National Grid's latest NY gas project delay revives concerns, monitor says

National Grid USA's failure to complete planned New York City natural gas infrastructure in time for the winter heating season underscores ongoing concerns about the company's ability to meet critical project deadlines, according to an independent monitor tasked with overseeing the company's downstate operations.

The monitor's latest report (19-G-0678) scrutinizes upgrades at National Grid's Brooklyn liquefied natural gas facility, where the company intended to replace a pair of aging LNG vaporizers, one of which is inoperable. The work was part of National Grid's plan to meet peak demand in the supply-constrained region during the 2020-2021 winter, but poor project planning delayed startup until the spring, according to the monitor, Perkins Coie LLP partner Adam Schuman.

National Grid's gas supply planning is subject to ongoing review following a 2019 dispute with New York over the company's six-month moratorium on new gas hookups in Brooklyn, Queens and Long Island. At the height of the dispute, Gov. Andrew Cuomo threatened to revoke National Grid's franchise. As part of a $36 million settlement, National Grid committed to developing ways to meet regional gas demand.

Schuman has previously raised concerns about National Grid's pattern of pushing back deadlines for projects in its Brooklyn Union Gas Co. and KeySpan Gas East Corp. service territories. In a September 2019 report, he traced those delays to National Grid's inability to secure permits.

Project design and corporate culture

In the case of the LNG project, National Grid halted work after realizing that its plan for building pipelines to connect the new vaporizers to the existing system would disrupt critical operations ahead of the winter season. National Grid did not catch the design flaw until after the work was permitted and construction got underway.

Schuman said his concern over project delays was even more pointed in this case because it was the result of National Grid's inadequate design, an issue within its control. "Thus, the failure to recognize earlier the complexity of the tie-ins for Vaporizers 11 and 12 further undermines faith in National Grid's projected timelines, reported progress and ability to execute complex projects in a timely manner," he said in the Dec. 18, 2020, report

During an October 2020 meeting, a project manager told executives that a more detailed engineering review would have identified the problem, Schuman wrote. A chief gas engineer said that National Grid's culture fosters an environment where "in an effort to please, we become overly optimistic in a lot of things that we lay out. That overly optimistic approach tends to drive us into a lot of waste and re-work, which extends and delays projects," according to the report.

Schuman commended the company for holding the meeting to learn from its misstep. However, he raised concerns about another two vaporizers, scheduled to be in service for December 2021 and an LNG trucking station at the Brooklyn facility, which have not received city and state approvals.

National Grid supply projects progressing

In its Dec. 18 response, National Grid acknowledged the delays due to "design and operational considerations" at the Brooklyn LNG facility. It said it undertook a very aggressive timeline to complete a portfolio of supply projects, leaving little room to account for contingencies. National Grid also noted that once-routine permitting has become subject to significant scrutiny and stakeholder input.

National Grid has long maintained that a gas pipeline project — which New York has repeatedly blocked — would address the region's supply crunch. In the absence of that project, National Grid said it continues to progress on delivering "an unprecedented portfolio" of assets, including new and expanded compressed natural gas injection sites in Long Island.

"Based on our current forecast, National Grid is well-positioned to serve new customers over the next several winters as long as we are able to advance the portfolio of infrastructure and non-infrastructure solutions identified in this proceeding," the company said. "But these solutions are only possible with the support and cooperation of regulators, government, customers, vendors, and other stakeholders."