West Amwell Citizens against the Pipeline has conducted a detailed analysis of PennEast’s stated purpose and need as indicated in their recent application to the Federal Energy Regulatory Commission (FERC). Below is the executive summary from that report, see the end of this post for a link to the full analysis.
The PennEast Pipeline Company, LLC has stated that the predominant purpose of their pipeline is to bring low cost natural gas to consumers and businesses in Pennsylvania and New Jersey. In the media and their web site they have focused solely on PA and NJ consumers, and indicate the natural gas from PennEast will not be used anywhere else. In their FERC application they paint a somewhat broader picture, and talk about supplying gas to “surrounding states”, supply reliability, and price stability. Investors into the individual member companies get yet a third view, one that is focused around the potential for new midstream business for most of the PennEast partner companies. In all cases PennEast asserts that this is a demand-driven project.
In contrast to PennEast’s claims, the research shows that New Jersey is well-served by natural gas already. The state enjoys some of the lowest prices in the country for residential natural gas. Recent issues with capacity constraints have been largely fixed, and PennEast owners themselves have indicated in their most recent filings that PennEast gas will be used to displace existing supplies, not to supply new demand.
This is a critical point that should be underscored. PennEast is not building this pipeline to meet new demand. No such demand exists. Instead, they are building it so they can avoid paying shipping charges on existing pipelines, and instead pocket those charges for themselves. This is a new revenue stream for the member companies on the order of $289 million/year.
In addition, the companies can resell the gas they’ve committed to via the precedent agreements to third parties during periods of low consumption. This is a practice that NJR and SJI already do extensively today to help generate their profits, and which they can accelerate once PennEast is operation, and has long been part of PSE&G Power’s overall strategy. Resale can be to other regions, or to the nascent LNG export industry.
The end result is that rate payers in PA and NJ will pay for this new $1 billion pipeline, and the member companies will enjoy a guaranteed new revenue stream from those captive rate payers. And existing pipelines that have been in service for decades may in turn become underutilized due to this over expansion of energy infrastructure.
The question to FERC and other agencies is why over-building of infrastructure on this scale should be allowed when the environmental impacts are proven to be so significant, and the cost to land owners in NJ from the threat of eminent domain is so high.
In the end, the true justification for this project would appear to be to allow the PennEast companies to capture a new $289 million/year revenue stream for themselves. This should not be seen as sufficient justification for a green field pipeline construction project involving federal eminent domain, and as such the “no action” alternative is the right choice for this project.
The full report has been submitted to FERC, and is available here: