Vermont Business Magazine Vermont Gas Systems, Inc today announced that it will not proceed with the proposal to build Phase 2 of its proposed pipeline expansion project – the connection from Middlebury to International Paper’s (IP) plant in Ticonderoga, NY. VGS is the only natural gas pipeline service in the state. Extending the pipeline south from Chittenden County has been met with protests from landowners and opponents of "fracked" gas, and by construction cost increases, which ultimately un-did the deal with IP.
Don Rendall, President and CEO of Vermont Gas, left. Above, the pipeline under construction in Williston last summer. Below, protests last May led to arrests at the VGS headquarters in South Burlington. Photos by Vermont Business Magazine.
“As the company committed to the Vermont Public Service Board (PSB) last year, Vermont Gas recently completed a thorough review of the schedule, costs and challenges to complete Phase 2 under current business conditions,” said Don Rendall, President and CEO of Vermont Gas. “IP and Vermont Gas extensively discussed the issues raised by this reassessment of the project, and we were unable to find a mutually acceptable path forward.”
“Our updated cost estimate for Phase 2 is now $105 million, compared to $74.4 million as presented to the PSB last August,” said Jim Sinclair, Vermont Gas’ Vice President for System Expansion. Under the agreement between Vermont Gas and IP, this would mean that IP’s total financial responsibility to Vermont Gas for Phase 2 as well as Phase 1 improvements would have risen from $99 million to $135 million, resulting in Phase 2 no longer being commercially practical.
In keeping with the terms of the companies’ agreement, IP has elected to withdraw because of the cost estimate increase.
“We value our relationship with IP. The door is open for cooperation in the future,” stated Rendall.
Governor Peter Shumlin has been a major supporter of the project and especially of eventually extended the service to Rutland, where he sees it as a significant economic development project.
The governor issued the following statement after Vermont Gas announced it would cancel plans to extend natural gas service to International Paper: “I’m glad that Vermont Gas Systems did what I asked and what the company committed to do – scrub the numbers and make sure the benefits of expansion continue to make sense for Vermont. In that process, it became clear that the costs and community challenges of the International Paper expansion have grown. Given the conclusions that the costs have exceeded International Paper’s threshold and the benefit to Vermonters from pursuing that project have decreased significantly, I support the companies’ decision to withdraw the project.
“I am gratified that Vermont Gas will be putting a renewed focus on offering strong public benefits and a choice for Vermonters of natural gas service through its ongoing expansion to Middlebury and continued exploration of how to drive farther south to Rutland. I know that the Public Service Board and Department will provide vigorous oversight. The state's interest and mine has always been in getting the choice of affordable natural gas to more Vermont residents and businesses, to help expand economic opportunity. I continue to expect Vermont Gas to work on making that happen.”
Today’s announcement does not affect Phase 1’s Certificate of Public Good or cost estimate. The PSB evaluated Phase 1 as a stand-alone project, without Phase 2, and Vermont Gas’ updated cost estimate for Phase 1, released in December, is also for a stand-alone project.
“We will now focus our efforts on completing Phase 1 of our expansion plan to serve Addison County as far south as Middlebury, and explore creative options for extending service to more Vermont communities, including Rutland,” said Sinclair. Vermont Gas will ask the PSB to dismiss the company’s pending petition for approval of Phase 2.
“It is crucial for all of us to have a clear understanding of what it takes to complete these projects. We have done that work and now we are looking to the future – how to serve more Vermont families and businesses and how to advance Vermont’s clean energy future by innovating, helping reduce emissions, partnering with renewable energy, and enhancing our successful energy efficiency programs,” said Rendall.
AARP Vermont has been a skeptic of the cost savings the gas project was supposed to bring to Vermonters.In a statement, Greg Marchildon, AARP Vermont State Director, said:
“On behalf of our members and all existing ratepayers in Chittenden and Franklin counties, AARP is pleased to learn that Vermont Gas Systems (VGS) has made the decision to drop its plans for Phase 2 of the gas pipeline project. The determination by VGS and International Paper (IP) that the project is not economically viable is a prudent one. However, it will have a direct impact on the cost of Phase 1 – a cost being paid for by current VGS customers. With Phase 1 costs already estimated to nearly double, this new development makes it even more difficult to prove that the greater good is being served by a project that will bring service to only 3,000 Addison County customers. According to VGS testimony, the rate increase for customers in Chittenden and Franklin counties will now go up at least 10% due to the elimination of Phase 2. This will represent the third substantial cost increase on a project that is just barely underway.
"AARP implores the Vermont Public Service Board to give very close scrutiny to the financial viability of Phase 1, and in particular to the burden it imposes on existing ratepayers. With the cost of this pipeline project rising steadily, however, it is imperative that the VT Department of Public Service step up to provide the needed data and analysis to inform the decision on Phase 1. It is our opinion that to date consumers have not been well represented by regulators and we feel strongly that Vermonters deserve better.”
Sources: VGS, governor's office, VBM. 2.10.2015