Despite setbacks for new natural gas projects, companies push forward with plans

When the State Corporation Commission on Dec. 1 rejected a proposal by Virginia Natural Gas to expand its pipeline infrastructure largely for a new power plant planned for Charles City County, opponents celebrated the decision as a critical blow to expansion of the fossil fuel in Virginia. 

“The residents can rest easy for a while and celebrate that there will be no fracked gas piped into our community,” said Wanda Roberts of the grassroots group Concerned Citizens of Charles City County in a statement. Northern Virginia organizer Tiziana Bottino of the social and environmental justice group Mothers Out Front similarly wrote that “moms and concerned residents alike can breathe a sigh of relief,” while Jolene Mafnas of climate group Food and Water Action said the decision was “a big victory for climate justice.” 

But in the two weeks since the ruling, both Michigan-based NOVI Energy, which is developing the C4GT plant in Charles City County, and Virginia Natural Gas have forged ahead with plans to add new natural gas infrastructure. 

NOVI Energy signaled that despite the failure of its plan to obtain gas from the utility for C4GT, it hasn’t given up its intention to build the facility: On the day its construction permit from the state’s Department of Environmental Quality was set to expire, the company hastily poured concrete for a fire pump house and installed silt fencing to avoid losing its permit. 

Earlier this week, Virginia Natural Gas also filed an application for a smaller pipeline expansion, citing demand from Columbia Gas of Virginia and Dominion Energy subsidiary Virginia Power Services Energy, as well as reliability concerns. The new project, estimated to cost $205 million, would add almost 10 miles of pipeline and an additional compressor station in Prince William County to the utility’s footprint. 

“In order to perform its legal duty to furnish adequate and reliable service, the company must, from time to time, update and expand its gas delivery capabilities through additional facilities to meet customer demand and to serve the public interest of the commonwealth,” the company wrote in its application.  

The gas projects come even as legislation passed by the Democrat-led General Assembly in 2020 and supported by Gov. Ralph Northam has called for Virginia to move away from fossil fuels like natural gas in favor of renewable energy sources. The landmark Virginia Clean Economy Act that went into effect July 1 requires Virginia’s electric grid to be powered solely by nuclear and renewables by 2050. 

Nevertheless, the law offers a loophole for natural gas to remain part of the grid if reliability is threatened, and some utilities and private companies contend it will continue to serve as a vital “bridge fuel.” All long-range scenarios offered by Dominion Energy to regulators this May outlining how the utility plans to comply with the VCEA call for the construction of new natural gas plants while also preserving existing gas facilities. Those plans, Virginia Natural Gas argued in an SCC filing this week, “recognize() that natural-gas fired generation will continue to play a critical, low-emission role in their system for decades to come.” 

The contention is disputed: During virtual hearings this fall on Dominion’s long-range plan, attorneys for environmental and consumer protection groups emphasized that the utility hasn’t yet completed a full reliability analysis that would justify the building of new gas plants and clarify how long the existing ones will need to run. 

“These are hypothetical reliability needs as of right now, because the analysis has not been completed,” Sierra Club attorney Dorothy Jaffe told the State Corporation Commission. 

“We don’t discount the fact that there very well might be reliability concerns,” she added. “But once you have that report and you can substantiate it, that is when the company should include it in its (planning), not when it is hypothetical. That sends mixed signals to the ratepayers and it leads to increased costs in the various plans.”

11th hour construction

The C4GT plant slated to be built in Charles City County, along with another large natural gas power plant known as Chickahominy Power planned for a mile away, fall outside of Virginia utilities’ planning. Both projects are being developed by private companies with the intent of selling their power into the regional electric grid operated by PJM Interconnection. 

That private backing eases the burden placed on developers to justify a project’s need. Because these merchant generators don’t have captive customers like monopoly utilities do, the State Corporation Commission doesn’t require them to prove they are warranted “by the public convenience and necessity.” Instead, after ensuring a proposed facility isn’t “contrary to the public interest,” regulators leave such projects’ fortunes in the hands of investors. 

C4GT, which did not respond to emails, has struggled to get off the ground. The plant was first approved by the SCC in 2017, and that approval was later extended at the company’s request. Commissioners began to balk at the delays this year, though, when faced with a proposal to supply the plant from Virginia Natural Gas. While the utility’s expansion plans, called the Header Improvement Project, would also have supplied Columbia Gas and the Dominion gas subsidiary, regulators concluded that “the project is not needed without C4GT.” 

Ultimately the commission set three conditions for its approval of the Header Improvement Project, all of which were related to C4GT’s financial viability. After the utility notified the commission this November it wouldn’t meet those conditions before the Dec. 31 deadline, regulators rejected the whole expansion plan. 

With that ruling, and the imminent expiration of the company’s construction permit from the Department of Environmental Quality on Dec. 3, the project seemed to be faltering. Emails from DEQ Air Permit Writer Alison Sinclair shared with the Mercury show that just before Thanksgiving, C4GT applied for a permit amendment that would allow it to delay construction but failed to pay the required $11,000 fee. 

That Monday, Nov. 30, “I acknowledged receipt of the request but the fee for the amendment was still not received so it wasn’t looking good,” wrote Sinclair. 

On Dec. 3, however, C4GT notified the department it had begun construction. An inspector sent to the site the next day found the company had built a short gravel road, installed silt fences and poured concrete for a pump house. 

Under Virginia law those actions count as construction activities, confirmed DEQ spokesman Gregory Bilyeu. 

“Pouring a pad, moving equipment on site, putting up fencing or other small structures and other things that seem minor are really considered construction activities in the regulatory world and cannot be done without a permit,” wrote Sinclair in one of the emails provided to the Mercury. “In this case, C4GT had a permit to construct and operate, they just started construction at the last minute rather than contend that they wanted an extension to construct.”

The Header Improvement Project becomes VNG Interconnect

Virginia Natural Gas’ path forward has been smoother than C4GT’s. When the State Corporation Commission rejected the Header Improvement Project earlier this month, it left open the door for the company to craft a smaller-scale expansion proposal.

“We find that a new application for facilities tailored to serve different needs than those” of the Header Improvement Project “would be best addressed in a new docket,” the commissioners wrote in their Dec. 1 order. “We invite VNG to file a new application at its convenience.” 

The natural gas utility, which had told regulators during hearings that it was open to submitting a new project that didn’t include C4GT, quickly revised its plans and on Dec. 14 put forward a new application for the renamed VNG Interconnect. 

This scaled-down expansion would add 6.2 miles of new pipeline running from Quantico to an interconnection station near Catlett, 3.5 miles of pipeline running parallel to existing pipe in Fauquier County and a new compressor station in Prince William County. A metering station in Hanover would also receive upgrades.

In total, the new infrastructure would add 245,000 dekatherms per day of capacity. How much of that has been committed to Columbia Gas and how much to the Dominion subsidiary has been redacted in State Corporation Commission filings, which are not subject to Freedom of Information Act requirements. 

Nevertheless, Virginia Natural Gas’ application argues that the additions are justified because its existing Joint Use Pipeline “is fully contracted and operating at capacity.” 

“While the COVID pandemic created a short lived disruption in the global energy sector, low natural gas prices are expected to stimulate the region’s economic recovery resulting in continued growth in energy demand,” the company wrote.

Columbia Gas, it said, “is presumed” to need the extra capacity “in regions of its service territory served by delivery points along the JUP; including but not limited to, the fast-growing communities of Stafford, Fredericksburg and Spotsylvania,” while Dominion’s subsidiary “is presumed” to need it “to meet natural gas demand for Dominion Energy Virginia electric power generation facilities served by the JUP; including delivery points at the Ladysmith Power Station and the Virginia Power Lateral in Mechanicsville, Virginia.” 

Under the new proposal, 86 percent of the expansion’s $205 million in costs would be paid by Columbia Gas and Dominion’s subsidiary, with the remaining 14 percent covered through base rates. The company has estimated that over the life of the facilities, they would cost $285.5 million, with the utility’s roughly 300,000 customers responsible for approximately $40.5 million of the total. 

A release from the company said the expansion was expected to generate “$158 million in economic activity and support over 1,400 jobs in Virginia.”