Tag Archives: pipelines

Getting gas out of buildings is critical for climate action, but the recipe isn’t easy

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I grew up with brothers, so I knew from an early age that the surest way to make friends with guys was to feed them homemade cookies. I took this strategy with me to college, commandeering the tiny kitchenette tucked into the hallway of my coed dorm. The aroma of chocolate chip cookies hot out of the oven reliably drew a crowd.

One fan was so enthusiastic that he wanted to learn to make cookies himself. So the next time, he showed up at the start of the process. He watched me combine sugar and butter, eggs and flour.

Instead of being appreciative, he was appalled. It had never occurred to him that anything as terrific as a cookie could be made of stuff so unhealthy. It’s not that he thought they were created from sunshine and elf magic; he just hadn’t thought about it at all. He left before the cookies even came out of the oven.

I felt so bad about it, I ate the whole batch.

Cookies are practically health food compared to other things we consume without really understanding the dangers. 

It’s not just food. Plastic packaging, chemical additives, PFAS, phthalates and numerous other chemicals enter our homes and bodies without our conscious acquiescence, causing havoc for ourselves, our children and the rest of life on earth. It’s hard to know the risks, harder still to avoid them. So maybe you carry reusable bags and water bottles, buy organic if you can, and otherwise, try not to think too hard about it.

Where ignorance is bliss—or at any rate, a state of mind sufficient to keep you from a complete mental breakdown — you could be excused for feeling ‘tis folly to be wise. Why not just eat the cookies?

Well, because sometimes reading the ingredients can make a difference. Public pressure has been the major driver of government action on climate, particularly in decarbonizing the electric sector. People saw the recipe for their power supply and recoiled at all that fossil fuel. Short of installing solar panels on their rooftops, individuals in most states have little control over their source of electricity. It was a collective outcry that led to nearly half of all states setting carbon-free electricity targets. 

It seems odd, then, that we have not seen the same outcry when it comes to fossil fuel use in buildings, including natural gas in homes. As our electricity gets cleaner, buildings must become all-electric on the way to a fully decarbonized energy economy.  

Turns out, that’s a tall order. About 48 percent of American homes use natural gas for heating, and many also have gas appliances like stoves and hot water heaters. Starting in 2019, a few cities started banning new gas connections in an effort to speed the transition to all-electric homes. But in response, the gas industry persuaded legislatures in 20 states to prohibit localities from enacting such bans. (An industry effort to “ban the bans” in Virginia failed mainly because no localities have tried to go that route.)

For now at least, the industry seems to have public sentiment on its side. Natural gas is truly the chocolate-chip cookie of fossil fuels: it heats the air reliably, chefs love it and it’s lower in calories—I mean, carbon—than coal. Even the name sounds benign. What can be wrong with something “natural?” 

Disillusionment sets in only when you read the recipe. (“First, frack one well…”) Understanding the harmfulness of the ingredients is the key to getting people to insist on all-electric homes and businesses. The primary component of natural gas is methane, a greenhouse gas far more potent than CO2. Methane leaking from wellheads, pipelines, compressor stations and storage facilities contributes alarmingly to climate change. Older cities are riddled with leaking distribution pipelines running through neighborhoods, especially those housing low-income and non-White residents. Occasionally, they explode. 

Those beloved gas stoves leak methane even when turned off, and burning gas in buildings causes high levels of indoor air pollution. Cooking with gas releases respiratory irritants, including nitrogen dioxide, ultrafine particulate matter (PM 2.5), carbon monoxide and formaldehyde. The effect is particularly harmful to children, with studies showing children living in homes with gas stoves are 42 percent more likely to suffer from symptoms of asthma.

It used to be that gas outperformed electricity in buildings, but no longer. Recent advances in technology mean electric heat pumps provide heating and air conditioning efficiently and effectively even in very cold climates. Every gas appliance has an electric counterpart. Even for cooking, gas has met its match in electric induction stoves, which have been winning over chefs nationwide. In a few years, we will wonder why we ever allowed open flames in our kitchens.  

Cost and convenience also favor all-electric buildings. An electric heat pump instead of both a gas burner and electric air conditioning means only one system to maintain and one utility bill instead of two. 

The question isn’t why homeowners would give up gas, but why builders still include it. Clearly, no one is reading the recipe.

With so much gas infrastructure already in place, and so little public awareness of the dangers, getting the gas out of buildings will be a slow process. In Virginia, gas companies continue to propose pipeline projects that would actually increase supply, in the hopes of locking in new customers. This is, to use the technical term, nuts. Those pipelines will have to be abandoned within a couple of decades, not “just” because the climate crisis demands it, but because consumers won’t keep buying.

Certainly, it will take time for most people to grasp how harmful methane is and how superior the alternative is. Once consumers begin insisting on all-electric buildings, however, gas utilities will enter a death spiral as they are forced to raise prices for remaining customers, who will then switch to electricity, too. 

At that point, electrification of the building sector will be complete, and we will begin to close the (cook)book on gas.

This article originally appeared in the Virginia Mercury on July 7, 2022.

Dear readers: Many of you know that although I write independently of any organization, I also volunteer for the Sierra Club and serve on its legislative committee. The Sierra Club’s Virginia Chapter urgently needs funds to support its legislative and political work towards a clean energy transition. So this summer I’m passing the hat and asking you to make a donation to our “Ten Wild Weekends” fundraising campaign. Thanks!

Southeastern electric utilities find their way to higher profits through gas pipelines and captive consumers

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Charlie Strickler of Harrisonburg, Virginia, was one of a dozen activists who fasted last September in protest of FERC's role in approving natural gas pipelines, citing their contribution to climate change and harm to communities in their path. Photo by Ivy Main.

Charlie Strickler of Harrisonburg, Virginia, was one of a dozen activists who fasted last September in protest of FERC’s role in approving natural gas pipelines, citing their contribution to climate change and harm to communities in their path. Photo by Ivy Main.

Duke Energy, Southern Company, NextEra Energy and Dominion Resources—four of the largest investor-owned utilities in the U.S., all headquartered in the Southeast—have simultaneously adopted a growth strategy reliant on large volumes of fracked gas. With the nation’s energy sector turning decisively away from coal and nuclear energy, these companies are betting natural gas will be the dominant fuel for at least the next several decades. All four are investing billions of dollars in gas pipelines and other gas infrastructure to profit from the fracking boom.

Pipelines are attractive investments because they are typically allowed rates of return of around 14%, compared with the average regulated utility return allowed by public utility commissions of about 10%.

For the southeastern utilities, however, that rate of return is only part of the attraction. In a strategy that ought to concern regulators and electricity consumers, Duke, Dominion and NextEra all plan to use their regulated electric power subsidiaries to guarantee demand for the pipelines they’re building. The subsidiaries will build natural gas generating plants, paid for by electricity consumers, to be supplied with gas carried through the pipelines owned by their sister companies.

Southern is also investing in pipelines, but it currently doesn’t need new generation beyond the coal and nuclear plants it is struggling to complete—themselves object lessons in why coal and nuclear are kaput.

Southern just announced completion of its $12 billion acquisition of AGL Resources, a natural gas pipeline and distribution company. The move makes Southern Company “the nation’s second-largest combined gas and electric utility by customer base,” according to Utility Dive.

Dominion Resources was already heavily invested in the natural gas sector before it announced a $4.4 billion purchase of Questar Corp. News reports say the acquisition will bring Dominion an additional 27,500 miles of gas distribution pipelines, 3,400 miles of gas transmission pipeline and 56 billion cubic feet of working gas storage.

Duke Energy is making a $4.9 billion purchase of Piedmont Natural Gas, a natural gas transmission and distribution company. And NextEra recently spent $2.1 billion to acquire Texas-based NET Midstream through the limited partnership it formed, NextEra Partners, LLC.

Moody’s Investor Services issued a report in March criticizing Dominion, Southern and Duke for their natural gas transmission buys, saying the added financial risks offset the benefits of diversifying their businesses.

Moody’s may not have known how the utilities plan to use electricity customers as a hedge for at least two planned pipelines, the Atlantic Coast Pipeline (ACP) and Sabal Trail.

Using electricity customers to pay for pipelines

Companies owned by Duke, Southern and Dominion are partners in the 550-mile ACP, which will carry fracked gas from West Virginia through Virginia to the North Carolina coast. Duke and NextEra are partners in Sabal Trail, a 515-mile pipeline proposed to run from an existing pipeline in Alabama through Georgia to Florida, where Duke says it will fuel gas plants owned by Duke Energy Florida and Florida Power and Light, a subsidiary of NextEra.

ACP and Sabal Trail are only two of 15 new pipelines proposed on the East Coast competing to carry fracked gas flowing out of the Marcellus shale in Pennsylvania and West Virginia. So many pipelines are in development that analysts say there simply isn’t enough gas to fill them all. At the 2016 Marcellus-Utica Midstream Conference in February, attendees were warned that pipeline capacity “will be largely overbuilt by the 2016-2017 timeframe.”

But the ACP and Sabal Trail have an advantage most of the competition lacks. The utility partners all own electric power subsidiaries that use fracked gas to generate electricity. If the subsidiaries build new gas plants, these pipelines will be guaranteed a customer base. That means they can be profitable for their investors even when other pipelines struggle to find customers.

Indeed, Duke and Dominion’s electricity subsidiaries are making the kinds of investments you’d expect to see if the success of the pipelines were their top priority. Dominion Virginia Power is in the middle of a three-plant, 4,300 MW gas generation build-out. In the ACP’s application to the Federal Energy Regulatory Commission (FERC), Dominion Resources justifies the ACP in part by saying it will supply the newer of these plants. And the utility is just getting started with new gas generation; Dominion Virginia Power told Virginia officials last fall it expects to build another 9,000 MW of gas plants by 2040.

Meanwhile, Duke’s regulated subsidiaries, Duke Energy Carolinas and Duke Energy Progress, filed integrated resource plans in North and South Carolina that call for up to nine new natural gas generating units, totaling 8,300 MW. In February of this year, Duke received approval to build two 280 MW gas units in Asheville, NC, and sought approval for a third.

Bigger investments, greater risks

Linking pipelines to captive customers should prove a profitable arrangement for the utilities. For the customers who bear the costs and risks, it’s much more problematic. But state law gives them no say in the matter. In these southern states, the electric power subsidiaries hold legal monopolies in their designated territories. Once federal regulators approve the pipelines and state regulators approve the gas plants, the captive customers bear the loss if the bet turns sour.

Any one of several scenarios would make the gas investments a bad bet. The age of plentiful shale gas could end almost as quickly as it started, as some analysts predict, or gas prices could resume their historic volatility for other reasons. The U.S. could adopt newer, tighter carbon rules to meet international climate obligations, or enact a carbon tax that increases the cost of fossil fuels. Alternatives like wind, solar and energy storage seem likely to continue their astonishing march towards domination of the electric sector. As they become increasingly competitive, much new gas infrastructure is destined to become stranded investments.

And finally, the demand for natural gas, and for the pipelines themselves, may simply not be there; Americans are using less electricity, and generating more of it themselves through rooftop solar systems. The vertically-integrated, monopoly utility model that prevails in the Southeast relies on ever-increasing sales, which means it doesn’t require much of a change in consumer behavior to turn black ink red.

So while environmentalists are enraged by the recklessness of the southeastern utilities’ natural gas strategy in an age of climate change, customers who only care about the bottom line on their utility bills have reason to be just as upset. Capitalism is supposed to ensure that corporate shareholders bear the costs as well as receive the benefits of risky bets. With the risks of their gas gamble shifted onto captive customers, the utilities won’t be punished for not choosing clean energy instead.

Bucking the trend towards renewables and efficiency

It’s worth noting that the plans of Dominion, Duke and their fellow monopoly utilities run counter to the expressed desires of their customers. Natural gas companies work to brand their product as “clean,” but polls show Americans overwhelmingly believe the U.S. should emphasize wind and solar over oil and gas production, and oppose the use of fracking to extract oil and gas. Major corporations now threaten to vote with their feet, refusing to locate where they can’t access electricity from renewable sources.

It is not a coincidence that Duke and Dominion fall near the bottom of a just-released survey conducted by Ceres that ranks major utilities by their performance on energy efficiency and renewable energy. NextEra and Southern do no better. NextEra’s electricity subsidiary, Florida Power and Light, came in dead last for renewable energy sales. Ceres says it was unable to include Southern this year because it did not respond to requests for data, but in 2014 Southern ranked 31 out of 32 on renewable energy sales.

The southeastern utilities stand in marked contrast to utilities like Berkshire Hathaway’s Mid-American, which has announced a goal of meeting 85% of its customers’ needs with wind power. Even Dominion’s Virginia rival, Appalachian Power Company, filed an integrated resource plan last year with more new wind and solar generation projected than new natural gas. Perhaps that’s because neither Appalachian Power nor its parent company, American Electric Power, own any gas pipelines.

Effects on competition and consumers trigger an antitrust complaint

Customers may be the biggest losers when utilities use their electricity subsidiaries to guarantee the success of their gas subsidiaries, but the arrangement also harms other business interests. These include pipeline operators who don’t have the same self-dealing opportunity; non-utility electricity generators who can’t sell their product to utilities because the utilities now prefer to build their own gas generation; and companies that build wind and solar projects, who find themselves boxed out.

Already one non-utility generator is crying foul: Columbia Energy LLC, an operator of a 523 MW independent combined cycle gas generating plant that wants to sell electricity to Duke Power but finds itself left out in the cold. Columbia is challenging both Duke’s application for approval of a new gas plant in Ashville and the merger of Duke with Piedmont Natural Gas, another partner in the Atlantic Coast Pipeline.

The potential of the ACP to harm consumers and competition led to the filing in May of a complaint with the Federal Trade Commission (FTC). The complainant, retired Department of Justice antitrust lawyer Michael Hirrel, believes the utilities’ abuse of their legitimate monopoly power violates federal antitrust laws, and he is urging the FTC to investigate.

The Virginia Chapter of the Sierra Club, which opposes both the ACP and Dominion’s gas build-out, followed up with its own letter delving more deeply into the facts of Duke and Dominion’s self-dealing. (The letter and supporting documents, including Hirrel’s complaint, can be found at http://wp.vasierraclub.org/LetterInFull.pdf. Note that it’s a big file and may take time to load.) Hirrel has added both documents to the FERC file on the ACP application.

(Full disclosure: I led the team compiling the information for the Sierra Club submission. I’ve never met Mr. Hirrel and only learned about his complaint weeks after it was filed. However, I had been doing my own complaining—though evidently not to the proper authorities—about the utilities’ conflict of interest.)

But is anyone listening?

Aside from the FTC filing, opponents of the gas plants have pinned their hopes on state public utility commissions, while pipeline opponents are focused on the Federal Energy Regulatory Commission (FERC). Neither venue offers grounds for optimism. Virginia’s State Corporation Commission (SCC) has approved three of Dominion’s new gas plants in a row over the objections of environmental advocates, and North Carolina’s Utility Commission recently approved Duke’s new gas units in Asheville (though for now it has turned down a request for a third).

FERC poses its own challenge. Activists want FERC to review gas transmission proposals collectively instead of singly, to avoid overbuilding and the unnecessary damage to the environment and local communities that would result. This would be a departure for the agency, which traditionally reviews proposals individually, and has approved nearly every pipeline proposal that has come before it.

So far FERC has resisted arguments of this nature, as well as objections based on climate concerns. But in a possible sign that the agency recognizes times are changing, it has recently slowed the approval process for some proposed new pipelines, apparently to conduct more thorough environmental reviews.

There is no sign yet that the public utility commissions and FERC are communicating with each other or with the FTC. That leaves anti-pipeline groups and environmental activists in a difficult position. They can make a strong case the utilities are taking unfair advantage of captive ratepayers for a purpose that harms both the environment and the public. But is anyone listening?

Dominion’s natural gas gamble looks risky for ratepayers

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Opposition to Dominon's planned Atlantic Coast Pipeline has spurred protests from landowners and environmental advocates and led to more than 5,000 comments to the McAuliffe Administration opposing the pipeline. Photo courtesy of Linda Muller.

Opposition to Dominon’s planned Atlantic Coast Pipeline has spurred protests from landowners and environmental advocates and led to more than 5,000 comments to the McAuliffe Administration opposing the pipeline. Photo courtesy of Linda Muller.

Dominion Resources and its regulated subsidiary, Dominion Virginia Power, are gambling big on natural gas. But while the utility giant will be a winner if gas prices stay low over the next 20 years, the risk of losing this bet is very real—and the risk is being borne disproportionately by Virginia consumers.

Ever since the shale gas boom sent natural gas prices into a tailspin beginning in 2008, Dominion has increasingly been putting its chips into gas. Its Virginia subsidiary just completed a 1,329 megawatt (MW) natural gas plant in Warren County, began construction last year on a 1,358 MW gas plant in Brunswick County, and last month announced plans for a 1,600 MW plant in Greenville County, to be operational in 2019. Virginia ratepayers will foot the bill for construction costs, plus the cost of operating and fueling these mammoth plants for decades to come.

But while Virginians tend to think of Dominion as an electricity provider, its bigger business line is in natural gas transmission and storage. According to the Dominion website, its subsidiary Dominion Transmission, Inc. maintains 7,800 miles of pipeline in six states and operates what it says is one of the largest underground natural gas storage facilities. Another subsidiary operates 1,500 miles of pipeline in South Carolina and Georgia. The company is moving aggressively to add and upgrade compressor stations and build additional pipeline capacity in West Virginia and Pennsylvania.

It is also angling to add a massive 42-inch diameter, 550-mile gas pipeline to run from West Virginia through Virginia to the coast in North Carolina. Promising a vast new supply of cheap fracked gas for industrial users, Dominion has won the support of lawmakers like Virginia Governor Terry McAuliffe while galvanizing opposition from landowners and environmentalists.

Meanwhile, Dominion has another game afoot, with plans to begin exporting liquefied natural gas from its Cove Point, Maryland facility. Upgrading the facility will cost the company $3.8 billion, and running the liquefaction facility will require 240 MW of power (using more natural gas). Natural gas is so much more expensive in foreign markets that Dominion considers the gamble worthwhile, even as it cites a U.S. Energy Information Administration study for the proposition that little or no natural gas would be exported if the U.S. price “increases much above current expectations.”

All of these ventures depend on one crucial assumption: that natural gas prices will remain low for as many years as it takes to fully recover the cost of these investments, and then some. For electric generation, moreover, gas has to be able to outcompete other fuel sources. That includes not just coal and nuclear, both of which are being abandoned in droves in the face of cheap gas, but also new sources like solar and wind, which have trended steadily downward in price over the past two decades. In some regions of the country (although not yet Virginia), wind and solar prices already outcompete natural gas.

Gas does have the advantage of dispatchability—the ability to provide power according to the peaks and valleys of demand, allowing it to fill in around variable energy sources like wind and solar. That makes gas vital for backup generation, at least until power storage technologies become cheaper. But it wouldn’t justify the large-scale shift to gas for baseload generation, as Dominion’s plans envision, unless the company is right that gas prices will stay low.

If Dominion’s assessment of the market is wrong, its shareholders will take a hit. Higher natural gas prices could make the export business fizzle, and there might not be enough customers to justify the pipeline buildout. That’s why the company is moving so quickly to build the three massive new natural gas generating plants in Virginia under the ownership of its regulated subsidiary. Dominion is protecting its bet by locking Virginia electricity customers into gas for the long term, guaranteeing itself a market not just for its natural gas generating plants but also for its pipeline business. If the shale boom becomes a bust, or if prices rise to pre-boom levels, it will be Virginia ratepayers who pay through the nose or get stuck with stranded assets.

How big the risk is depends on whom you ask. The gas industry claims supplies will be sufficient to meet demand for decades to come. The U.S. Energy Information Agency, that voracious consumer of yesterday’s news, largely agrees (though it has more recently begun tempering its enthusiasm). If the optimists are right, production from the major shale gas plays will increase 40% by 2030 over today’s production levels, enough to support the mad rush to gas by Dominion and other utilities like it, without upward pressure on prices.

But a more pessimistic view is gaining adherents. As described in the December 2014 issue of the journal Nature, a team of a dozen geoscientists, petroleum engineers and economists at the University of Texas at Austin (UTA) has been analyzing assumptions behind the industry’s rosy outlook, and concludes it is wrong. Instead, the UTA study indicates production of natural gas from the “big four” shale plays will slow significantly after 2016, peak by about 2020, and then decline, dropping 20% from current levels by 2030. If so, the amount of natural gas coming to market in the U.S. will be less than half of what the optimists expect. The upward pressure on prices will be enormous.

The UTA team joins a growing chorus of doubters, whose studies suggest that the shale juggernaut can’t be maintained profitably. If these pessimists are correct, we should begin seeing evidence of it well before 2020. For now, there is at the least a very serious risk that cheap gas won’t last, and anyone who can’t afford to lose big would be well advised to wait it out.

IMG_0634There are other reasons Virginians should be wary of over-investment in natural gas infrastructure, both generating plants and pipelines. The need to fill pipelines will put pressure on the state to welcome fracking companies, both in the Marcellus shale in the western part of the state, and in the Taylorsville Basin in the east. Until 2010, Dominion itself owned gas drilling leases, and according to the Center for Media and Democracy, “Dominion is a member of several special interest groups that push for expanded drilling rights and limited or no regulation of fracking.”

With pollution of air and water a serious concern, and given the state’s tradition of lax regulation on industry, some localities are already looking for ways to exclude drilling companies from their borders. If we are going to have this fight, it shouldn’t be because one powerful corporation made a bad bet.

Finally, of course, there is the climate cost of natural gas. As we congratulate ourselves for leaving coal in the rear-view mirror, we need to recall that we have a long way to go to reach the carbon-free grid, and stalling out at the halfway point isn’t grounds for celebration.

Natural gas has a role to play in the transition period before wind, solar, and other carbon-free sources take over permanently, and it will remain useful as a back-up source when wind and solar aren’t producing power. But a wise energy policy today focuses on developing those renewable sources as fast as possible, reducing demand through investments in energy efficiency, and using natural gas as a backstop rather than as a primary source of power.

This approach reduces risk to the national economy if shale gas production declines, and it reduces risk to ratepayers stuck paying whatever the price of natural gas may be when demand outstrips supply.

Dominion Resources is an investor-owned corporation. As such, it is entitled to place risky bets in the hopes of making a killing for its shareholders. What it is not entitled to do is to shift the risk of losing the bet onto its captive ratepayers in Virginia.

With the odds so stacked against consumers, Virginia should refuse to play.

Thanks go to Richard Ball, PhD., Energy Chair of the Virginia Sierra Club, for his research and analysis of shale gas supplies.