By Peggy Mackenzie
The Mountain Valley Pipeline (MVP) proposed by Mountain Valley Pipeline, LLC, is unlike any project previously completed in the region. With a diameter of 42”, the pipeline would be capable of transporting two billion cubic feet of natural gas per day. The industry-sponsored studies, which the Federal Energy Regulatory Commission (FERC) uses to determine the benefits of the pipeline, make no mention of the potential harm, economic or otherwise, on the communities or the properties it crosses, which leaves the the public and decision makers with a distorted picture of the overall economic effect of the proposed pipeline.
A coalition of community groups and organizations from the eight counties (Greenbrier, Monroe and Summers in West Virginia, and Giles, Craig, Montgomery, Roanoke and Franklin in Virginia) commissioned Charlottesville-based Key-Log Economics to conduct an independent study to ensure that FERC would have more comprehensive and robust estimates of economic effects that are typically discounted or ignored in natural-gas pipeline approval processes.
“FERC’s procedures and its track record show a blatant disregard for established economic principles as well as clear evidence that pipelines reduce property values, discourage business development, and diminish the capacity of the natural environment to provide clean water, beautiful scenery, and other valuable services to people,” said the study’s lead author, Dr. Spencer Phillips.
Considering this eight-county region alone, estimated one-time costs range from $65.1 to $135.5 million in the short-term as construction strips forests and other productive land bare, and as private property values take a hit due to the dangers and inconvenience of living near the MVP route. Annual costs following the construction period include permanent changes in land cover, lost property tax revenues, and dampened economic growth in key sectors. These total between $119.1 million to $130.8 million per year and would persist for as long as the MVP right-of-way exists – that is, in perpetuity. Putting the stream of costs into present value terms and adding the one-time costs, the total estimated cost of the MVP in the eight counties is between $14.5 and $15.3 billion.
The costs represented by the estimates presented here are what economists call “externalities,” or “external costs,” because they would be imposed on parties other than (external to) the company proposing to build the pipeline. Unlike the private (or internal) costs of the pipeline, external costs borne by the public do not affect the company’s bottom-line. From an economic perspective, the presence of externalities is what demands public involvement in decisions about the MVP. Without consideration of all of the costs of the project, too much pipeline (which may mean any pipeline at all) is the inevitable result. FERC must consider the true bottom line and ensure that the full costs of the pipeline, especially those external costs imposed on the public, are rigorously examined and brought to bear on its decision about whether or not to permit the MVP project to proceed, reports Key-Log Economics.
“Only if we count all of these costs (plus others our study did not get to, like the cost of damage to roads during construction or of heightened emergency response capacity afterward), weigh the full cost against reasonable estimates of societal benefits, and then ensure that the pipeline’s owners pay the full cost of the pipeline could we possibly say that the MVP is a good idea, economically,” said Phillips.
Kirk Bowers of the Virginia Chapter of the Sierra Club said, “Based on a comparison of even the exaggerated benefit estimates put out by the MVP’s backers with these very conservative cost estimates, it is hard to see this pipeline being worth it for the region.”
