Oil Change International

Exposing the true costs of fossil fuels

The Vanishing Need for the Atlantic Coast Pipeline

The Vanishing Need for the Atlantic Coast Pipeline: Growing Risk That the Pipeline Will Not Be Able to Recover Costs From Ratepayers

Oil Change International & Institute for Energy Economics and Financial Analysis

January 2019

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The Atlantic Coast Pipeline (ACP) is a 600-mile, 42-inch natural gas pipeline designed to bring natural gas from northern West Virginia to Virginia and North Carolina. The project is being built by a joint venture of Dominion (48%), Duke Energy (47%), and Southern Company (5%). Its construction was approved by the Federal Energy Regulatory Commission in October 2017.

The project was originally projected to cost $5.1 billion. Cost overruns to date have raised the cost of the project by about 30% to $6.5 to $7 billion, excluding financing costs. But cost overruns are not the only challenge faced by the project. The biggest threat to the project’s profitability may come if and when the project is ever completed. The demand outlook for gas has changed dramatically since the project’s inception and much of the project’s original justification has evaporated. Indications are that the project’s affiliated utility customers may struggle to convince state regulators to pass the full cost of pipeline transportation agreements through to utility customers. Indeed, the project does not represent good value to the ratepayer.

This report discusses the considerable headwinds faced by the Atlantic Coast Pipeline. Key findings include:

  • Six companies, all of whom are regulated utility affiliates of the pipeline’s sponsors, have contracted for 96% of the pipeline’s capacity.
  • Atlantic Coast Pipeline, LLC will recover the costs of the pipeline through rates charged to the pipeline’s customers. Given that the vast majority are regulated utilities, these costs will have to be approved by state utility regulators in Virginia and North Carolina.
  • Electric utility subsidiaries of Duke and Dominion in Virginia and North Carolina have contracted for 68% of the pipeline’s capacity. Yet, the argument by these utilities that they need new natural gas pipeline capacity has been significantly weakened since the ACP was first proposed.
  • In its most recent long-term Integrated Resource Plan (IRP), four out of five of Dominion’s modeled scenarios show no increase in natural gas consumption from 2019 through 2033.
  • Dominion’s 2018 IRP was rejected by Virginia state regulators, in part for overstating projections of future electricity demand. This implies that future natural gas consumption will likely be even less than forecasted in the IRP.
  • The most recent IRPs of Duke Energy Progress and Duke Energy Carolinas show that previously planned natural gas plants have been delayed further into the future. We also find that Duke also has a history of overstating its forecast of electricity demand.
  • Over the next decade, it is likely that the demand for natural gas in Virginia and North Carolina will be further eroded as renewable energy and storage technologies continue to rapidly decline in price.

We recommend several questions investors could be asking management in order to obtain a clearer view of the project’s value.

Download the report here.

Further reports and briefings on gas and gas pipelines:

Comments (10)

  1. Mary Wildfire says:

    I can see just one window for increased energy demand, which no one is talking about. If we actually got serious about a Green New Deal, about a massive, rapid buildout of solar, wind and perhaps water energy capacity, it would take existing energy to power the construction of all those solar panels, windmills and batteries–a large, if temporary surge. I would be in favor of pipelines leading to those specific projects.

  2. Kay Ferguson says:

    This pipeline will not be built.

  3. phil irwin says:

    If new capacity is provably needed, build in existing corridors before creating new ones.

  4. Matthew Gallelli says:

    Energy corps are unconcerned about costs since they have installed all the “right” people in all state and federal offices and agencies. These governmental bodies make sure that the corporations can charge off all expenses to the ratepayers.

  5. William F. Limpert says:

    There is no need for the ACP.

    Once renewable energy systems, like solar, wind, retrofit hydroelectric (new turbines at existing impoundments), and geothermal are in place, and except for minor maintenance costs, the energy they produce is free, robust, and inexhaustible. They produce no unhealthy air pollution, and contribute no greenhouse gas emissions.

    Renewable energy, and energy efficiency are win, win, win propositions.

    The ACP is a lose, lose, lose proposition.

  6. Philip Khnopp says:

    Wind and solar energy technologies are only stop-gap measures at best. The TRUE alternative energy technologies (which foundationally preempt the need for any fossil fuel use) have been viciously suppressed by the kings of the fossil fuel industry for the past 100 years. Something in excess of 5,000 patented, ZERO-POINT ENERGY TECHNOLOGIES, are withheld from us, on the deep shelves of the U.S. Patent Office. When released to the general populace, these technologies could transform our world into a paradise within a single generation. View YouTube-Dr. Steven Greer, ” Unacknowledged” Open your mind to the truths revealed here!

  7. Jill Averitt says:

    The exisiting pipes we have right now are not running at capacity and we already have more than enough fracked gas that they are selling it. Dominion is jumping on the band wagon to make a buck overseas while the VA ratepayers and private landowners pay for it. They can say this is for the US market because their own shell companies are saying they need it. They can use eminant domain to take our land and ship the gas out to sell overseas. This pipeline is not needed.

  8. David Pratt says:

    Germany just announced a plan to close all its coal power plants within 19 years. If Germany can switch to renewable energy in 19 years so can Virginia. We don’t need to build pipelines for more fracked gas capacity when the goal should be to REDUCE the need for capacity from where it is today, and soon. We can’t proceed with “interim” solutions.

  9. Cera Beth says:

    Some pretty bold assumptions and opinions have ben stated as fact in this article. Shame on you. You should be better than this.

    BTW… Maybe Duke’s plants have been delayed or postponed because there is no fuel to supply them. You wouldn’t build a house without access to water, gas and electric. Why build a power gen plant with no fuel?

  10. John Leyzorek says:

    ACP is based on fraud, in which FERC is criminally complicit. Proposed ACP connects to existing line to Norfolk, Va, a port. Gas is worth more overseas. Duty to stockholders will require that the gas be exported, regardless of ACP’s claims, therefore no domestic benefit and no public purpose. Also, regardless of where the gas will go, ACP cannot claim where it will go because ACP will only transport it, not own it, therefore ANY claim of where it will go is fraud.

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