A recently published study by the Institute for Energy Economics and Financial Analysis (IEEFA) concludes that natural gas pipelines proposed for construction from West Virginia into Virginia and North Carolina are indicative of a rush toward industry overbuilding. Titled “Risks Associated With Natural Gas Pipeline Expansion Across Appalachia,” the study examines the proposed Mountain Valley Pipeline and the proposed Atlantic Coast Pipeline, which together would cost roughly $9 billion.
“There is a widespread assumption that a pipeline would only be proposed if it is necessary, but this assumption is not supported by the facts,” said Cathy Kunkel, an IEEFA energy analyst and lead author of the report. “Developers are being rewarded for overbuilding and are guaranteed a return on their investment by the Federal Energy Regulatory Commission (FERC).”
“Demand for natural gas will not keep pace with the level of capital investment currently going into pipeline infrastructure,” said Tom Sanzillo, IEEFA’s director of finance and a co-author of the study. “Those affected, at bottom, are the communities through which the pipelines run and the consumers who pay the rate increases needed to underwrite pipeline development.”
“We found that the dynamics of the pipeline business tend toward building excess pipeline capacity,” said Kunkel. “Major pipeline companies are competing with each other to build out the best, most well-connected pipeline networks. And utility companies are entering the pipeline space because much of the risk of overbuilding can be pushed off onto captive ratepayers. Natural gas production companies are [also] entering the pipeline business because their core business of drilling is under-performing and they are looking for ways to boost revenue and investment value.”
“These kinds of financial considerations on the part of individual companies do not add up to the kind of socially rational, long term planning of natural gas infrastructure that we need,” said Kunkel.
The study, published by IEEFA at the request of Appalachian Mountain Advocates and Appalachian Voices, is especially important for its findings on flawed regulatory processes, said Joe Lovett, executive director of Appalachian Mountain Advocates. “This report shows why FERC must consider whether new pipelines are actually needed in our region,” Lovett said. “It makes plain that FERC must consider all the proposed pipelines together. FERC may not allow pipeline companies to take private property before it conducts an informed analysis about whether such takings are necessary.”
