Southeast Energy Companies Canceling Atlantic Coast Pipeline

Mon July 06, 2020 - National Edition
Dominion Energy



Richmond, Va.-based Dominion Energy and Duke Energy in Charlotte announced July 5 the cancellation of the Atlantic Coast Pipeline (ACP) due to ongoing delays and increasing cost uncertainty, which threaten the economic viability of the project.

The 605-mi.-long ACP, with a projected cost of $8 billion, was designed to bring natural gas from West Virginia to growing markets in Virginia and North Carolina. Its supporters said the pipeline would bring economic development, thousands of jobs and reduced energy costs for customers.

Despite June's overwhelming 7-2 victory at the United States Supreme Court, which vindicated the project and decisions made by permitting agencies, the companies said that recent developments created an unacceptable layer of uncertainty and anticipated delays for the ACP.

Specifically, the decision of the United States District Court for the District of Montana overturning long-standing federal permit authority for waterbody and wetland crossings, followed by a Ninth Circuit ruling on May 28 indicating an appeal is not likely to be successful, were seen by the two utilities as new and serious challenges.

The potential for a stay by the SCOTUS of the district court's injunction would not ultimately change the judicial venue for appeal nor decrease the uncertainty associated with an eventual ruling. The Montana district court decision also is likely to prompt similar challenges in other circuit courts related to permits issued under the nationwide program.

This new information and litigation risk, among other continuing execution risks, make the project too uncertain to justify investing more shareholder capital. For example, a productive tree-felling season this winter is a key milestone to maintaining the project's cost and schedule. Unfortunately, the inability to predict with confidence the outcome of the project's permits and the potential for additional incremental delays associated with continued legal challenges, means that committing millions of dollars of additional investment for tree-felling and subsequent ramp up for full construction is no longer a prudent use of capital.

Thomas F. Farrell II, Dominion Energy chairman, president and chief executive officer, and Lynn J. Good, Duke Energy chair, president and chief executive officer, said in a joint statement:

"We regret that we will be unable to complete the Atlantic Coast Pipeline. For almost six years we have worked diligently and invested billions of dollars to complete the project and deliver the much-needed infrastructure to our customers and communities. Throughout we have engaged extensively with and incorporated feedback from local communities, labor and industrial leaders, government and permitting agencies, environmental interests and social justice organizations."

The two company executives also added: "This announcement reflects the increasing legal uncertainty that overhangs large-scale energy and industrial infrastructure development in the United States. Until these issues are resolved, the ability to satisfy the country's energy needs will be significantly challenged."

The ACP was initially announced in 2014 in response to a lack of energy supply and delivery diversification for millions of families, businesses, schools, and national defense installations across North Carolina and Virginia. Robust demand for the project was driven by the regional retirement of coal-fired electric generation in favor of environmentally superior, lower cost natural gas-fired generation combined with widespread growing demand for residential, commercial, defense and industrial applications of low-cost and low-emitting natural gas.

The project also was expected to create thousands of construction jobs and millions of dollars in tax revenue for local communities across West Virginia, Virginia and North Carolina.

More than 7 million customers in 20 states energize their homes and businesses with electricity or natural gas from Dominion Energy.

Duke Energy is one of the largest energy-holding companies in the country with 29,000 employees. Among its many energy sources, Duke Energy's Gas Utilities and Infrastructure unit distributes natural gas to 1.6 million customers in five states: North Carolina, South Carolina, Tennessee, Ohio and Kentucky.