PSB is asked to halt gas pipeline work
MONTPELIER — Citing a soaring cost estimate, the Conservation Law Foundation on Monday asked the Public Service Board to halt construction of a natural gas pipeline until Vermont Gas Systems receives an amended certificate of public good.
In making its request, CLF cited a $35 million, or 40 percent, increase in the cost of Phase I of the Addison Rutland Natural Gas Project. The company this month put the revised cost at $121 million.
Sandra Levine, CLF senior attorney, said Monday a substantial change in a utility project requires an amended permit.
“Here there’s about a 40 percent increase in the cost,” Levine said. “Vermont Gas either knew or should have known about these cost increases much earlier.”
She said at the very least Vermont Gas knew of the escalating costs in March and never sought an amended permit. Vermont Gas received PSB approval in December for Phase I of the project. Phase I would extend the pipeline from Chittenden County south to Addison County, including Middlebury.
CLF cited cost as a factor in whether the project meets the law’s requirement that it will “promote the general good of the state.”
“Failure to update or correct testimony is a substantial change affecting at least one of the Section 248 criteria as it bears on the trustworthiness of VGS and its ability to responsibly carry out its statutory obligations,” CLF wrote in its eight-page petition.
Vermont Gas has started construction on the northern end of the project, but CLF asked the board to issue an injunction to stop work until it receives an amended certificate of public good.
In making public its revised cost estimate this month, the company said the nationwide demand for natural gas drilling services was primarily responsible for the $35 million increase.
The company also cited engineering costs associated with route changes to accommodate concerns of landowners, residents and other interested parties. Other increases related to oversight of the project, including construction managers and inspectors.
Vermont Gas Systems spokesman Steve Wark said even with a 40 percent cost increase there are still significant economic and environmental benefits to the project.
“The amended project costs will result in a rate increase of about 3.8 percent,” Wark said. “Even at that level, the project will still bring $152 million in energy savings (over 20 years) or roughly anywhere between $1,000 and $2,000 (a year) for a typical home in energy cost reduction.”
He said it will also result in lower emissions by about 23 percent.
Wark said the jump in costs is related to newer drilling activity and in a sense caught the industry by surprise. New England in particular has seen greater upward pressure as the result of labor costs and construction delays, he said.
He added the company has no reason to believe there will be additional cost increases.
Wark said the company has hired Price Waterhouse Cooper to keep tabs on the construction budget so the board and the Department of Public Service “have confidence in these numbers.”
“Nobody is more disappointed in having to file this budget adjustment than we are,” he said.
Public Service Department Commissioner Chris Recchia said that while the increase in cost is a concern, the project should go forward without delay.
“I think it is unfortunate the costs have increased through the bidding process, but demand for services are such (that) the costs are much higher than we thought they would be,” Recchia said. “That is a concern … (but) the economic benefits of this project far exceed the cost and we think that equation doesn’t change.”
Recchia said he wants his department and the board to know why Vermont Gas Systems didn’t have a better grasp on the cost estimates. But again he said because the benefits are “so huge” any delay “will simply exacerbate the problem and increase the costs further.”
In seeking an amended permit for the project, CLF cited the 2005 case involving the Vermont Electric Power Co. and its Northwest Reliability power line project.
“The board was very clear that where a permit has been granted and a project substantially changed, an amended permit is needed,” Levine said. “So we’re simply following board precedent and the Vermont Public Service Board rules.”
VGS estimates Phase I will be completed in mid-2015.
Phase II of the project would extend the pipeline southwest from Middlebury and under Lake Champlain to the International Paper mill in Ticonderoga, New York. International Paper is picking up $62 million of the $64 million cost for Phase II. That phase is currently under review by the PSB.
Phase III would extend the pipeline farther south to parts of Rutland County.
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