A Lesson for Guyana: U.S. abandons gas project with concerns mirroring Wales project

May 19, 2024 News

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• Approval granted without feasibility study
• Numerous environmental concerns
• Exorbitant yearly repayment

Kaieteur News – A proposed gas pipeline project in the United States, with concerns mirroring Guyana’s Gas-to-Energy (GTE) project, has been abandoned in the United States.

The Institute for Energy Economics and Financial Analysis (IEEFA) in a research article last week chronicled the failed gas project that lacked proper analysis to determine its feasibility.

Transco, a subsidiary of pipeline industry giant Williams Corp., sought to build a system of 26- and 42-inch diameter natural gas pipeline stretching from Pennsylvania, through New Jersey, to a transfer point about three miles offshore from the Rockaway Peninsula in Queens, N.Y., to service a gas utility, National Grid.

Although the utility’s system was meeting regular daily needs, Williams claimed the pipeline was necessary to meet projected peak demand levels. The Federal Energy Regulatory Commission (FERC) reportedly granted a certificate of approval with little analysis of need.

Showing unusual foresight for an energy regulator, the New York State Public Service Commission ordered National Grid to produce a study evaluating long-term energy needs and potential alternatives to the Northeast Supply Enhancement (NESE) pipeline.

IEEFA contributed comments to the process in the form of an April 2020 report that found the gap between National Grid’s peak demand projection and actual record highs of peak demand was substantial. This was important because the utility acknowledged the primary purpose of the project was to meet peak demand needs that occurred only a few days out of the year.

Moreover, the report also highlighted that the National Grid utility’s contract for the pipeline would have required ratepayers in Long Island, Brooklyn, Staten Island and most of Queens to pay $193 million a year for 15 years.

IEEFA also argued the pipeline developer and the utility would profit from overbuilding because they would have benefited from a high rate of return on capital costs even while requiring ratepayers to pay gas rates inflated by the rate of return for construction of an unnecessary pipeline and distribution lines.

The utility’s new analysis, issued in May 2020, identified an alternative for natural gas services that did not require construction of a new pipeline. A week later, the New York State Department of Environmental Conservation denied a water quality certificate for the NESE pipeline on environmental grounds, also noting that the utility’s new analysis had identified an alternative to the project that would include enhancements to existing infrastructure combined with incremental energy efficiency and demand management measures. New Jersey’s environmental agency issued a similar water quality certificate denial the same day.

Transco did not appeal the water quality denials or attempt to redesign the project to avoid the problems identified by the two agencies. Even so, the company showed an unwillingness to let go of the project. It requested and received from FERC a two-year extension in May 2021.

During the process, media scrutiny of the pipeline focused not only on environmental matters but also on financial and energy-planning issues. The New York City Comptroller’s Office and other officials challenged the project. In September 2020, Moody’s highlighted the failure of the project to gain acceptance. The credit agency cited the pipeline and seven other fossil fuel infrastructure projects as part of a trend in which fossil fuel infrastructure projects had lost market validity.

Citizen organisations like the Sierra Club, 350 Brooklyn, Food and Water Watch, Sane Energy Project, Clean Ocean Action and more mounted a multi-year effort mobilising people, resources and public interest voices raising substantive critiques of the proposed pipeline, including financial arguments. The proposed pipeline posed numerous environmental and climate risks, but fundamentally, the project was a bad investment, the IEEFA analysis said.

The Institute opined that FERC should have rejected the NESE project in 2019; instead, five years of state agency time and resources, as well as public advocacy, had to be sunk into the effort to achieve that goal.

Several major pipeline projects approved by FERC—including the Constitution Pipeline, the Atlantic Coast Pipeline, the PennEast pipeline and now the Williams NESE pipeline—have failed to go forward. Each time, state, local and community resources were expended challenging the need for these projects—needs that FERC should have analyzed thoroughly but did not.

Guyana’s GTE project

The failed gas project in the US due to the lack of stringent analysis comes at a time when Guyana is pushing ahead with a US$2 billion Gas-to-Energy (GTE) project, intended to provide some 300 megawatts of electricity to the national grid.

The project in its current format was never subjected to a feasibility study, although it remains the single largest financial venture to ever be pursued by the country.

Initially this project, inclusive of a pipeline to transport the gas, a Natural Gas Liquid (NGL) plant and the gas-fired power plant was pegged at US$478M; however, the project cost has now climbed to US$1.8B for the three listed components above.

In the meantime, government is already pursuing compensation for landowners affected by the pipeline, as well as supervisory costs for the gas plants and transmission and distribution expenses.

Similar to the failed US gas pipeline, Guyana’s planned gas project will also indebt this country for a period of 20 years at an annual cost of US$106M.

While the US gas project failed to achieve necessary water quality certificates, concerns raised locally by environmental activist, Simone Mangal-Joly about possible impacts to the country’s water supply were also dismissed as the government pushes ahead with the controversial initiative.

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• abandoned, gas, IEEFA, project, Wales

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