Court Puts Region's Gas Pipeline Projects in Peril

By TIM FAULKNER/ecoRI News staff

A key court decision casts doubt on the future of regional natural-gas pipeline projects such as Access Northeast.

On Aug. 17, the Massachusetts Supreme Judicial Court declared it illegal for electric distributors National Grid and Eversource Energy to charge a fee, or tariff, to their customers to pay for natural-gas pipelines.

The decision creates uncertainty for the multi-state Access Northeast pipeline project. The developer, Spectra Energy of Houston, and its partners National Grid and Eversource, were counting on the tariffs to fund a portion of the $3 billion project.

Both companies and the Massachusetts Department of Public Utilities (DPU) — at the behest of the state Department of Energy Resources — argued in court that the tariff, subsequent pipeline expansion, and influx of natural gas from Pennsylvania would reduce price swings for electricity, especially during winter months when demand for natural gas often increases.

However, Justice Robert Cordy decided that the tariff undermines the objectives of state Administrative Procedure Act of 1997. The fee he said would “re-expose ratepayers to the types of financial risks from which the Legislature sought to protect them.”

The Conservation Law Foundation (CLF) challenged the DPU because it believes the tariff puts a greater financial burden on electric customers, many of whom may not be natural-gas customers. According to CLF, the tariff was an attempt by Gov. Charlie Baker to “subsidize the dying fossil fuel industry.”

“The course of our economy and our energy markets runs counter to the will of multi-billion dollar pipeline companies, and, thanks to today’s decision, the government will no longer be able to unfairly and unlawfully tip the scales,” according to an Aug. 17 CLF press release.

Eversource, National Grid and Spectra Energy all expressed disappointment with the court decision and pledged their commitment to the project. A spokesman for Eversource said the ruling leaves the region in a precarious position by limiting natural-gas supply and potentially increasing energy prices.

The decision undermines the Access Northeast pipeline project and the partnership with National Grid and Spectra Energy, according to Eversourse spokesman Michael Durand. Access Northeast, he claimed, could save New Englanders some $1 billion a year, while replacing oil and coal power plants with lower emission natural-gas facilities.

“While the court’s decision is certainly a setback, we will re-evaluate our path forward and remain committed to working with the New England states to provide the infrastructure so urgently needed to ensure reliable and lower-cost electricity for customers," Durand said.

The case pits Baker, who supports pipeline expansion and whose Department of Energy Resources (DOER) supports the tariff, against Attorney General Maura Healey who opposes both. Healey applauded the court decision saying that the tariff shifts the cost and risk for pipelines to ratepayers. She pointed to a 2015 study by her office showing that improvements in energy efficiency, a greater supply of liquefied natural gas and imported hydropower can meet future energy needs at a lower cost than new pipelines and reduce carbon emissions.

Baker’s office of Energy and Environmental Affairs (EEA) noted that the Federal Energy Regulatory Commission (FERC) has the final say on the pipeline. The court decision, however, means that without more natural-gas infrastructure energy prices will go up, according to the EEA.

“The Baker-Polito Administration believes meeting the region’s energy demands without raising costs for consumers requires additional natural gas along with the wind and hydroelectric power provisions recently signed into law," EEA spokesman Peter Lorenz said.

David Ismay, CLF’s lead attorney in the case, said the court decision effectively removes New England’s largest energy user from helping fund the project and creates doubts for Spectra and Access Northeast investors. The result is that more of the project’s cost falls on Connecticut, Maine, New Hampshire and Rhode Island. Without Massachusetts, FERC must decide if there is sufficient funding for the project to go forward.

In 2015, the DOER asked the DPU to consider the tariff, which is referred to by critics as a “pipeline tax.” Last October, the DPU decided that it had the authority to approve contracts between pipeline companies and electric utilities, prompting the lawsuit by CLF and liquefied natural gas company ENGIE.

As a result of the recent court decision, the DPU has suspended hearings for petitions by National Grid and Eversource to enter into natural-gas pipeline capacity and storage contracts. The AG’s office and CLF also filed requests for the DPU to dismiss the petitions. The DPU is expected to offer an answer this week.

National Grid said the Massachusetts ruling will not stop efforts to enact a similar pipeline tariff in Rhode Island. The tariff plan stems from a 2013 regional agreement by New England governors to share the costs of bringing more natural-gas pipelines into the region.

The Rhode Island Public Utilities Commission is expected to discuss the impact of the Massachusetts court decision and the delay by the DPU at an Aug. 25 public meeting. The future of National Grid’s expedited 120-day application also is expected to be addressed.

In Rhode Island, the Access Northeast project includes a second expansion of a compressor station in Burrillville. In southern New England, the project includes 123 miles of new pipeline, expansion of seven compressor stations, including new compressor stations in Weymouth and Rehoboth, Mass., and a liquefied natural gas peaking facility.

The project is under review by FERC. If approved, the first phase of Access Northeast is scheduled to be completed in 2018. National Grid and Eversource are partners in the entire Access Northeast proposal.