Sierra Club Submits Letter of Opposition to Nexus Pipeline - 12/21/15

Sierra Club Michigan Chapter

Kimberly D. Bose, Secretary

Federal Energy Regulatory Commission

888 First Street NE, Room 1A

Washington, DC 20426

Dear Ms. Bose,

The comments submitted below are pursuant to the proposed Nexus Pipeline (Docket #CP16-22-000).  These comments are submitted on behalf of the Sierra Club Michigan Chapter, 109 E Grand River Avenue, Lansing, MI 48906.

Nancy Shiffler

Chair, Michigan Beyond Natural Gas and Oil Committee

December 21, 2015

The Michigan Chapter of the Sierra Club opposes the proposed Nexus pipeline for the following reasons:

Questionable need for this pipeline

•   The AEO 2015 Early Release forecasts that Marcellus gas production will remain relatively flat from 2015 thru 2030.  http://www.eia.gov/forecasts/aeo/workinggroup/oil-naturalgas/pdf/oilandnatgas_presentation_91614.pdf

•   Natural gas demand in Eastern Canada is in decline.  In spite of phasing out coal, natural gas declined to only 7% of Ontario’s 4^th quarter 2014 electric production. Hydro and nuclear accounted for 87%, and wind 6%.  (In Quebec, almost all electricity comes from hydro.) http://www.ontarioenergyreport.ca/pdfs/Energy%20Quarterly_Electricity_Q4.pdf

•   Few US and Canadian LNG export plans will be realized.  According to analysts, “Huge cost overruns, poor planning, changing market conditions and emerging skinny margins will likely kill many projects across the world, or postpone their materialization to an uncertain future; Canadian projects likely will be the hardest hit. Of the 15 proposed Canadian LNG export facilities, none have reached a final investment decision.”  http://theadvocate.com/news/business/10650285-123/falling-oil-prices-put-proposed

•   Based on a February, 2015 Department of Energy report (“Natural Gas Infrastructure Implications of Increased Demand from the Electric Power Sector”—http://energy.gov/sites/prod/files/2015/02 /f19/DOE%20Report%20Natural%20Gas%20Infrastructure%20V_02-02.pdf), only 54% of current pipeline capacity is being used.  One of their key findings:  “Higher utilization of existing interstate natural gas pipeline infrastructure will reduce the need for new pipelines.”  Even so, FERC is in the process of approving far more pipeline capacity than the DOE and EPA say are needed.  For example, FERC is reviewing applications for 48 Bcf/d additional Marcellus pipeline capacity to be built over the next few years.  The DOE finds only 8.4 Bcf/d is needed over the next 15 years.

•   Analysis of SNL Energy data finds these pipelines are underutilized most of the time.  “We definitely can see slowdowns already in Midwest — Rover and Nexus pipeline expansions, the Prairie State pipeline to deliver REX gas to Chicago city gates.  It's not clear from today's standpoint that the market needs these pipelines, and we're already starting to see them slow down a bit, as well as some LNG projects."…. "Demand growth itself, as a result of conservation and demand-side management and lower GDP growth post financial crisis, is really taking the wind out of the sails of generation demand growth that natural gas can accommodate." https://www.snl.com/InteractiveX/article.aspx?ID=34292452&KPLT=4

•   According to Robert Huffman, Spectra Energy’s business development director, "Going forward, there's been such a buildout already in commitments to realign and re-pipe the grid," Huffman said. "Maybe we're reaching a point where things have caught up." http://www.platts.com/latest-news/natural-gas/pittsburgh/appalachian-gas-pipeline-developers- facing-more-21310494

•   FERC must consider that Nexus’ binding shipper agreements were signed over a year ago, and FERC must evaluate the current soundness of these agreements and companies.  Nexus must present FERC with “legally binding precedent agreements showing that the pipeline will be fully or nearly fully (85%) subscribed for a minimum of ten years.”  http://www.naruc.org/Grants/Documents/ICF-EISPC-Gas-Electric-Infrastructure-FINAL%202014-12-08.pdf. It is doubtful that many Nexus shippers are financially sound enough to fulfill this requirement.  Many Marcellus/Utica E&P companies are predicted to go bankrupt (unless they sell themselves or otherwise sell off major assets). Here is a “ Death list” report listing very risky companies and their unacceptably high debt-to-earnings ratios: 
Antero Resources (4.99), EV Energy Partners (6.54), Halcon Resources (7.81), Magnum Hunter Resources (52.29), REX Energy (5.06), Vantage Drilling (6.16), and Warren Resources (5.50). http://www.investorvillage.com/uploads/77263/files/OXFORD19CODEBTHITLIST.pdf?cmpid=verticalcontent

•   FERC needs to do more evaluation of the Certificates of Need policy: 
“The Commission balances the public benefits against the potential adverse consequences. ... the applicant's responsibility for unsubscribed capacity, the avoidance of unnecessary disruptions of the environment, and the unneeded exercise of eminent domain in evaluating new pipeline construction.” http://www.ferc.gov/legal/maj-ord-reg/PL99-3-000.pdf.  Given that considerable environment, quality of life and billions of dollars are at stake, it would be a travesty for FERC to approve a pipeline that would later be greatly underutilized or abandoned because of neglectful disregard of risky shipper financials.

Adverse Environmental Impacts

•   The pipeline and related infrastructure construction would cause irreversible damage to thousands of acres of forests, wetlands, and fields.  Relevant to this issue is the June 2014, decision by the U.S. Court of Appeals for the District of Columbia, Delaware Riverkeeper Network, et al. v. Federal Energy Regulatory Commission, Tennessee Gas Pipeline Company, which noted FERC’s responsibility to consider cumulative impacts.  FERC should consider the cumulative impacts of the entire length of the Nexus pipeline and the activities that produce the gas to be transported through the pipeline.

•   Farmlands would be impacted through potential damage to drainage tiles, soil compaction, and destruction of orchards and productive woodlands in an area that has some of the highest agricultural land values in the state.  Soil compaction affects the structure of the soil and can reduce productivity for years beyond the actual construction of the pipeline.  Temporary plugging or damage to drainage ditches and underground tiling could have affects extending beyond the construction area.  Impacts on drainage into Lake Erie would be of particular concern. 

•   Air pollution from construction and operation of the pipelines is a health hazard.  FERC has already determined that the estimated construction emissions for the Rover pipeline would exceed the thresholds for ozone and particulate matter in the Detroit-Ann Arbor maintenance area.  Once in operation, the pipelines, and particularly the compressor stations, produce emissions of methane and volatile organic compounds.  In addition, the gas produced from the Marcellus is known to have potentially significant concentrations of radon; this should be factored into the chronic losses of pipeline gas, particularly from compressors.

•   As part of its environmental review, FERC should estimate the green house gas impacts from the production, transport, and usage of the gas, including methane leakage from the production sites, the pipeline and compressor stations, and the CO2 releases from increased burning of natural gas.  This analysis would be in line with the President’s recently announced targets to cut net greenhouse gas emissions 26-28 percent below 2005 levels by 2025.

•   Finally, FERC should consider the potential environmental impacts of increased use of hydraulic fracturing in the Marcellus region as a result of the new markets targeted by this and similar projects.  These impacts include: air and water quality (http://files.dep.state.pa.us/OilGas/BOGM/BOGMPortalFiles/OilGasReports/Determination_Letters/Regional_Determination_Letters.pdf); health impacts (Concerned Health Professionals of New York. (2014, December 11), Compendium of scientific, medical, and media findings demonstrating risks and harms of fracking (unconventional gas and oil extraction) (2nd ed.). http://concernedhealthny.org/compendium/); and worker safety (http://www.eenews.net/login?r=%2Fenergywire%2F2014%2F10%2F20%2Fstories%2F106000753).

Adverse Impact on Landowners and Local Communities

•   Safety impacts are of paramount concern.  The required setbacks from homes and other buildings are insufficient to account for the potential impact radius in the event of an explosion.  Of particular concern is the potential impact on dense residential areas such as the Ypsilanti area.

•   Rural areas served by small fire departments would be stretched thin in the event of a major explosion or a fire.

•   Local government concerns over the impact of heavy equipment on local roads and bridges must be addressed.  The potential costs to local communities should be fully assessed.

•   Individual landowners are rightfully concerned with the impact of the project on their property values, access to mortgages, and insurance coverage.  Estimates of these costs should be available from previous pipeline construction projects.

FERC’s own guidelines state “Landowners should not be subject to eminent domain for projects that are not financially viable and therefore may not be viable in the market place.”  We should not be pitting the safety, economic value, and environmental health of local property owners and communities against pipeline projects that are neither viable nor needed.

In summary, we oppose this project as having little or no demonstrated “public convenience or necessity” in light of the potential environmental and human costs.  FERC appears to have a very limited view of its responsibilities for rationalizing pipeline capacity or addressing climate change and cumulative environmental damage.  Consequently, we believe this project should be denied. 

Thank you for your consideration of these concerns.