The recent Huffington Post article that went out about the PennEast pipeline has made a big splash with pipeline opponents (and with good reason).  For those not familiar with it it’s available here:

http://www.huffingtonpost.com/wild-river-review/beleaguered-new-jersey-co_b_7984424.html

As part of her research, the article’s author, Joy E. Stocke, interviewed PennEast spokes person Patricia Kornick. Joy was kind enough to share her Q&A information with us and has consented on letting me release it on the FERC docket.

That QA and available below in the FERC-generated PDF:

http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=13959687

I’ve included my own rebuttal to the Ms. Kornick’s answers in the document and the full text of the submission is recreated here.

My personal observation of the Q&A

At a high level I have to say that PennEast’s responses are appalling and highly unresponsive. People have very specific concerns and questions and PennEast responds predominantly with condescending boilerplate and platitudes. FERC staff should see this as a prime example of how PennEast “reaches out” to the community – by talking down to us, by obfuscating the facts, by hiding behind jargon and evading plain questions whenever they can. This is not “reaching out”. This is an insult to our communities, our families, and our lives. I submit that none of these actions should not count as “community outreach” according to NEPA standards and that PennEast should be found wholly deficient in this area.

Q/A Section

Question to PennEast from TC Onstott – PhD Geosciences – Princeton University.   In 2007 listed as one of TIME Magazine’s most influential people in the world:

It is pretty clear from the current PennEast Map, that the pipeline passes right through the center of the highest arsenic concentration in the State of New Jersey. The Pipeline goes through legally permanently protected land including Open Spaces, Preserved Farmland, DEP preserved lands, and land trusts. It runs within a few hundred feet of reservoirs such as the Swan Creek reservoir, which provides drinking water to West Amwell. It runs through a county where nearly all residents rely on private wells for their water and private septic systems. Arsenic is the most important pollutant of wells in the state. That is why the wells are so carefully monitored. The arsenic comes from the rocks and enters the aquifer. PennEast proposes to mainly blast their way through the rocks to make the trench. That is because the soil zone is so thin in these same counties Hunterdon/Mercer where the arsenic is so high. MOST IMPORTANTLY, this is rural country and a sole source aquifer. The vast majority of residences depend upon their well water. The towns all depend upon local wells all provide by this same aquifer and aquifer which is very sensitive to this type of construction because it is open to the surface. This is a fractured rock aquifer so there is not that much groundwater to begin with and the rain fall is not that great in this region either. So any contamination takes a very long time to dilute with fresh recharge water. Why would PennEast risk the drinking water for these communities? And how did they not know about this before they proposed their route?

PennEast Response:
Please appreciate that PennEast employs a seasoned team of safety, engineering, environmental, geologists and other specialists with vast experience working within the energy industry and on pipeline infrastructure projects. The PennEast team is dedicated to examining all aspects associated with safely constructing and operating the pipeline while minimizing impact to the community and environment. The team is conducting various studies to ensure it has an accurate understanding of the underlying geology of the proposed route and will assess any risks and develop applicable mitigation measures to ensure safe construction near critical water supplies. Given the various challenging environments in which pipelines have been built across the country, and the improved construction techniques used today to manage these types of risk, PennEast is confident it will be able to adequately address these concerns.

My Comments:
Professor Onstott can comment best on this. But I will add that the State of NJ, Hunterdon County, Mercer County, the various municipalities in the region, and organizations such as the Stony Brook Millstone Watershed Association have been studying this area for decades. The issues we have with our watershed, drinking water recharge, arsenic issues, radon issues, etc are all extraordinarily well documented. Thousands of pages of studies are available on these topics. PennEast appears to be ignoring all of this information and instead will be paying for their own biased experts from the natural gas industry who will spend only weeks or months investigating serious issues we have been struggling with for decades. Responses such as the above serve only to show PennEast’s over-confidence and total lack of information about the route they have chosen. To put it bluntly we have no reason to trust that a rushed survey under a PennEast deadline is going to be of the same quality and accuracy as the surveys local governments and environmental organizations have done based on year after year after year of observation.

Question to PennEast:
PennEast listed the homes that would be benefitting from the Marcellus Shale Gas. Would you list them again? PennEast claims to service 4.7 million homes in NJ and PA. The Transco Leidy Loop claims 2 million for their project in Princeton. The TEAM 14 project, just approved by FERC, will add the equivalent of 2.8 million homes to its route which terminates in Lambertville NJ and Staten Island. A projected total of new local service to some 9.5 million homes just from these 3 projects. NJ and PA have two of the worst recoveries from the Great Recession and there are no housing or business booms that would qualify this kind of expansion. The 2013 Census shows a total of 3.5 million housing units in NJ, 80% of them already using natural gas.

PennEast Response:
In an effort not to quantify without using industry terms (e.g., bcf, mcf), PennEast has shared that the natural gas transported through the pipeline would be enough to heat the equivalent of 4.7 million homes, not listing specific homes or communities to be directly serviced. The PennEast website is being update to ensure this point is reflected accurately. PennEast provides a much-needed expansion of upstream pipeline capacity that ultimately provides supply to entities that serve consumers throughout the region with critical energy distribution service. Natural gas is not consumed only by residential consumers, nor does the number of 3.5 million housing units above listed reflect the overall market for natural gas demand. Natural gas also is used by businesses, industry, transportation, hospitals, schools, and government. Its role in electric generation also is growing, with natural gas being a major source of fuel for the region’s newest fleet of power generation units. PennEast consistently has represented the benefits extend to New Jersey and Pennsylvania consumers, and in all likelihood, surrounding states, as well. ConEdison, a metropolitan New York utility, also recently subscribed for capacity. Simple census data is not reliable to dissect the complexities of the natural gas and electricity market dynamics; in actuality, this is where many often mistake the true benefits that would be realized from the Project. Generalized data or averages miss peculiarities or nuances to many areas of the demand market. Unlike any of the projects above listed, PennEast represents a targeted benefit to the utilities that have been providing critical energy distribution service to the region’s consumers, which in part explains why all of the New Jersey utilities have subscribed capacity on the project.

My Comments:
This answer is highly evasive and does not match the facts. The majority of the companies subscribed to the PennEast pipeline are national, not local entities, and are involved in midstream transportation as well as local use. While they could use some of this gas for local use, in fact the companies can also consider these part of their midstream assets and transport the gas elsewhere over their existing networks. Examples include Spectra Energy, a company that operates throughout the U.S. New Jersey Resources, who sells gas throughout the Atlantic and New England states. And UGI Energy Services, who has been playing up their recent overseas LNG acquisitions in the financial press. The addition of ConEdison to the mix further underlines this fact. PennEast keeps increasing its scope over time. At first it was just for PA and NJ. Then PA and NJ and “surrounding states”. Then it was PA and NJ and NY and surrounding states”. Companies such as Spectra Energy simply refer to “The Region”. In reality PennEast’s increasing scope creep demonstrates that they cannot find sufficient consumers for their natural gas in PA and NJ and had to look elsewhere for the majority of the usage.

Question to PennEast:
NJ averages a total of 1.8 billion cubic feet of natural gas per day across all users. The PennEast pipeline will add 1 billion cubic feet to that mix. How can PennEast justify adding 55% over-capacity?

PennEast Response:
Again, natural gas markets are very complex and data referencing average daily use overlooks the significant seasonality of natural gas demand markets. Over the last decade, the reality is that natural gas demand — baseload and peak — has increased significantly. Natural gas demand is projected to continue to grow significantly due to its abundance, and its economic and environmental benefits. While you might disagree, natural gas represents an affordable, clean source of energy that most homes, businesses and industry prefer if it is available to them.

My Comments:
This response from PennEast makes a number of assertions, but critically contains no numbers or references to back those assertions up. The facts are that NJ is well served by natural gas now and in the future, and PennEast is a vast overkill. In reality NJ uses only 1.8 billion cubic feet per day of gas on average, for a total of 657 billion cubic feet a year. PennEast will be carrying 365 cubic feet per year into the state – which is again a 55% over-capacity. On natural gas demand projections – PennEast is flat out wrong. Government studies show that natural gas use is expected to decline out to 2040, with the exception of electrical generation. That will show modest increases as coal plants are converted to natural gas, but the emphasis here is on “modest”. And specifically in NJ only a single coal plant is planned to be converted to natural gas. So in NJ demand is projected to trend down out to 2040. PennEast has been provided with numerous DOE and EIA.GOV studies that have contradicted their empty assertions such as the one above. If they want to keep making these assertions they’re going to have to back it up with hard data and facts.

Question to PennEast:
NJ enjoys the 4th lowest residential natural gas prices in the country (actually we’re tied for 4th). Explain why we need to add 55% more natural gas with prices this low?

PennEast Response:
It is easy to mistake the complexity of the natural gas markets, as natural gas costs in the region continue to be one of the highest in the nation when the current pipeline capacity is at full demand. (This generally occurs during peak seasonal demands.) If the lowest cost source of gas literally is right next door, why not ensure it can be delivered in a reliable, environmentally friendly, affordable manner, and specifically, to benefit consumers within the region? While there are some who can afford the energy delivered to local markets, most people would welcome additional cost savings, especially in light of the above-referenced slowed regional recovery from the Great Recession. Reduced energy rates also mean greater disposable income and greater quality of life. Lower cost energy to businesses and industry translates to competitiveness in a regional, national and global marketplace, which can lead to job growth and numerous other benefits. At a time when schools and government are looking to rein costs, maintain tax revenue and improve their communities, natural gas offers a pragmatic solution.

My Comment:
The above response from PennEast does not answer the question at all. In fact, the original question understated the position NJ is in as it referenced it older set of eia.gov data. The April 2015 numbers show New Jersey with the lowest natural gas prices in the entire country. So let’s repeat the question, but with the updated data: why does NJ need a 55% supply increase when we have the lowest residential natural gas prices in the entire United States. On the issue of peak seasonal demands, as mentioned elsewhere those problems have been alleviated. As of 2015 FERC has indicated that the supply issues New Jersey faced have been fixed, and that despite one of the harshest winters in recent memory the natural gas industry came out fine. The addition of the Leidy Line Southeast Expansion project will add even more cushion. So – why, again, does PennEast think we need an extra billion cubic feet a day?

Question to PennEast:
What are PennEast’s projections for electrical and natural gas prices in NJ out to 2040? They claim New Jersyans will see a cost savings, let’s see an actual number. I ask this because a joint DOE/EIA.GOV study projects natural gas and electrical prices will rise in all of the scenarios they’ve studied due to the expansin of the LNG Industry. The numbers go over 10% in some scenarios.

PennEast Response:
PennEast does not make such projections; however, it evaluates the behavior of the market, researches credible predictions about what could happen and plans accordingly. PennEast consistently has shared that New Jerseyans and Pennsylvanians will see benefits, which is supported by the third-party report developed by Concentric Energy Advisors. It is probable that neighboring New Yorkers, Marylanders and others also are likely to see benefits, though to a lesser degree than the primary New Jersey and Pennsylvania communities. I am not certain about some of the points you are asking with this question. If your argument is that PennEast should ensure the lowest cost of natural gas as possible for regional consumers, PennEast agrees. If LNG exports marginally increase domestic prices, PennEast offers the ability to ensure a direct connection to the lowest cost source of natural gas in the country.

My Comment:
What doesn’t PennEast understand about this question? Do they have price models or do they not? If they don’t, then they’re lying to the public if they’re saying their pipeline will save consumers money. It’s that simple. PennEast claims that its member companies are predominantly public utilities that will use the gas locally. It is not even remotely credible that local utilities have no price or consumption projections.

PennEast statement:

PennEast is not an LNG export project nor is it connected to any export facility. Much to the contrary, PennEast is subscribed primarily by local distributors of natural gas.

My Comment:
This assertion is wrong on many counts. First, UGI, Spectra Energy, and NJR are all national companies serving wide regions. Second, the PennEast pipeline is connecting to pipelines which will
connect to the approved Cove Point LNG Export facility under construction now. PennEast’s Lambertville interconnects have also been explicitly named by Downeast LNG which is in pre-filing with FERC right now.

Question to PennEast:
What are Spectra Energy’s specific plans for their cut of the gas?

PennEast Response:

The partners’ plans for the natural gas are outlined in Draft Resource Report 1: (http://elibrary.ferc.gov/idmws/file_list.asp?accession_num=20150416-5108).

My Comment:
The only mention of Spectra Energy’s plans in that document are listed under Texas Eastern. It states:

“The PennEast Project provides Texas Eastern with direct access to the eastern Marcellus, which allows Texas Eastern to increase supply diversity and optionality for its shippers and for markets that it serves in the region. “

This is a non-answer and certainly does not paint Spectra Energy as a local service provider. I’ll ask again – what are Spectra Energy’s specific plans for this gas? They are the second largest subscriber t the pipeline with over 13% of the total volume (125,000 Dth/Day) so their plans are material and significant.

Question to PennEast:
PennEast has widely cited their commissioned study indicating that the region would have saved $890 million if the pipeline had been here in the winter of 2013-2014. Does PennEast realize that this study is invalid on its face because the problems cited by the study have been rectified? FERC itself has made this clear in their 2014 State of the Markets report:

Click to access 2014-som.pdf

Their report can be summed up from this quote:

“By many measures, this winter rivaled last year’s in terms of record low temperatures across much of the country, and in overall demand for electricity. However, compared to last winter, with its series of Polar Vortex events in early 2014, the wholesale power markets and natural gas pipeline system performed remarkably well.”

PennEast Response:
The suggestion that the problem has been rectified is another example of misinformation generally inferred from those unfamiliar with the intricacies of the market. One of the greatest concerns during the polar vortex was the fact that the regional pipeline system was stressed significantly and on the verge of not meeting demand throughout the winter. In fact, some utilities required interruptions of non-critical demand users.

The resulting price impacts reached record highs. This past winter was different. The actual number of colder days was greater, but the peak cold days were not as significant and the colder weather occurred later in the season. Additionally, several electric regional transmission organizations (RTOs) ensured that power generators reliant on dirty fuel sources (e.g., oil) were able to run in emergency conditions to reduce the load on the natural gas pipeline system; environmentally, this was less than ideal.

It also is important to note that while the winter price peaks might have been less pronounced in the latest winter, the average differential between the local supply pricing and the local market prices primarily was sustained, as compared to the previous polar vortex winter. This again suggests there was significant opportunity for local consumers to realize greater energy cost savings. As you might have noticed in reading the Concentric report, it notes that it used a significantly conservative approach, omitting many of the coldest days of the polar vortex; therefore, it did not account for the highest costs for natural gas during the polar vortex. If it had, the potential savings would have been significantly greater.

Any improvement over the polar vortex winter still would leave a tremendous amount of room for cost savings, and meanwhile, this overlooks the fact that the demand for natural gas supply and the taxing effect on the existing regional pipeline system continues to grow.

My Comment:
The problem with this response is that it ignores the FERC report entirely, and focuses on a highly biased report commissioned by PennEast. PennEast should actually read the FERC report and give hard numbers on why the PennEast pipeline is needed in light of that report. As it is PennEast is effectively admitting that their “$890 million” is incorrect and vastly overblown in real market terms. If you factor in the recent DOE and EIA.gov reports on LNG export ramp up for the next 25 years, in reality pipelines like PennEast will result in a net increase of natural gas prices and increased costs to consumers up to a staggering 10% increase. PennEast will not be saving us money; to the contrary PennEast will put consumers in a position where they will be competing with overseas markets where natural gas costs 4x what it does here.

Question to PennEast:
PennEast claims it’s creating jobs, yet observers along the pipeline survey route in Delaware and Hopewell Townships have been keeping track of license plates and not one of them are from New Jersey. How many people will be hired in New Jersey and where?

PennEast Response:
From the beginning, PennEast has shared that it would be hiring a local workforce as much as possible. There are occasions when the specialized nature of the work will involve resources beyond New Jersey and Pennsylvania, which also is something PennEast has shared. PennEast has local engineers, consultants, legal resources, and contractors from New Jersey and Pennsylvania working on the Project. The majority of the team members are from the region, so their license plates would not be noticed. Additionally, PennEast is spending significant amounts in the local communities, though this is only the beginning compared to the economic boon that will occur once construction begins.

My Comment:
PennEast is apparently not aware of how surveys are done. The surveyors park their trucks and other vehicles on the side of the road and then go into the survey areas for extended periods of time. Observers have noted that 3/4 of the license plates are from out of state. Only a quarter are from NJ or PA. If PennEast wants to refute this they should give specific numbers on how many PA and NJ workers have been employed by them or their contractors on this project, and how many are from out of state.

Question to PennEast:
Can you guarantee 100 percent that PennEast gas is not for export? Can you guarantee that no additional pipes can EVER be built along the route? Especially those containing LNG for export? What is to stop the same consortium from forming another LLC? PennEast Response: As I shared when we talked, the natural gas being transported through the PennEast Pipeline would be to serve consumers in New Jersey and Pennsylvania. In spite of oppositionists’ claims to know otherwise, it would not be for export. Additionally, PennEast has had no discussions with its shippers about the desire to export gas overseas nor has PennEast had discussions with any interconnecting facility operators about plans to build export facilities off the PennEast pipeline.

Also as shared when we talked, PennEast cannot guarantee that other pipelines would not be built along the proposed route. Market and environmental conditions might dictate that additional pipeline infrastructure is necessary.

As to your point regarding LNG, pipelines often do not carry LNG. LNG for export is natural gas that is liquefied at a specialized facility, typically near a port or other easily accessible location along a navigable waterbody. In theory, there is nothing to stop the consortium from forming another LLC, but why would PennEast Pipeline Company want to form another LLC? If PennEast Pipeline Company believes additional pipeline infrastructure is needed and PennEast is best suited to deliver that service, PennEast would develop that Project.

The notion that the partnership or consortium of the major regional distributors of energy to New Jersey and southeastern Pennsylvania consumers is a bad thing seems counterintuitive. Rather, PennEast believes it signals the unified viewpoint by energy experts who have centuries of experience providing this critical energy service to the region’s consumers.

My Comment:
There are documented submissions to the FERC showing where PennEast connects to a pipeline which connects to the Cove Point LNG export facility under construction today. There are also documented connections the Downeast LNG export facility in FERC pre-filing. PennEast’s assertions on this are flat out wrong. Cove Point is on track be online in 2017, and Downeast LNG is entering the FERC process for their import/export terminal. I ask PennEast this point blank: will PennEast connect indirectly to these systems once they are completed as planned, or will they not?

In addition, PennEast is contradicting themselves in this very Q&A document. In this section PennEast has fallen back to saying “the natural gas being transported through the PennEast Pipeline would be to serve consumers in New Jersey and Pennsylvania”. Yet in other areas of this Q&A they admit to this gas being also being sent to the NYC metro market via Con Edison, and other shippers such as Spectra Energy indicate that they will be sending the gas out to “the region”. PennEast can’t even keep their answers straight when speaking to one single journalist.