A $5 billion pipeline Duke Energy and Piedmont Natural Gas announced Tuesday could smooth out natural gas price spikes, the companies say, while drawing new industries to its endpoint in Eastern North Carolina.
The Atlantic Coast Pipeline will reverse the decades-old, northward flow of gas from the Gulf of Mexico to the Northeast. The new line will tap rich shale-gas reserves in West Virginia, Ohio and Pennsylvania and send fuel south.
Richmond, Va.-based energy company Dominion will build and operate the 550-mile pipeline from West Virginia to North Carolina’s Robeson County. It will be the second major pipeline into the state.
The sole existing line runs from Texas to New York City, cutting across western North Carolina, including Charlotte.
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“The significance is that instead of having one pipeline into North Carolina, we’ll have two,” said UNC Charlotte economics professor Peter Schwarz, who studies energy and environmental issues. “That’s a big deal.”
Greater diversity of supply could temper weather-related interruptions, an important factor as Duke shifts to gas to fuel its power plants, Schwarz said. The new project also signals a growing partnership between the companies that he said could lead to construction of a third line.
Duke and Piedmont jointly solicited proposals for the line in April. Both will be partial owners of the pipeline – Duke’s commercial business unit will own 40 percent, Piedmont 10 percent – and customers.
“When you think about a pipeline of this type that will be available for decades to come, we do see an additional need for gas and we do expect retirements of coal in the 2020s and beyond,” Duke CEO Lynn Good said. “This is infrastructure that positions the company really well.”
The line is expected to cost $4.5 billion to $5 billion and go into service in late 2018. It will need approval from the Federal Energy Regulatory Commission.
Duke’s ownership share puts the company back in the natural gas business, which it exited in 2007.
When Duke Power merged with Houston gas company PanEnergy Corp. in 1997, the new Duke Energy delivered 12 percent of the natural gas consumed in the United States. Duke spun off the gas business as Spectra Energy in 2007.
Dominion, which owns electric utilities and thousands of miles of gas pipeline, will own 45 percent of the pipeline and Atlanta-based AGL Resources 5 percent.
Shift to natural gas
Electric utilities are rapidly turning to natural gas to fuel their power plants.
Prices have dropped and reserves expanded as hydraulic fracturing and horizontal drilling tapped places like the Marcellus and Utica shale basins in West Virginia, Ohio and Pennsylvania, which will supply the new pipeline. Natural gas also burns more cleanly than coal.
Duke has retired seven of its 14 North Carolina coal-burning power plants in the past three years, while opening five new gas-fired plants. Piedmont serves most of Duke’s Carolinas gas fleet.
The appetite for gas among utilities increased the expected capacity of the pipeline from 900 million cubic feet a day to 1.5 billion cubic feet. It’s expandable to 2 billion cubic feet, Dominion says.
Six utilities and related companies have committed to buy most of that capacity: Duke Energy Carolinas, which serves the Charlotte area; Duke Energy Progress, serving Eastern North Carolina and Asheville; Virginia Power Services Energy; Piedmont; Virginia Natural Gas; and Columbia, S.C.-based PSNC Energy.
“What won the day, and a major factor, was the economies of scale of this pipeline, securing market commitments in both North Carolina and Virginia,” said Piedmont CEO Thomas Skains.
The joint-venture pipeline will start in Harrison County, W.Va., then travel southeast through Virginia before entering North Carolina in Northampton County, northeast of Raleigh. It will run roughly parallel to Interstate 95 across the eastern third of the state. A separate, 70-mile extension will traveled east to the Hampton Roads area, including Norfolk.
Dominion CEO Thomas Farrell said the peak of last winter’s cold illustrated the need for new supply lines to the Southeast. High demand taxed the ability of the lone Gulf pipeline to deliver enough gas.
“We saw (Gulf) gas that could be purchased at the wellhead for $5 (per 1,000 cubic feet) and delivered in North Carolina and Virginia for $100,” he said.
Retail customers don’t see those wild price swings, but Schwarz said the new line might have little impact on consumer bills in eastern North Carolina. “I’m not saying it’s going to make prices go down,” he said, “but if they go up they will go up less than they would.”
State and company officials predicted the line will spur economic development in parts of the state that need it most.
Gov. Pat McCrory said the project “will drive economic growth and create much-needed jobs for eastern North Carolina.”
Recruiters in Sampson County, near the southern tip of the pipeline that ends in Robeson County, have to steer industrial prospects away from sites that don’t have gas lines.
“It is a limiting factor,” said John Swope, executive director of the county’s economic development commission. “We have areas along Interstate 40 where we’re working to develop sites, but none have gas.”
But construction of the pipeline is likely to raise protests from landowners.
The pipe will be 42 inches in diameter in West Virginia and Virginia, and 36 inches in North Carolina. The North Carolina portion will require a right-of-way 110 feet wide during construction and 50 feet wide permanently.
Dominion says it has notified landowners along a 400-foot-wide study corridor. Preliminary surveys and route planning started in May and could be completed by December.