Williams Cos.Inc. wants to save the Constitution natural gas pipeline projectfrom the teeth of New York regulators, and it is hoping for support from FERCand the New York ISO.
"There's been quite a bit of media coverage around thestate of New York's denialof our [Clean Water Act Section] 401 water quality permit with the Constitutionpipeline," Williams CEO and President Alan Armstrong said in a May 5earnings call. "We obviously don't agree with the decision and believethat there is a significant amount of politics involved that went into thatdecision."
Armstrong said Williams and its partners in ConstitutionPipeline Co. LLC, including CabotOil & Gas Corp., are committed to the project. The factsrevealed in a likely challenge to the New York decision will weigh inConstitution's favor, Armstrong said, because the developers "took greatmeasures" to address the environmental issues raised by the state andreceived assurance that everything was fine.
"I think we have extremely strong evidence in thatregard," he said.
Armstrong was pressed by an analyst whether Constitutioncould find relief without running into the same politics, as the project would if a court sends thecase back to the New York agency that denied the permit.
"At this point, it's really a matter of dealing withthe facts that are in the permit application and taking that forward to thelegal process," Armstrong said.
Craig Shere, director of research at Tuohy BrothersInvestment Research Inc., asked whether "FERC will finally step up andexercise some authority to get Constitution over the finish line."
Armstrong called for backup. "I think certainly thefederal government understands how critical that is," the CEO said. "AndI would even tell you the state of New York, New York ISO and the powergenerators … and the businesses there understand how incredibly important thatproject is. So I think we'll have a lot of people weighing in on our side ofthat argument."
FERC has not commented on how it will address the New Yorkblock of a project that has been approved by the commission.
Armstrong listed political and practical for New York to spareConstitution. "It's certainly important to economic development and jobsin upstate New York, and a reliable supply of natural gas is critical if NewYork is going to continue its transition from coal-fired power generation tothe natural gas units," he said.
"It's also critical if the entire New England region isto benefit from U.S. natural gas as it also transitions away from retirednuclear plants and coal-fired generation," he said.
Williams Senior Vice President and CFO Donald Chappel saidthe hangup with Constitution will not change Williams' CapEx plan for 2016.
While headlines have focused on Constitution, Armstrong saidWilliams has made significant progress on a number of its other natural gasinfrastructure projects, including FERC approval of TranscontinentalGas Pipe Line Co. LLC's Garden State project and the Hillabeeexpansion linked to a larger Southeast markets pipeline campaign. Anotherhighlight was Atlantic Sunrise, which received a favorable draft environmentalimpact statement on the same morning as the call, and which Armstrong pointedout has already received its Clean Water Act Section 401 water qualitycertificate in Pennsylvania. Rob Rains, an analyst with the policy andfinancial research firm Washington Analysis LLC, observed in a recent interviewthat Atlantic Sunrise is an important project for Williams and its shippers.
"It's a project that is going to help unlock tremendousvalue in the Marcellus like never before to serve growing ," Armstrong said. "Andit's on track to receiving its state and federal permits and clearances."
During the call, Williams executives declined to discuss themoribund merger withEnergy Transfer, other than to say Williams is still committed to thetransaction and to enforcing its rights under the September 2015 mergeragreement.
The call covered Williams' earnings for the first quarter of2016. On May 4, Williams reportedfirst-quarter adjusted income of $26 million, compared to $122 million duringthe prior-year period.