Amid rising costs, protests, Vermont regulators take new look at gas pipeline

The president of Vermont Gas Systems told skeptical state regulators Monday that the current cost forecast for a pipeline expansion in western Vermont is accurate now, even though its price tag already has gone from $86 million to nearly $154 million.

"There are many opportunities that we will have to manage our prices for our customers and to maintain them as affordable and competitive," Don Rendall, the company's president and CEO told the Public Service Board before a standing-room-only hearing room that included many project opponents.

The board is considering whether to reopen its 2013 decision to award what's essentially a state permit for Phase 1 of a the company's planned pipeline expansion, connecting its current system in northwestern Vermont's Franklin and Chittenden counties with the Addison County seat of Middlebury in west-central Vermont.

Phase II of the project, a spur across Addison County and under Lake Champlain to the International Paper Co. mill in Ticonderoga, New York, was cancelled in February. The paper company, which had agreed to pay for Phase II, backed out after that section's estimated cost jumped from $69 million in October of 2012 to $135 million this February. Prospects for Phase III, extending farther south to Rutland, appear uncertain at best.

Public Service Board member Margaret Cheney noted that the estimated costs of Phase 1 had jumped from $121 million last September to $154 million three months later.

"Why should the board rely on Vermont Gas' representations in this proceeding, given our arguably misplaced reliance last fall?" Cheney asked Rendall.

Rendall said at the time of the September board hearing, the company was going through a full-scale review of the costs of the project that was not complete. "We know a lot more today than we knew" last summer, he said.

"We now have a construction season behind us and that certainly influenced" the later cost estimate Rendall said. But he also said the company had not yet hired a contractor to install the expansion project's main pipeline. Instead, he said the $60 to $70 million spent so far had gone to planning, engineering and right-of-way acquisitions.

Critics of the project, including land owners along the route and environmentalists, are hoping to use the new round of hearings to reopen debate on environmental issues as well as economics of the project.

"These hearings show the tremendous expense of the continued reliance on natural gas," said Sandra Levine, a senior attorney with the Conservation Law Foundation. "There are higher environmental costs, and higher customer costs. The cost of this project has nearly doubled in a year and a half, and that shows that natural gas expansion is a bad bet for Vermont."

Other groups, including Rising Tide Vermont, have complained about the gas being extracted in Canada using hydraulic fracturing, or fracking. The industry and many federal and state officials say fracking is safe when done properly, but environmental groups contend the process is risky and damaging and can contaminate water supply.