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Pipe opponents call on FERC to halt project reviews to stop 'overbuilding'

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Pipe opponents call on FERC to halt project reviews to stop 'overbuilding'

Toomuch pipeline capacity is being built out of the Marcellus and Utica shaleregion, and FERC is to blame, according to a report commissioned by opponentsof the Mountain Valley and Atlantic Coast natural gas pipeline projects.

"TheFederal Energy Regulatory Commission facilitates overbuilding," theInstitute for Energy Economics and Financial Analysis said in a study releasedApril 27. "The high rates of return on equity that FERC grants to pipelinecompanies (allowable rates of up to 14%), along with the lack of acomprehensive planning process for natural gas infrastructure, attracts morecapital into pipeline development than is necessary."

Thereport's authors also found "FERC's approach to assessing the need forsuch projects is insufficient."

Thereport said the $9 billion in costs for both the Mountain Valley and AtlanticCoast projects would likely be added to the price consumers pay for gas or beabsorbed as a loss by project investors. In addition, IEEFA said landownerswere at risk of sacrificing property to projects that are not needed.

IEEFArecommended that FERC suspend the applications for the Atlantic Coast andMountain Valley pipelines "until a regional planning process can bedeveloped for pipeline infrastructure; that FERC lower the returns on equitygranted to pipeline developers; and that an investigation be conducted into therelatively high failure rate of new pipelines."

FERCspokeswoman Mary O'Driscoll said the commission's policy is to not respond tothese kinds of reports through the media. The report's authors said they willmake the report part of the FERC record for Mountain Valley and Atlantic Coast,so the commission will likely address the report's arguments there.

Thestudy, "Risks Associated With Natural Gas Pipeline Expansion AcrossAppalachia," was requested by non-profit law firm Appalachian MountainAdvocates. During an April 27 call, the group's Executive Director Joe Lovettdescribed the "destructive" impact of pipelines on streams, forests,farms and communities. He wanted FERC to "rationalize the process,"requiring pipes to be built in corridors, "so it's not like everyonebuilding their own highway," he said.

IEEFAenergy analyst Cathy Kunkel, the lead author of the study, said the institutefound in many cases, including Mountain Valley and Atlantic Coast, thepipelines and its customers are affiliates, which she said calls into questionthe FERC analysis of need.

TheInterstate Natural Gas Association of America disagreed with the conclusions ofthe report, noting that the regulatory model for interstate gas transmissionprojects requires a pipeline to prove its need before it receives a certificatefrom FERC.

"Thatmeans long-term contracts from shippers willing to commit to the project,"INGAA spokeswoman Catherine Landry said. "They have to believe the need isreal and put their money where their mouth is. Those shippers could beproducers or end-users or marketers.

 "Second, there clearly is a need for pipelinecapacity," she said. "In fact, the INGAA Foundation recently releaseda report that showed that between $2.2 billion and $3.6 billion in capitalexpenditures is needed in the natural gas midstream space from 2015-2035. Westand by that.

"Iwould also point out that while natural gas production is down because of lowcommodity prices, the Marcellus and Utica Basins are the lowest cost basins inthe nation, and all the experts I know of see production growing sharply thereonce prices rebound," Landry said. "Natural gas demand for powergeneration, manufacturing and industrial applications, as well as Mexican andLNG exports, continues to grow. These factors all support the need foradditional pipeline capacity."

Theapproximately 564-mile AtlanticCoast pipeline project is a joint venture of , , and AGL Resources Inc.The pipeline would carry up to 1.5 million Dth/d from West Virginia to Virginiaand North Carolina, and it is expected to go into service in late 2018.(CP15-554)

The approximately 300-mile is a jointventure of EQT Midstream PartnersLP, which is the majority owner and would be the operator, andaffiliates of NextEra Energy Inc.,WGL Holdings Inc.,Vega Energy Partners Ltd.and RGC Resources Inc.The pipeline would run from Wetzel County, W.Va., to a point on the 'ssystem in Pittsylvania County, Va. It would be capable of moving at least 2million Dth/d. It is expected to begin service during the fourth quarter of2018. (CP16-10)