Citing inadequate capacity commitments from prospective customers, Kinder Morgan and its subsidiary, Tennessee Gas Pipeline Company (TGP), announced last week they have suspended further work and expenditures on the Northeast Energy Direct (NED) project.
Kinder Morgan spokesman Richard Wheatley said in an April 20 statement the company’s initial decision to move forward with the $3.3 billion “market path” segment from New York to Dracut, Mass., was based on existing contractual commitments with local gas distribution companies (LDCs) to purchase natural gas from the project, as well as anticipated commitments from additional LDCs, electric distribution companies (EDCs) and other market participants in New England.
“Unfortunately, despite working for more than two years and expending substantial shareholder resources, TGP did not receive the additional commitments it expected,” he said. “As a result, there are currently neither sufficient volumes, nor a reasonable expectation of securing them, to proceed with the project as it is currently configured.”
Kinder Morgan attributed the insufficient contracted capacity to New Hampshire’s lack of regulatory procedures to facilitate binding EDC commitments, an open-ended process in each state for establishing such procedures and lack of assurance the processes would ultimately prove successful.
Additionally, the company said innovations in production have resulted in a low-price environment that has made it difficult for producers to make new long-term commitments; and that current market conditions and counter-party financial instability have called into question TGP’s ability to secure incremental supply for the project.
“Given these market conditions, continuing to develop the project is not an acceptable use of shareholder funds,” Wheatley said in the statement.
TGP submitted its application for the NED project to the Federal Energy Regulatory Commission (FERC) last year for a 30-inch natural gas pipeline, with a capacity of 1.2 billion cubic feet per day (Bcf/d), an increase over capacity requested in pre-filing documents, which the company said was due to increased interest on the NED “supply” portion of the project.
The market segment of the pipeline would have cut through about 2.5 miles of Londonderry.
Kinder Morgan last year awarded a $300,000 donation to Londonderry Trailways to help complete the Rail Trail connection between Londonderry and Derry. An existing TG pipeline crosses the Rail Trail underground near the trailhead across from North Elementary School.
Despite efforts to make the case that the pipeline project was needed to meet New England’s existing and anticipated gas-fired electricity generation demand, as well as other substantial investments in local community groups and projects, the TGP project faced tough opposition from New Hampshire residents, many of whom refused to allow TGP to survey their land.
Opponents expressed concerns over the safety of a pipeline near their homes and schools, as well as with the environmental impacts of expanding natural gas infrastructure.
Following Kinder Morgan’s announcement to suspend the NED pipeline project, U.S. Sen. Kelly Ayotte, R-NH issued a press release saying she was “the first statewide elected official to oppose the pipeline moving forward because of the many unanswered questions and concerns raised by New Hampshire residents who would have been affected by this project. I am pleased by today’s announcement.”
But Town Council Chairman John Farrell pointed out the Londonderry Council had previously voted, about six months earlier, to take an official stand against the pipeline.
“The Council has all along seen the proposed (NED) pipeline as a project that would not directly benefit the citizens of Londonderry, and we’re pleased to see they have moved on and will not be proceeding in the near future,” he said.
Cherylann Pierce, a leader of Londonderry’s opposition to the proposed pipeline, said she was “thrilled Kinder Morgan realizes they don’t have a leg to stand on to demonstrate need.
“That’s what we’ve been saying all along,” she said.
However, Pierce noted she will “feel a little more comfortable when the FERC takes (the project) off the table.”
“This fight is not over,” she said. “There are many more bills before the House to tighten up legislation to stop these types of projects from coming in, and the bigger issue is fracking.”
According to Wheatley, TGP remains committed to meeting what it called the critical need for constructing additional natural gas infrastructure in the region.
“Although we have suspended work and further expenditures on the NED project, TGP will continue to work with customers to explore alternative solutions to address their needs, particularly local distribution companies that are unable to fully serve consumers and businesses in their areas because of the lack of access to abundant, low-cost domestic natural gas,” he said.