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February 12th, 2014

Report: New England Needs to Add 2 Billion Feet of Natural Gas Pipeline | The Portland Daily Sun

The Portland Daily Sun Posted: February 11, 2014. Full Story at The Portland Daily Sun here. View complete CES report here

Written by David Carkhuff

New England needs 2 billion cubic feet of new natural gas pipeline capacity to eliminate cost spikes and make New England competitive with the rest of the nation, according to a new consultant's study.

The Industrial Energy Consumer Group, which represents some of the region's largest industrial facilities, commissioned a study, "Assessing Natural Gas Supply Options for New England and their Impacts on Natural Gas and Electricity Prices," from the energy consulting firm Competitive Energy Services to review the most recent data and "determine the true impact of high natural gas prices on New England," explained Anthony W. Buxton, attorney with Preti Flaherty of Maine and counsel to the Industrial Energy Consumer Group. "This is a manmade crisis, truly, and we can fix it," Buxton said in an interview Monday. The nonprofit New England States Committee on Electricity invited comment late last month on a proposal to expand natural gas capacity in the region. "Announced in January, the NESCOE proposal requests the regional grid operator, ISO-NE, to socialize the cost of additional natural gas pipeline capacity and up to three electric transmission lines to increase the purchase of renewable energy," Buxton explained in a memo. "As you are aware," Buxton wrote to the New England Gas-Electric Focus Group in this memo, "this winter (2013-2014) has provided frigid witness to the highest energy prices ever experienced by New England, prices routinely twice as high as those of last winter (2012-2013). The human and economic costs of these huge price increases have been staggering: on just one Friday in January, the total cost of electricity in New England measured by the energy clearing price was $100,000,000 (one hundred million dollars) more than what it otherwise would have been if New England experienced prices like the rest of the nation. The total 'above-market' energy costs to New England in 2014 will be in the billions of dollars."

Buxton went on to state that the crisis " is entirely man-made." "In neighboring New York and Pennsylvania, merely 250 miles from Boston, a century's supply of natural gas is available at prices that are often less than $3.00 per million BTU, the equivalent of heating oil at a cost of 45 cents/gallon," he wrote. "But, because New England lacks adequate natural gas pipeline capacity, New England's natural gas prices in cold weather have risen routinely above $20.00 per million BTU and as high as $80 per million BTU. To make matters worse, these prices drive up the price of electricity astronomically for virtually all New England consumers. Electricity prices have routinely doubled this winter and have reached over $1.00 per kWh at times, twenty times the normal price. These prices have closed New England mills for weeks on end, strained home budgets and burdened New England's economy uniquely among regions of the nation." Buxton said natural gas can save residential consumers as well. The average Maine resident can save, after paying for the furnace, $1,500 a year by switching to gas from oil, he said. On the commercial front, the natural gas problem affects Maine workers, Buxton said. A Waterville mill now requires shifts to call in to decide whether they can work depending on the supply of natural gas, Buxton said. A Gorham, N.H. paper mill only started up a couple of machines after being shut down due to similar energy-supply problems, he said. "There are a lot of problems being caused by this all throughout New England," Buxton said. "It's pretty serious when you can't operate your electric grid or you're shutting down mills because they can't get natural gas," he said. Unitil is seeking a rate increase, "and that's in significant part due to the price of gas in the marketplace," Buxton said.

"The high winter prices in New England suggest a natural gas delivery system that is stretched significantly," the U.S. Energy Information Administration reported. "With rising natural gas output from the Marcellus production field, pipeline expansion to move this gas to New England is one option for alleviating market stress. ... Companies have proposed pipeline expansion, but getting the financial commitments to move forward has been difficult because the additional capacity may only be necessary for short periods during the year. Pipeline expansion may become more viable if baseload consumption of natural gas to generate electricity continues to increase," the agency noted (http://www.eia.gov/naturalgas/issuesandtrends/deliverysystem/2013).

Patrick Woodcock, director of the Governor's Energy Office, commenting on the natural gas capacity report, said, "Clearly capacity needs to be increased, and this winter is clearly illustrating that New England needs to move forward with basic infrastructure in order to provide stable and affordable energy for residences and business customers."
In December, New England's governors signed an agreement for a Regional Energy Infrastructure Initiative. They included Governors Dannel P. Malloy, Connecticut; Paul LePage, Maine; Deval L. Patrick, Massachusetts; Margaret Wood Hassan, New Hampshire; Lincoln D. Chafee, Rhode Island; and Peter Shumlin, Vermont. "This initiative will accelerate regional cooperation on expanding renewable energy and energy infrastructure in New England. ..." the governors announced at the time. "The agreement calls attention to the fact that the region's electric and natural gas systems have become 'increasingly interdependent,' creating a need for cooperative investments in energy efficiency, new and existing renewable generation, natural gas pipelines, and electric transmission," the governors announced.

"New England's energy costs are not competitive," LePage said at the time. "Our high energy prices drain family budgets and are a significant barrier to attracting business investment, especially in energy-intensive industries. At the same time, we are geographically positioned to take advantage of competitively priced natural gas and hydropower resources if we collectively invest in key infrastructure. This energy infrastructure initiative can bring these world-class resources to start powering New England industry and start saving money for families across our states." In response to the plan, the Conservation Law Foundation questioned whether the approach — "electric tariff changes to build transmission to facilitate new wind and hydropower, and increase natural gas pipeline capacity by nearly 20 percent in three years" — would "achieve the states' legally mandated climate policies." "This agreement raises concerns over whether the proposed upgrades would be consistent with the rapidly changing grid and states' climate laws and policies," said N. Jonathan Peress, VP and Director, Clean Energy and Climate Change for the foundation. "In particular there is a very real risk that the states will overbuild natural gas infrastructure that would ultimately not comply with these laws, increase our overreliance on natural gas, and potentially leave the public holding the bag for a bad bet."
Buxton said renewable energy should be a part of the region's energy mix, but he said natural gas can't be discounted.

"New England has historically been terribly burdened by oil, the cost of oil, the pollution of oil," as well as the foreign policy complications of acquiring oil from overseas, Buxton said. Natural gas provides an answer, he said.
"We need to complete that transition as we also move to renewables," he said.