On February 18, 2015

Vermont Gas pulls plug on pipeline to New York

Decision expected to delay timeline for natural gas to reach Rutland

By John Herrick

Vermont Gas Systems has abandoned its plan to bring natural gas under Lake Champlain to a New York paper mill after the plant withdrew its financial support.
Vermont Gas had proposed building a pipeline from Middlebury to the International Paper facility in Ticonderoga, New York. The mill was to pay a significant portion of the pipeline cost, but recent construction estimates proved unacceptable to the plant’s operators.
The utility’s latest cost estimate pegs the project at $105 million — up from the original $64 million estimate. On Monday, Feb. 9, International Paper told Vermont Gas it was terminating its financial agreement to pay for nearly the entire project.
“This project was designed primarily to serve International Paper. Without their continued participation, the project doesn’t make sense anymore,” Vermont Gas CEO Don Rendall said Tuesday.
The project would have served fewer than 200 Vermont residents before crossing beneath Lake Champlain to the paper mill. The project has garnered political support as a stepping stone for delivering gas to Vermont customers in Rutland, but has seen pushback from landowners and environmental groups.
Gov. Peter Shumlin, who has consistently backed the pipeline, said he supports the company’s decision to “scrub the numbers” and make sure the project makes sense for ratepayers.
“I am gratified that Vermont Gas will be putting a renewed focus on offering strong public benefits and a choice for Vermonters of natural gas service through its ongoing expansion to Middlebury and continued exploration of how to drive farther south to Rutland,” Shumlin said in a statement.
International Paper planned to contribute $25 million to $31 million toward phase one. According to company testimony filed with regulators last September, the rate impacts for existing customers are estimated to rise 3.6 percent in 2015 to 10.2 percent without phase two. Rendall said the company will still have to file a rate case with regulators before the impacts are finalized. He said the overall cost of the initial project will not change.
The cost for the first phase of the project has already jumped by 78 percent to $154 million, largely due to rising construction costs. The Public Service Board will consider whether to reevaluate the company’s permit, which could include making changes or revoking it altogether.
Rendall said Vermont Gas still intends to seek ways to bring natural gas service to the Rutland area and has not ruled out construction of a pipeline, although the timeline will likely be extended.

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