Liberty Utilities and the Bigger Picture

What links Liberty Utilities’ proposed expansion in Lebanon and Hanover to interstate pipeline expansion and liquefied natural gas (LNG) export being pushed in Washington? Whether you call it opportunism, market-building, or “energy dominance,” it’s all part of the growth paradigm of international energy conglomerates, and has little to do with the “public interest” that public utilities are meant to serve.

Proposed LNG export terminals in Nova Scotia (the Bear Head LNG and Goldboro LNG projects) have received approval from Canadian regulators, and both of these LNG projects have sought and received blanket authorization from the U.S. Department of Energy (DOE) to export U.S.-sourced LNG. The Goldboro LNG Project website specifically states on its website that the gas would be delivered via the Maritimes & Northeast (M&N) Pipeline. The Atlantic Bridge project, recently approved by FERC, includes modifications along the M&N pipeline to facilitate the flow of gas north from Dracut, Massachusetts (historically, gas has flowed south to Dracut). Dracut functions as a hub where the major natural gas pipelines in New England connect, and it was the proposed end point of the Kinder Morgan Northeast Energy Direct (NED) pipeline across Massachusetts and New Hampshire.

These export projects, including the northward flow of gas on the M&N Pipeline, were set into motion back when NED project was on the table. Both NED and Enbridge’s Access Northeast project were cited in DOE applications as proposed paths for gas to flow from the Marcellus region to the Canadian Maritimes for export overseas. NED was cancelled, followed by Access Northeast, because the pipeline companies did not have enough solid contracts signed up to justify the projects. These export projects seem less speculative now, given the major support from Washington.

By all indications, companies like Liberty Utilities’ parent – a Canadian company called Algonquin Power & Utilities Corp. (unrelated to the Algonquin pipeline system in New England) – want to get back in the game, with contracts for as much capacity as they can muster, since the financial risks fall to ratepayers (explained below). Looking at the proposed Lebanon/Hanover project through this prism, it is easier to speculate why Liberty is pushing so hard for a project that has so little community support.

The NED pipeline project – originally proposed to transport 2.2 billion cubic feet of natural gas per day – only had firm contracts signed up for about one quarter of that amount of pipeline capacity, almost all with local gas distribution companies, including Liberty Utilities. Kinder Morgan’s two investment partners for NED were Liberty Utilities’ parent and UIL Holdings, the parent of three other gas utilities that were signed up as NED customers, now owned by Spanish energy conglomerate, Iberdrola, S.A.

Local gas companies traditionally provide the justification and financial basis for interstate gas pipeline projects. The gas utilities sign up as customers for proposed new pipeline capacity to be able to serve their current and future ratepayers. Traditionally, this made sense, but gas utilities are no longer independent local companies. We are now seeing a troubling trend in which gas utilities’ corporate parents partner with pipeline companies in proposing new pipeline projects, while the subsidiary gas utilities sign up as customers for the pipeline. This provides the utilities an incentive to sign up for more capacity than their ratepayers need, because the utilities are helping move forward a major capital project for their corporate parents.

Why would a pipeline proponent want a bigger pipeline with more capacity than the ratepayers and current customers want or need?

It’s a win-win situation for energy conglomerates working through their regulated utility affiliates like Liberty Utilities: as Environmental Defense Fund attorney Natalie Karas explains, “local utilities have a legally guaranteed right to recover costs of providing service to their ratepayers. These costs include the signed contracts used to support the initial pipeline investment. This means developers get paid whether or not demand for gas shipped through their pipeline ever materializes.” This scheme puts ratepayers at unjustified financial risk, and brings in gas expansion projects that are at odds with community green energy goals.

In addition to the newly developing LNG export market and the traditional customers for pipelines, there is now a major push for increased pipeline capacity for gas-powered electric generation.  How New England will power its electrical grid in the coming years is a policy choice that our region must grapple with. (Read more about our grid operator’s pro-pipeline outlook here . . . )

The bottom line:   Entrenched fossil fuels interests have signaled that they will continue to pursue major gas infrastructure expansion across New England.  It is up to us, as individuals and communities, to expose the complex web of motivations behind local gas infrastructure expansion plans, and to speak out and fight for a transition to a sustainable energy system.