Dominion Energy and Duke Energy have abandoned plans to complete construction of the estimated $8-billion Atlantic Coast Pipeline, ending a controversial seven-year quest to build the 600-mile natural gas pipeline between West Virginia and eastern North Carolina.
In a July 5 statement, the companies said that the project's economic viability was threatened by “ongoing delays and increasing cost uncertainty” resulting from an April 15 ruling by a federal judge in Montana preventing use of the U.S. Corps of Engineers' fast-tracked Nationwide Permit 12 process for constructing new oil and gas pipeline water crossings, which the agency suspended.
That legal challenge was to the Keystone XL oil pipeline project, which got a further blow on July 6 when the US. Supreme Court declined to review the lower court decision, which prevents that line's use of the NWP-12 permit.
However, the court did allow its use by all other oil and gas pipeline projects in the U.S. while a revised permit is being completed.
Meanwhile, in a separate ruling on July 6, U.S. District Court Judge James Boasberg ordered the shutdown in 30 days of the 1,172-mile Dakota Access pipeline, in operation for three years, while the Corps of Engineers revises its environmental permit as part of a planned expansion. That revision may not be complete until mid-2021, the agency has said. The line carries oil from North Dakota to Illinois.
Boasberg had weighed briefs by pipeline proponents and by nearby tribes and other opponents, as to whether the shutdown should occur but then declined to hear an appeal for a temporary stay of the order from owner Owner Energy Transfer LP, which said it would take three months to empty the line of oil.
But on July 14, that emergency halt was granted to allow operation, on further appeal to the U.S. appellate court in Washington, D.C. It will remain in effect until the court decides the merits of continued Dakota Access operation during the Corps review.
In the Atlantic Coast case, a subsequent ruling by a federal appellate court dimmed prospects of a successful appeal, presenting “new and serious challenges,” the developers' statement added, given the potential for similar legal challenges to permits issued under the nationwide program.
The federal government's appeal to the U.S. Supreme Court for a stay of the Montana ruling had been joined by 18 Republican state attorneys general.
The cancellation comes less than three weeks after the project prevailed in a 7-2 U.S. high court ruling that upheld the U.S. Forest Service's authority to allow a .1-mile section of pipeline to be built about 600 ft beneath the Appalachian Trail in the George Washington National Forest in Virginia.
Despite that victory, the developers said, the potential for a Supreme Court stay of the lower court injunction on use of the NWP-12 permit "would not ultimately change the judicial venue for appeal nor decrease the uncertainty associated with an eventual ruling.”
Dominion also announced on July 5 that it reached a $10-billion cash and debt-assumption deal with Berkshire Hathaway to sell the utility's natural gas transmission and storage assets. The firm provides energy to 7 million customers in 20 states.
Potential for More Delay
The statement went on to say that “the inability to predict with confidence the outcome of the project's permits and the potential for additional incremental delays associated with continued legal challenges, means that committing millions of dollars of additional investment for tree-felling and subsequent ramp up for full construction is no longer a prudent use of shareholder capital.”
The companies claim that the current estimated construction cost has nearly doubled since the original 2014 estimate of $4.5 billion to $5 billion, and that challenging the recent court actions would add at least three years to the planned early 2022 operational start-up.
Project construction had been halted since 2018, after U.S. courts and agencies had suspended seven critical permits for the line. A Quanta Services and Primoris Services Inc. joint venture was named as project contractor in 2016.
In a July 6 note, Andrew Wittmann, Baird Equity Research construction sector stock analyst, said the NWP-12 permit halt is "the critical factor which impedes the project's chances of success and raises its costs to uneconomic levels. This cancellation is by far the most tangible example of the impact of the NWP-12 ruling."
He added that "new large infrastructure [projects], particularly pipelines, are at risk until the permitting process finds a better path to completion for developers," naming Keystone XL, Mountain Valley and Enbridge Corp. Line 3 as lines possibly most affected.
Friends and Foes
Originating in Harrison County, W.Va., the proposed 42-in, dia. Atlantic Coast pipeline was designed to transport 1.5 million cu ft of natural gas daily to its terminus in eastern North Carolina, with a lateral connection to Chesapeake, Va.
The project drew swift opposition from opponents for its routing through environmentally sensitive areas and alleged disproportionate impacts on low-income and minority residents. In January 2020, a federal appellate court revoked a state-issued air permit for a planned 68-acre compressor station in Buckingham County, Va., citing regulators' failure to consider all alternatives to the project's proposed gas-fired turbines.
But its builders had signed a project labor agreement in 2017 with the operating engineers, laborers', plumbers and teamsters' unions, which claimed about 13,000 jobs would be created—about half for workers in pipeline-crossing states, with added apprenticeship and training promised to local residents.
“Like too many shovel-ready projects before it, the Atlantic Coast Pipeline faced legal and permitting challenges waged without merit by activists, and these challenges ultimately cost Americans along its route the environmental, employment, and economic benefits that modern pipeline projects bring,” said North America's Building Trades Unions and the American Petroleum Institute in a joint statement released by the latter.
The building trades remain concerned about loss of energy sector jobs, contending in two studies released on July 17 that renewables-sector positions are not as well-paying.
"The costly and unneeded Atlantic Coast pipeline would have threatened waterways and communities across its 600-mile path," said the Natural Resources Defense Council in a statement. "Dominion and Duke should now pivot to investing more in energy efficiency, wind and solar—that’s how to provide jobs and a better future for all.”
Dominion Energy already is completing construction of a 12-MW offshore wind prototype off the coast of Virginia Beach, and has proposed developing a 2,600-MW offshore wind farm to be located 27 miles offshore, which so far is America's largest planned project and projected to cost $7.8 billion.