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Liberty Utilities Can Buy Space In Kinder Morgan Pipeline - If It's Built

Kinder Morgan

  Late Friday evening the Public Utilities Commission approved Liberty Utilities' proposal to buy space on a controversial natural gas pipeline proposed for Southern border of the state.

Weekend Edition's Brady Carlson and reporter Sam Evans-Brown sat down to talk about what this means.

Lots of people are following the Kinder Morgan proposal as a whole; why are people watching this deal so closely?

Well, what’s going on here is that in order to get any pipeline built, you need to prove to federal regulators that it’s needed. And to do that you have to sign up companies that are buying what’s called “firm capacity”, which is essentially the right to use space on that pipeline.

And so, Kinder Morgan has proposed a pipeline, the Northeast Energy Direct, which would go from the Marcellus Shale gas fields in Pennsylvania all the way to Dracut Massachusetts which is a big New England natural gas hub, and opponents to this pipeline all along that route have challenged the agreements that individual natural gas heating utilities have made with pipeline.

They’re hoping that by getting these agreements thrown out, they can block the pipeline entirely.

So yesterday’s announcement would appear to be a blow to that effort.

Right, and it’s not the first one they’ve had. Almost exactly a month ago, three similar agreements with utilities in Massachusetts were approved over similar challenges, presented by the Massachusetts branch of the same opposition group, and even represented by the same attorney.

And in what is probably something you can anticipate up here, the Massachusetts group announced it would be appealing the decision.

It seems like getting these agreements thrown out would be a challenge. 

Right. In fact, if you look at both the Massachusetts proceeding and ours, these groups were not alone in arguing against the contracts. In Mass they had the attorney general’s office on their side, and up here the office of the consumer advocate, a state official who is supposed to argue for the rate-payers, was saying this contract was too expensive, saying it was a Mercedes when all we need is a Honda.

But the fact is that Liberty knows the rules that regulate it really well, and isn’t going to put forward a proposal that isn’t solidly defensible.

And what’s important to realize here is that Liberty didn’t need to prove that the entire pipeline is a good idea to get this agreement approved, it just had to prove that their plan is in the financial interests of their customers.

And they had a very strong argument in favor of that: the point where they are purchasing gas from right now, Dracut, Mass, is one of the most expensive places to buy natural gas in the country. This pipeline would be connecting them to the Marcellus shale which is literally the cheapest place to buy gas in the country. So while the actual space on the pipeline might be a little more expensive than just getting by with the contracts they have currently, the access to what Liberty hopes will be cheap gas was what Liberty was relying on to make their case.

Is that what convinced the commissioners of the Public Utilities Commission to back this proposal?

There were a number of other factors as well: Liberty is expecting to get some big new customers in Concord, where a centralized wood-burning heating plant is having business trouble; there’s a new natural gas trucking service that’s starting up in Concord; Liberty is also going to start converting the City of Keene to Natural Gas, which is currently fueled by a mix of propane and air. But when you look at the core of the decision, the fact that the new pipeline would bypass that expensive pinch-point in Dracut Mass… that’s what convinced regulators.

This is a significant development, but that's not to say we're anywhere closed to finished with the debate over this pipeline proposal. 

Well there’s a lot left. Kinder Morgan still has yet to submit its application to build the thing, so this agreement is by no means the last word.

And if we’re just looking at the contracts that Kinder Morgan has signed up, they’ve got a little over 600 million cubic feet a day, which is really about as close to what is has said is the minimum number of customers it needs to make the project work financially.

In the meantime, there are a number of competitor projects that are vying to get built as well, so there’s lots of time still to see where this thing shakes out.

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