner in Williston who already has an agreement with the company. Rendall said VGS is working through those issues and hopes to reach agreements in lieu of any land takings. The land issues could be an impediment to completing the pipeline this year, he said.
He said the eminent domain filings would be a "last resort" if agreements could not be reached, though he would not speculate on when any sort of resolution might be achieved. As for the current dispute with the Williston family with whom an agreement already has been reached, he said, "We are focused on living up to the letter and the spirit of that agreement."
In any case, Rendall said, "We're committed to finishing what we've started." Eleven miles of the 41-mile pipeline were completed last year, including nearly all of the northern most segment from Colchester to Williston. VGS is now busy on the Williston-Hinesburg segment, which he expects to be completed in the next two to three weeks. VGS has over 200 workers in the field.
"The teams are making good progress," he said.
Vermont Gas has been plagued by cost hikes since the project received its certificate of public good in 2013 with a pricetag of $86 million. The estimate Vermont Gas presented to regulators last fall was $154 million. However, Vermont Gas said at the time that it would cap those costs at $134 million to reduce exposure to ratepayers.
In the original plan, the extension of the gas line from Chittenden County to Addison County was to include a further spur across Lake Champlain to the Ticonderoga, NY, International Paper Company. Increasing costs canceled that proposal. A hoped-for future extension to Rutland also has been put off indefinitely. Vermont Gas has not only endured construction cost and land-acquisition increases, which also have run-up costs across the country, but the Addison project has been met by anti-fracking protests as well as opposition from some impacted landowners. On top of that, South Burlington-based Vermont Gas terminated the relationship with its original contractor in 2014, which has resulted in ongoing litigation, and it is now working with Michels out of Wisconsin.
As for the protesters who have intermittently held up the progress of the construction, Rendall said VGS is committed to the "safety of workers, the public and of the protesters."
Don Rendall's statement reads:
“The Addison Natural Gas Project will bring an important energy choice to thousands of families and businesses in Addison County. The 50,000 customers we currently serve are paying about 15% less on their heating bills today than they were six years ago and we are committed to continuing our record of low and stable rates.
“Since Vermont Gas’ last Addison Natural Gas Project filing in April 2016, the Company has undertaken significant construction planning, contracting and field construction, which have prompted us to revise our cost estimate for the Project upward.
“As with any project of this size and scope, challenges such as increased rock and ledge, underground drilling, ongoing landowner negotiations and disruptions occur. With these challenges in mind, we currently forecast the project cost to be approximately $160 million, with an additional contingency of approximately $5.6 million, for a total revised budget to complete the project of $165.6 million. This revised total budget represents an approximately 7.8% adjustment.
“Very importantly, the $134 million cost cap negotiated by the Department of Public Service last Fall and approved by the Public Service Board means this change in project cost will not be borne by Vermont Gas customers, with the limited exceptions set forth in the cost cap agreement. We estimate, to date, approximately $525,000 of costs resulting from cost cap exceptions, such as unreasonable interference by opposition groups and delays in access to right of way. Customers are protected from nearly all of the impacts of this cost estimate increase.
“With timely access to remaining parcels this construction season, the Company plans to complete the Project in late 2016, as previously projected.
“We will provide the Public Service Board with our regular quarterly project cost update in mid-July, as scheduled.
“We are focused on bringing this project online later this year and continuing our 50 year record of low and competitive rates for customers. For Vermont Gas, this project is all about the thousands of families and businesses in Addison County who are depending on access to cleaner, more affordable energy.”
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Vermont Gas, DPS reach MOU on capping pipeline cost at $134 million
Source: Vermont Gas 6.21.2016 www.VermontGas.com.