After six years, the developers of the Atlantic Coast pipeline have called it quits due to regulatory delays caused by environmental opposition and $3 billion in associated higher costs. Duke Energy and Dominion Energy are abandoning the proposed $8 billion pipeline that would have transported natural gas 600 miles through West Virginia, Virginia, and North Carolina, despite a favorable ruling by the Supreme Court on its crossing under the Appalachian Trail. The Supreme Court overturned a lower-court ruling that found the U.S. Forest Service did not have the authority to grant a special-use permit that allowed for the development of that segment. The two companies had invested a combined $3.4 billion in the pipeline to date. Just five months ago, Williams Co. canceled its Constitution natural gas pipeline after failing several times to obtain a water permit from New York State.
Another uncertainty that the developers of the Atlantic Coast pipeline would face is a Montana court ruling last month regarding the path of the Keystone XL Pipeline. That ruling was related to a U.S. Army Corps of Engineers’ permitting program, known as Nationwide 12, which allowed gas and oil pipelines to traverse wetlands and bodies of water. Energy industry experts said the decision, made in the case to block the Keystone XL oil pipeline from Canada, ultimately endangered as many as 70 other projects across the country and could cost companies up to $2 billion. On Monday, the Supreme Court reinstated the use of the permitting program, but not for the Keystone XL pipeline.
The Virginia Chamber of Commerce lamented losing the potential economic benefits of the Atlantic Coast pipeline, which was projected to support 8,800 jobs and $1.4 billion in economic activity in the state. The pipeline would have created high-paying construction and manufacturing jobs for West Virginians and North Carolinians as well, increased the domestic energy supply in the area, and strengthened national security with reliable energy to key military installations.
Dominion Energy is also selling the rest of its natural-gas transmission and storage network to Warren Buffett’s Berkshire Hathaway for $9.7 billion including $5.7 billion in debt. The deal includes a 25 percent stake in the Cove Point liquefied natural gas export facility in Maryland, of which Dominion will retain a 50 percent stake. Berkshire Hathaway Energy operates a $100 billion portfolio of utility, transmission and generation businesses providing natural gas and electricity to more than 12 million customers. The Dominion acquisition will add 7,700 miles of natural-gas storage and transmission pipelines and about 900 billion cubic feet of gas storage to its holdings.
Duke Energy and Dominion Energy have pledged to reach net-zero emissions by 2050 and have turned to renewable energy sources to produce electricity that includes wind, solar, and hydroelectric power. But, both companies believe that they need natural gas for back-up when those intermittent energy resources (wind and solar) are not available.
Recently, Dominion completed the initial phase of installing two turbines of an offshore wind farm project it is developing 27 miles off the coast of Virginia Beach that could be the largest in the country when over 180 wind turbines are expected to be in operation by 2026. Virginia has mandated 5,200 megawatts of wind turbines to be installed by 2034. But, what Virginians do not realize is that this power is not cheap—it is several times more expensive than natural gas generating sources and requires back-up power or systems when the wind is not blowing. According to the Energy Information Administration, the capital costs for offshore wind are five times higher than those of a natural gas combined-cycle plant.
The Atlantic Coast pipeline would have created jobs, provided lower energy costs for consumers, and helped draw heavy manufacturing companies to the region. Without being able to get domestic natural gas, the utilities will be building wind and solar units instead, which will continue to increase their rate base as these units have half the operating life of a natural gas plant and will be replaced every 20 or 25 years. Wind and solar energy will increase utilities’ profits and raise dividends for their stockholders. Only the residents of the three states will be hurt by much higher electricity prices since Dominion Energy is guaranteed profits on its offshore wind units because Virginia’s state regulators have deemed wind energy as “in the public interest,” despite its intermittency and higher cost.