Kinder Morgan pulls plug on pipeline
Cites inadequate commitments from prospective customers
STATE HOUSE NEWS SERVICE
CITING INADEQUATE COMMITMENTS from prospective customers, Kinder Morgan on Wednesday suspended further work and spending on its Northeast Energy Direct natural gas pipeline project, which held the possibility of helping Massachusetts and the New England to meet energy and electricity cost goals.
Less than a year ago, in July 2015, the company’s board authorized Tennessee Gas Pipeline (TGP) Company to move forward with a $3.3 billion investment in pipeline capacity from Wright, New York, to Dracut, Massachusetts. On Wednesday, Kinder Morgan said that approval was based on contractual commitments at the time and expected commitments from additional gas distribution companies, electric distribution companies, 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,” Kinder Morgan said in a statement on Wednesday. “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 lack of contracted capacity to the lack of regulatory procedures in the New England states to facilitate binding commitments and the “open-ended” nature for establishing those procedures in each state.
“In addition, innovations in production have resulted in a low-price environment that, while good for consumers, has made it difficult for producers to make new long term commitments. Further, 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,” Kinder Morgan said.
TGP plans to “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,” Kinder Morgan said.
Asked earlier in the day whether Kinder Morgan and other pipelines developers should be able to pass along the cost of construction to consumers, Gov. Charlie Baker said:
“I’m not paying too much attention to the Kinder Morgan project, primarily because most of that is driven by federal policy and not by state policy. What I’ve said all along is the best way for Massachusetts and New England to ensure that people here in the Commonwealth get the best price they possible can on their electricity and their thermal piece is to have a proactive approach to this and my hope and my anticipation is that that pro-active approach will look like a bill that comes out of the House at some point during this session and gets debated and enacted and includes what I’ve talked about before, which is a combo platter of the two I’m particularly interested i,n which is hydro and wind,” Baker said.[While Baker has never said he opposed the Kinder Morgan project, he has made no secret of the fact he prefers pipeline expansions on existing rights of way. Much of the Kinder Morgan project relied on purchasing new rights of way and building there. Sources say the Baker administration is more favorably inclined toward a separate natural gas pipeline project called Access Northeast, which would be built by Spectra Energy and the state’s two major utilities — Eversource Energy and National Grid]
Energy industry stakeholders – from natural gas to offshore wind and solar and hydro producers – are jockeying for a piece of the region’s supply mix as lawmakers contemplate major energy policy legislation and the looming 2019 shutdown of Pilgrim Nuclear Power Station in Plymouth, a major source of carbon-free power.
Matt Murphy contributed reporting for this story.