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Amid New Jersey holdups, PennEast seeks to split project into phases

Highlights

Precedent agreements for 338,000 Dt/d in Phase 1

Court ruling, regulatory denials in New Jersey

Washington — Stymied by a court ruling that put its route in New Jersey in question, the 116-mile, 1.1 Bcf/d PennEast Pipeline has asked the Federal Energy Regulatory Commission for permission to build the project in two phases, starting with a segment in Pennsylvania.

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The pipeline company has 338,000 Dt/d in precedent agreements in hand with four shippers for Phase 1, it said, and has negotiations underway for agreements covering a "significant quantity" of long-term, firm service, for that 650,000 Dt/d phase. Phase 2 would encompass the remaining route in Pennsylvania and New Jersey.

68-MILE SEGMENT IN PENNSYLVANIA

The Phase 1 segment would entail 68 miles of pipeline in Pennsylvania, terminating in Northampton County, two out of three compressor units at the Kidder Compressor Station, as well as new interconnection facilities.

In its abbreviated application for a certificate amendment filed at FERC Thursday (CP15-558), PennEast acknowledged it has faced "unforeseen delays in acquiring New Jersey authorizations."

Operation of the Phase 1 facilities "are in no way contingent on or otherwise impacted by the New Jersey authorizations," the pipeline company told FERC.

PennEast in a statement said the phased approach allows PennEast to meet public need in Pennsylvania in the short term, and in the long term in New Jersey by "affording sufficient time for permit and legal issues to be resolved."

In addition to a 3rd US Circuit Court of Appeals ruling finding PennEast lacked authority to condemn state lands in federal court, the pipeline developer has struggled to obtain key water and wetlands authorizations in New Jersey.

FERC ASSIST ON COURT RULING

The new request at FERC comes as the commission on Thursday granted PennEast's request that it weigh in with its "expert" opinion on the adverse 3rd Circuit ruling. FERC sought to avoid directly addressing constitutional issues raised in the ruling but affirmed its view that the Natural Gas Act intended to give private pipeline certificate holders, rather than FERC, authority to condemn state lands.

PennEast said the phased approach will give it three delivery points in Pennsylvania: UGI Utilities, to serve the Blue Mountain Ski Resort, and new interconnections with Columbia Gas and Adelphia Gateway "to serve growing demand in the Southeast region."

Anthony Cox, chair of the PennEast board, said the step will allow eastern Pennsylvania and the greater Philadelphia region to benefit from greater access to low-cost gas. Since the initial announcement of the PennEast project, he said, demand has continued to grow, yet the economic and air quality benefits have been denied to customers by "short-sighted political interests."

IN-SERVICE TARGETS

PennEast asked for FERC approval by October 1, 2020, to meet its in-service targets. Those were identified as November 2021 for Phase 1 and 2023 for Phase 2 in the press statement.

PennEast also asked FERC for permission to adjust rates to reflect updated capital cost estimates of $1.67 billion for the full project, and $835 million for the first phase. That is up from a total estimate of $1.13 billion at the time of the original application in 2015.

Maya van Rossum of the Delaware Riverkeeper Network said PennEast's announcement "that it will seek to construct its project in Pennsylvania first while it continues to pressure for approvals in New Jersey is not a surprise."

"What will also not be a shock, but is legally and morally wrong, is that FERC will help PennEast pursue this strategy," she said. The development makes it more important that the Delaware River Basin Commission serve as a check on FERC power, she added.