Williams will not refile after New York, New Jersey deny 400,000 Dt/d gas project

Washington — Williams said it will not refile with New Jersey or New York at this time after state regulators on Friday rejected Transcontinental Gas Pipe Line's third application to secure a critical water quality permit for the hotly disputed Northeast Supply Enhancement pipeline project to expand natural gas capacity in downstate regions.

Laura Creekmur, a spokeswoman for Williams, said the company was "disappointed" and continued to believe in the fundamentals of the project.

"The decision to pause this important infrastructure project is unfortunate for the region as the design and construction would have generated valuable economic activity in Pennsylvania, New Jersey and New York and would have directly and indirectly supported more than 3,000 jobs during the construction period," she said.

WATER QUALITY IMPACTS

The New York State Department of Environmental Conservation on Friday determined the project would not meet the state's "rigorous" water quality standards and was not necessary to meet its energy needs. NYSDEC consequently denied Transcontinental Gas Pipe Line a Clean Water Act Section 401 Water Quality Certification necessary to move forward with NESE.

The project, proposed in 2016, would provide an additional 400,000 Dt/day of gas supply to National Grid USA's service territories in Brooklyn, Queens and Long Island. It would include about 17.4 miles of new 26-inch-diameter pipeline through New York Bay, Raritan Bay and Middlesex County, New Jersey, and a new compression station in Somerset County, New Jersey.

NYSDEC said NESE's construction would lead to "significant water quality impacts" by disturbing sediments and contaminants, including mercury and copper, and disrupting sensitive habitats like shellfish beds.

Since NYSDEC's second rejection a year ago, New York has passed an ambitious new climate change law and ordered National Grid to identify alternate ways to supply its Brooklyn Union Gas and KeySpan Gas East territories.

The denial Friday noted the new climate law and National Grid's recent identification of a new option for meeting future needs without NESE.

New Jersey the same day denied a freshwater wetlands permit for the project, along with several other permits, saying New York's action indicated the energy needs could be met otherwise and that there was no compelling public need for the project.

PROSPECTS FOR FUTURE PROJECTS

Gary Kruse of Law IQ said that apparent coordination among New York and New Jersey in announcements is "probably not a positive sign for any future [gas] projects that need to go through either or both states."

It also doesn't bode well for the New Jersey portion of the 118-mile, 1.1 Bcf/d PennEast pipeline project, he said, adding it also remains possible that New York will seek to delay Iroquois Gas Transmission System's 125,000 Dt/d Enhancement by Compression project until it can convince National Grid and Consolidated Edison that they don't need more capacity.

Christi Tezak of ClearView Energy Partners said tougher market conditions add to the existing challenges of securing water quality certification at the state level.

"[T]he significant reduction in electricity generation arising from the pandemic-related shut downs is likely dampening assumptions for natural gas demand [and] likely erodes the urgency for NESE and other expansion projects in the Northeast," said Tezak in an email. "Although we may be coming off the bottom of demand lows, we do expect the trajectory of growth for power and gas might be more modest than might have been forecast just six months ago."

EVOLVING STATE POLICY

Economic growth and fuel oil-to-gas conversion in downstate New York have increased gas demand in recent years, but regional climate policy and pipeline opposition have made it a challenging place to build fossil fuel infrastructure. The situation came to a head in 2019 when National Grid and Consolidated Edison of New York refused to connect new gas customers in parts of New York City and Westchester County, respectively.

New York Governor Andrew Cuomo then lambasted utility executives for relying too heavily on NESE for future supply, even as the state ratcheted up efforts to cut greenhouse gas emissions. The company reached a $36 million settlement with state utility regulators after Cuomo threatened to strip its license to deliver gas.

Just one week before NYSDEC's decision, National Grid determined NESE is one of the two best options for addressing the region's supply crunch.

National Grid projected that, absent a solution, the city could experience a gas shortage during extreme cold as soon as the winter of 2022-2023, with the supply gap growing to 220,000 Dt to 390,000 Dt by the mid-2030s. Opposing analysis has argued National Grid's methodology is flawed and downstate New York could have a gas surplus due to energy efficiency initiatives and other factors.