The Vermont Fuel Dealers Association, which represents the state’s oil heat industry, is questioning whether continuing work on a natural gas pipeline makes economic sense, now that one phase of the project has been canceled.
Last week, Vermont Gas Systems canceled Phase 2 of the Addison-Rutland Natural Gas Pipeline, which would have run from Middlebury to the International Paper plant in Ticonderoga, N.Y.
In its weekly newsletter, the Vermont Fuel Dealers Association says rising pipeline construction costs would erase the price advantage that natural gas has maintained over oil as a heating fuel.
Association Executive Director Matt Cota says after International Paper bowed out due to Phase 2 cost increases, the Public Service Board, the Department of Public Service and others should assess Phase 1 costs and viability. “We’ve seen a doubling of the construction costs for this pipeline. We’ve seen a drop in 50 to 60 percent of the commodity costs of the competing fuel, which is heating oil. So as a result the purported savings delivered by the pipeline in Phase 1 that was first reported back in November of 2013 don’t exist in February of 2015. And so we think that the Public Service Board, the Department of Public Service should examine the numbers based on the updated construction costs and the updated commodity costs as well.”
The Public Service Board had solicited comments regarding estimated Phase 1 cost increases. In its submission, the Vermont Fuel Dealers Association notes there have been “recent sea changes in the economics of the energy market.” Cota adds there have been fundamental changes in the markets. “What we’ve seen in the last year, the last six months in particular, is that the commodity costs for all energy products have gone down. And that’s a good thing for consumers. But what it doesn’t do is prop up a pipeline in terms of a campaign that says it’s going to save Vermonters all this money. If the construction costs are borne by the ratepayers, the cost of natural gas on a BTU per gallon equivalent will be about the same as oil heat. To be clear, our contention with the pipeline project has nothing to do with the product or the pipe itself. It has to do with the claims of savings which, according to our analysis, don’t bear fruit.”
In an interview with WAMC last week, Vermont Gas CEO Don Rendell remained confident that Phase 1 would continue. “We are very confident that Phase 1, the pipeline to Middlebury, remains a strong project with strong benefits for Vermont families and businesses. We are confident that we’ll have a healthy regulatory review of that process and we’re looking forward to completing that project after the regulatory review is completed. On a forward looking basis that will position us to continue to look at opportunities to expand natural gas service to more communities in Vermont and we look forward to using all of our creativity to find cost effective ways to accomplish that.”
Vermont Energy Partnership spokesman Guy Page characterizes the group as agnostic when it comes to the pipeline since it focuses on electricity. But Page believes the Vermont Gas pipeline highlights energy problems facing Vermont and the rest of New England. “We need to recognize that it’s harder to build than we thought it would be. The thought was we would have all this off shore wind. That’s turning out to be incredibly expensive. We thought we’d have the Northern Pass. That’s looking a little iffy. We thought we’d have the gas pipeline project. One in Massachusetts and in Vermont. So if you can’t build new, you better hold on to what you’ve got. And that’s a lesson that Vermont is teaching, whether it wants to or not, to the rest of New England.”
Five miles of the 41 planned under Phase 1 between Colchester and Middlebury have been constructed. The current estimated cost to complete Phase 1 is $154 million, $33 million more than Vermont Gas estimated in July.
