Dominion Energy (NYSE: D) collided with a major legal wall in trying to complete a large capital project. It was a long and protracted fight that reached the Supreme Court, but the battle is already over. Here’s what happened and what it means for Dominion’s multi-billion dollar Atlantic Coast Pipeline project.
The project and the fight.
To simplify things a bit, natural gas has been increasingly used to replace coal in the country’s power grid. It is a cleaner burning fuel, and is considered a transitional energy source as the world moves towards less carbon intensive energy. But the real boost was economic, since the construction and operation of a natural gas power plant has been very cheap lately due to low fuel costs.
Image source: Getty Images.
The problem is that you can easily put coal in a truck or boat, you need pipes to transport natural gas from where it is extracted to where it is used. Building a pipeline is not an easy thing. That has been a problem for Dominion, which has material operations on the east coast, an area of the country with limited access to natural gas. The Atlantic Coast Pipeline, a project you’re working on with a couple of similarly located utilities Duke Energy (NYSE: DUK), was meant to fix that. It is a 600-mile underground pipeline that runs from West Virginia, through Virginia, and finally ends in North Carolina. That’s a lot of ground to cover, especially since environmentalists were searching every inch for a reason to stop the project.
The opportunity to hamper the pipeline arose because it was slated to go under the Appalachian Trail. The dispute, which was a bit arcane, traveled to the Supreme Court. The question was which legal entity should decide whether to approve the crossing, which represents approximately 1/10 of a mile. Dominion said the United States Forest Service had the right to make the call, and the court agreed. This was the biggest obstacle the project faces, and now it is gone.
What happens now
The next easy step is for Dominion to lay a pipe under the Appalachian Trail. However, there is still a lot of work to do. To put a timeline on it, the company expects to complete the pipeline by the first half of 2022. That means it is approximately two years before the project is in service.
Along the way, you need to get additional approvals. You should receive news from the United States Fish and Wildlife Service at any time. Note that the goal was an approval of the first half of 2020, which appears to have been lost. In the second half of the year, Dominion awaits key approvals from the Virginia Air Control Board. And he’s also working with the US Army Corps of Engineers on additional permits. There will be environmental groups every step of the way fighting the pipeline. Rollback is not expected to be such a big issue on any of these approvals.
Although delays related to the Supreme Court case increased costs by approximately 17% (approximately $ 1 billion), the company’s most recent update on the project kept the final account stable at $ 8 billion. Still, there are some urgent issues involved. For example, permission from the US Army Corps of Engineers will determine if Dominion can remove trees during a multi-month window that begins in November 2020, or if it will have to wait until, perhaps, November 2021 to begin the process. Obviously, if that approval is delayed, the project completion date could be delayed and costs will increase.
A great victory, but it is not over yet.
Dominion’s victory on the Supreme Court was a great relief. If he had lost the case, there were other avenues to travel, but they would have been even more complicated and time consuming. For now, however, this multi-million dollar project is back on track, which is very good news for Dominion and its shareholders. That said, the pipeline on the Atlantic coast is far from complete. With that giant hurdle behind, investors can breathe easier, but it’s still important to monitor the project’s progress even as the company’s new clean energy capital investments start to make headlines.
