Kinder Morgan suspends Northeast Energy Direct project

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Pittsfield, Mass. >> Kinder Morgan, the nation's largest pipeline operator, has pulled the plug on its highly controversial Tennessee Gas Northeast Energy Direct pipeline, citing lack of distribution commitments from distributors.

The surprise announcement late Wednesday followed a company board meeting in Houston.

All work and spending has been suspended on the $5 billion, 412-mile pipeline project that would have crossed seven Berkshire County towns from Hancock to Hinsdale.

The line that would have served Berkshire Gas, National Grid and at least five other companies that had signed on the project was slated to begin in Wright, N.Y., 40 miles west of Schenectady and end at the existing terminal in Dracut, near Lowell.

Economic headwinds buffeting energy companies were an apparent factor in the decision, according to industry sources, since Kinder Morgan missed their own quarterly earnings projections.

The project had triggered widespread opposition along the route, especially in the Berkshires, as well as the Pioneer Valley, southern New Hampshire and in New York's Columbia County.

However, the Connecticut Expansion Project that includes four miles of new pipeline through Sandisfield, including state-protected land in Otis State Forest, is still ongoing, said Steve Crawford, a Kinder Morgan spokesman in Boston.

In a written statement on the demise of the Northeast Energy Direct line, Kinder Morgan's Vice President for Corporate Communications and Public Affairs Dave Conover explained that last July, the company's board approved the "market path" segment of the Tennessee Gas project from Wright, N.Y., to Dracut.

The $3.3 billion investment was aimed at helping "alleviate New England's uniquely high natural gas and electricity costs caused by severely limited natural gas transportation capacity currently serving the region," Conover stated.

But the board had not yet authorized the "supply path" portion of the project that would have routed high-pressure gas from the shale fields of southwest Pennsylvania to upstate New York.

The company cited "production innovations" that have caused falling prices that were good for consumers but difficult for producers to make new long-term commitments.

Current market conditions and "financial instability" also called into question the ability of Tennessee Gas to secure supplies for the project, the company announcement conceded. "Given these market conditions, continuing to develop the project is not an acceptable use of shareholder funds," Conover said.

"The board's initial approval was based on existing contractual commitments at the time by local gas distribution companies to purchase natural gas from the project," Conover pointed out. But the economic benefits to Kinder Morgan also required commitments from additional distribution companies, as well as electrical power generation plants and other market participants in New England.

"Tennessee Gas did not receive the additional commitments it expected," Conover acknowledged. "As a result, there are currently neither sufficient volumes, nor a reasonable expectation of securing them, to proceed with the project as it is currently configured."

Project opponents greeted the announcement with caution rather than elation.

"Pipeline Awareness for the Northeast has been fighting the project since our inception, and I personally have been fighting Northeast Energy Direct for more than two years," said Kathryn Eiseman, who's based in Cummington.

"We've said all along that it didn't make economic sense, in addition to sending us in the wrong direction as far as where our energy system needs to be heading," she told The Eagle.

However, she added, "of course Kinder Morgan isn't done yet," citing the continuing plan for the pipeline through Otis State Forest.

"They could still come back with a new project across our region," Eiseman said. "Meanwhile, electric ratepayer across the commonwealth should pay attention to the fact that Eversource and National Grid want us as consumers to pay for Spectra's Access Northeast Pipeline Project."

"So there is still work to do," she said, referring to Spectra Energy's project that would serve southern New England, including parts of southeast and central Massachusetts.

Kinder Morgan listed several reasons for reluctance by additional distribution companies to commit to the project. The company contended that the New England states have yet to set up regulatory procedures in connection with binding contracts with the distribution companies.

"The process in each state for establishing such procedures is open-ended, and the ultimate success of those processes is not assured," Conover said.

The company announcement restated Tennessee Pipeline Gas's continuing commitment "to meeting the critical need for constructing additional natural gas infrastructure in the region."

"Although we have suspended work and further expenditures on the NED project, TGP will continue to work with customers to explore alternative solutions to address their needs, particularly local distribution companies that are unable to fully serve consumers and businesses in their areas because of the lack of access to abundant, low-cost domestic natural gas," the company added.

State Senate President Stanley Rosenberg, a strong critic of the project, issued a statement describing the company's decision as a "game changer."

"This allows us to have a broader discussion about how to meet Massachusetts' energy needs," he wrote. "Our discussions moving forward must include a comprehensive approach to reducing energy costs for all while meeting our increasing renewable energy needs and continuing to protect our priceless public spaces."

Contact Clarence Fanto at 413-637-2551.


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