Fundamental flaws exposed in PennEast application
FAR HILLS, N.J. (Sept. 13, 2016) — The New Jersey Division of Rate Counsel, which represents ratepayers’ interests, yesterday submitted a strong case against the supposed market need for the PennEast pipeline, at the close of the Federal Energy Regulatory Commission (FERC) public comment period on its Draft Environmental Impact Statement (DEIS) for PennEast.
According to the New Jersey Rate Counsel’s comment published on the FERC PennEast docket, the ratepayer advocate agency “is concerned that the DEIS does not address that the ‘need’ for the Project appears to be driven more by the search for higher returns on investment than any actual deficiency in gas supply or pipeline capacity to transport it.” The report concluded that “the terms under which the Project has been proposed are unduly generous to PennEast and unfair to consumers” and that “the pursuit of rich financial incentives does not constitute a showing of ‘need,’ and is insufficient to justify the Project.”
“We are grateful to the New Jersey Rate Counsel for serving as a public watchdog against profit-driven pipelines like PennEast,” said Tom Gilbert, campaign director, New Jersey Conservation Foundation. “The Rate Counsel has affirmed the self-serving nature of PennEast’s proposed pipeline. New Jersey ratepayers should not be forced to pay for a pipeline we don’t even need.”
The New Jersey Division of Rate Counsel’s comment is available here.
Another new analysis published yesterday demonstrates that current and projected demand for natural gas in the New Jersey and eastern Pennsylvania region can be easily met through the year 2030 by existing pipelines and supplemental supplies. In addition, these alternatives to meet gas demand needs during “peak” periods are more cost effective and less environmentally damaging than building the proposed PennEast pipeline.
Gas market expert Skipping Stone, a nationally respected consulting firm that has provided analysis to energy companies and testimony to FERC and other regulatory agencies for more than 25 years, conducted the analysis. The report was submitted to FERC as a formal comment on the DEIS, by the Eastern Environmental Law Center on behalf of New Jersey Conservation Foundation and Stony Brook-Millstone Watershed Association.
In its DEIS, FERC failed to conduct a thorough analysis to determine whether there are less harmful alternatives to its proposed pipeline, including a no-action option. Such an analysis is required under the National Environmental Policy Act (NEPA).
The New Jersey Division of Rate Counsel’s comment also acknowledged this deficiency in PennEast and FERC’s assessments, stating “the DEIS gives overly short shrift to the ‘no action’ alternative.”
“FERC completely ignored the mandate to fully analyze whether less harmful alternatives exist,” Gilbert said. “Skipping Stone’s new analysis demonstrates that other, less costly options are available that would avoid the devastating impacts PennEast would cause. There is no justification to build this unneeded, damaging pipeline other than to profit private companies at the expense of ratepayers and our communities.”
The Skipping Stone analysis shows that PennEast is not needed to meet current or projected demand for natural gas, and that current pipeline capacity far exceeds even peak winter demand. By 2030, a small potential gap between peak winter demand and pipeline capacity shown by projections can easily be met by utilizing existing supplemental “peak shaving” resources.
Using supplemental supplies to meet demand that exceeds pipeline capacity has been a common practice “for as long as there has been a gas business,” according to Skipping Stone’s report.
Gilbert pointed to a quote in a recent rate hike request from New Jersey Natural Gas — one of the owner companies of PennEast — that reinforces this practice:
“The weather-sensitive nature of NJNG’s customer requirements exhibits a pronounced peak over a limited number of days. Pipeline service, designed to provide year-round availability, is less cost-effective to meet this portion of the firm requirements of NJNG’s customers.”
To demonstrate to FERC that additional alternatives exist to the PennEast pipeline, Skipping Stone’s study evaluated the option of importing peak winter supplies through existing LNG terminals. The analysis shows that existing pipeline capacity can be used to bring peak winter supplies to the region from existing LNG facilities in the Northeast. This conclusion highlights the failure of the DEIS to consider less costly and less environmentally damaging alternatives.
“This is a clear-cut situation in which NEPA mandates FERC to consider “no-action” alternatives to PennEast’s proposed pipeline,” said Jennifer Danis, senior staff lawyer, Eastern Environmental Law Center. “Not surprisingly, FERC did not adequately consider these alternatives, because PennEast said they would not serve its needs. Despite PennEast’s attempts at denial of process, Skipping Stone’s new analysis provides the proper consideration for this massive project, which carries huge potential for damage. Federal law has made FERC’s directive clear; it must consider the ‘no-action’ alternative submitted today — it meets public needs without blindly gratifying private purposes.”
“This analysis provides further evidence that PennEast is about private gain, not public need. Once again, PennEast companies are doing what’s good for their bottom lines, not their customers or ratepayers, and regardless of massive environmental impact,” said Jim Waltman, Executive Director of Stony Brook-Millstone Watershed Association.
Summary of the Skipping Stone Analysis
The DEIS issued by FERC in July 2016 contains only one paragraph from PennEast about alternatives, in which the company concludes that there are no alternatives to its proposed pipeline despite the fact that they did not complete any of the required analysis.
In the absence of a comprehensive evaluation of alternatives by PennEast, Skipping Stone was commissioned to undertake a review of alternatives to constructing a pipeline.
In its methodology, Skipping Stone first determined the gas demand requirements of the region for the year 2011, and then, using the demand projection for the year 2030 from the 2014 report by the National Association of Regulatory Utility Commissioners (NARUC) and the Eastern Interconnect States Planning Council (EISPC) determined the 2030 need. The NARUC/EISPC report includes detailed summaries of demand for pipeline capacity in 2011 and projected demand for 2030.
Next, Skipping Stone calculated a conservative estimate of physical pipeline delivery capacity for 2011 and 2016, based on FERC’s “Index of Customers” database of pipeline capacity contracts. Skipping Stone compared the demand requirements to the physical pipeline delivery capacity and assessed the amount of demand that was not met by pipeline capacity in 2011, and that is projected to be unmet in the year 2030. This final step of Skipping Stone’s analysis resulted in several important insights:
- In 2011, New Jersey’s natural gas demand exceeded pipeline capacity by 1 billion cubic feet per day, for about 20 days during the winter. In 2011, actual peak demand was about 20% higher than the existing pipeline capacity.
- Utilities are able to meet short-term peak demand cost-effectively by using LNG and other “peak shaving” resources available to them. According to New Jersey Natural Gas, this is more cost-effective than building a pipeline that operates all year.
- More than 2.3 billion cubic feet per day of pipeline capacity was constructed from 2011 to 2016. As a result, very little demand will be unmet by pipeline capacity between now and the year 2030. Projections suggest that the highest level of unmet demand during this time will be 395 million cubic feet of capacity per day, far less than the unmet capacity that existed in 2011 and well within the bounds of what can be met by “peak shaving” resources.
- By 2030, the period of demand exceeding pipeline capacity is projected to be only 7 days per year and the total demand unmet by pipeline capacity is calculated to be 1.5 billion cubic feet.
Skipping Stone’s analysis also shows that the LNG alternative offers a far more cost-effective alternative than PennEast to meeting “peak” demand periods. On an all-in cost basis LNG is not only lower cost, but requires no new construction, thereby minimizing environmental impacts. LNG already meets peak demand and avoids the year-round excess pipeline capacity that PennEast would create.
These alternative solutions are unaddressed in the DEIS, and they must be considered as “no-action” alternatives to the proposed PennEast Pipeline.