The Federal Energy Regulatory Commission cancelled a contract with engineer-contractor Burns & McDonnell for an independent environmental assessment of a $142.7-million natural gas transmission project in Virginia after discovering the firm also was the engineer for a separate project on the same pipeline owned by a U.S. unit of Canada-based energy giant TC Energy.
FERC said in a letter last month to Houston-based Columbia Gas Transmission that agency staff identified an “organizational conflict of interest” related to Burns & McDonnell’s contract for a National Environmental Policy Act (NEPA) assessment of the energy firm’s Virginia Electrification Project.
That project, proposed in September, includes replacing two gas-fired compressors with electric compressors to reduce greenhouse gas emissions and expanding compressor stations to increase capacity on the Columbia Gas pipeline system.
The company plans to begin construction in fourth quarter 2022 with a target in-service date of late 2023.
A second Columbia Gas project, the $205-million Virginia Reliability Project was proposed to FERC on Dec. 1, two weeks after FERC selected Burns & McDonnell for the environmental work on the electrification project.
Burns & McDonnell is the engineer on the reliability project, which includes compressor upgrades to reduce greenhouse gas emissions, as well as replacement of about 48 miles of existing natural gas pipeline. Construction is expected to begin in 2024.
According to documents filed at FERC, the two projects are on the same Columbia Gas natural gas pipeline. The electrification project involves compressors in and north of Petersburg, Va., while the reliability project involves pipe replacement and compressor work south of the city.
Neither FERC, TC Energy nor Burns & McDonnell released the value of either the engineering or NEPA contracts.
Itai Vardi, a research manager at San Francisco-based energy watchdog group Energy and Policy Institute told ENR that because both projects are linked, it “raises the real possibility that [Burns & McDonnell] has a financial stake in getting the Virginia Electrification Project, the project it's reviewing under NEPA, approved.”
Vardi, whose comments in a local publication in Virginia related to the contract link appeared to have triggered FERC’s action, said the agency needs to take a close look at how the award happened, particularly given that it claims to vet third-party contractors for conflicts.
Columbia Gas said in an October filing to FERC that it had, after consulting with agency staff, begun the process of providing a third-party contractor reference to assist FERC staff in preparing the NEPA review. The energy firm issued a request for proposals on Sept. 24, with responses from three contractors, when bids closed on Oct. 5. Bidders’ names and proposals were marked “privileged and confidential” and not publicly available.
FERC says it selected Burns & McDonnell based on its “technical approach, personnel qualifications, past work history and clearance of any organizational conflict of interest.”
Vardi contends, however, that the selection raises a broader process issue at FERC related to potential conflict of interest, “whereby pipeline applicants are allowed to hire and pay for industry third party contractors who often work for these same pipeline companies.”
In a Nov. 18 letter to Columbia Gas approving Burns & McDonnell for the NEPA work, FERC said its staff “must have complete control over the scope, content and quality of the contractor’s work,” will independently evaluate the results and “bears ultimate responsibility for full compliance” with the law’s requirements.
Burns & McDonnell Senior Vice President Steve Nalefski told ENR that the firm was awarded the contract after responding to a competitive solicitation with a technical and cost proposal.
“It was our understanding that the Virginia Reliability Project was an expansion and reliability driven project and Virginia Electrification Project was a greenhouse gas reduction project,” he said, adding that both projects “were filed independently with FERC as single and complete projects and had separate solicitations for third-party contractor support.”
As such, the firm did not see its support of the reliability project as a conflict with a third-party review role on the electrification project.