Atlantic Coast Pipeline canceled
Dominion Energy also agrees to sell gas transmission, storage assets to Berkshire Hathaway affiliate
Despite a favorable recent U.S. Supreme Court ruling, Dominion Energy Inc. and Duke Energy Corp. announced Sunday that they are abandoning plans to build the controversial, long-delayed Atlantic Coast Pipeline. The 600-mile, $8 billion-plus natural gas pipeline was supposed to run from West Virginia through Virginia to eastern Northern Carolina.
At the same time, Dominion also announced that it has entered into a definitive agreement to sell off its Gas Transmission & Storage segment assets to an affiliate of Berkshire Hathaway for $9.7 billion, including the assumption of $5.7 billion in existing debt. The deal includes more than 7,700 miles of natural gas storage and transmission pipelines and about 900 billion cubic feet of gas storage. Assets covered by the agreement include Dominion’s interests in Dominion Energy Transmission, Questar Pipeline (including Overthrust and White River Hub), Carolina Gas Transmission, Iroquois Gas Transmission System (50% interest), legacy gathering and processing operations, farmout acreage, as well as a 25% operating interest in the Dominion Energy Cove Point gas liquefaction facility in Maryland.
Dominion Energy Chairman, President and CEO Thomas F. Farrell II said in a statement that the company was taking the action as part of a “narrowing of focus,” repositioning Dominion strategically with a pure-play focus on its “state-regulated, sustainability-focused utilities” business.
Moving forward, Richmond-based Dominion Energy expects as much as 90% of its future operating earnings will come from its portfolio of electric and natural gas state-regulated utility companies in Virginia, North Carolina, South Carolina, Ohio and Utah.
“This narrowing of focus will also allow us to increase our long-term earnings growth rate guidance by around 30%. Our rebased dividend policy better reflects our revised operating and financial strengths, aligns with our best-in-class industry peers and allows us to grow our dividend much more rapidly than before,” Farrell said. “This transaction represents another significant step in our evolution as a company, allowing us to focus even more on fulfilling utility customer needs and positioning us for a bright and increasingly sustainable future.”
Speaking about the deal in a statement, Berkshire Hathaway Chairman Warren Buffett said, “I admire Tom Farrell for his exceptional leadership across the energy industry as well as within Dominion Energy. We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business.”
Dominion’s interest in the Atlantic Coast Pipeline was not part of the deal with Berkshire Hathaway.
In a joint statement about the pipeline decision, Dominion’s Farrell and Duke Energy Chair, President and CEO Lynn J. Good said, “We regret that we will be unable to complete the Atlantic Coast Pipeline. For almost six years we have worked diligently and invested billions of dollars to complete the project and deliver the much-needed infrastructure to our customers and communities. Throughout we have engaged extensively with and incorporated feedback from local communities, labor and industrial leaders, government and permitting agencies, environmental interests and social justice organizations. We express sincere appreciation for the tireless efforts and important contributions made by all who were involved in this essential project. This announcement reflects the increasing legal uncertainty that overhangs large-scale energy and industrial infrastructure development in the United States. Until these issues are resolved, the ability to satisfy the country’s energy needs will be significantly challenged.”
In a news release Sunday, Dominion Energy and Charlotte, North Carolina-based Duke Energy cited recent federal court rulings on the Keystone XL pipeline construction on Montana, which are likely to be appealed to the U.S. Supreme Court, as adding increased litigation risks and “an unacceptable layer of uncertainty and [additional] anticipated delays” for the Atlantic Coast Pipeline project, which had already ballooned in estimated costs from around $4.5 to $5 billion to more than $8 billion.
Announced in 2014 and originally planned to begin transporting natural gas by late 2019, the Atlantic Coast Pipeline was delayed by legal proceedings and opposition from environmental groups and landowners in the pathway of the pipeline’s construction route. On June 15, the U.S. Supreme Court handed down a ruling that would have allowed the pipeline to cross under the Appalachian Trail, hailed by Dominion and Duke as a major victory toward completing the pipeline, which was identified by the Trump administration as a priority infrastructure project. Before announcing the project’s cancellation, Dominion and Duke had hoped to put the pipeline into operation by 2022.
Virginia Chamber of Commerce President and CEO Barry DuVal issued a statement saying that the loss of the pipeline “detrimentally impacts the commonwealth’s access to affordable, reliable energy … [and] demonstrates the significant regulatory burdens businesses must deal with in order to operate.” The project’s cancellation is a significant economic development loss for Virginia, DuVal said, as it was projected to generate 8,800 jobs and result in $1.4 billion in economic activity during construction, as well as supporting more than 1,300 permanent jobs and $10.4 million in local tax revenue in the pipeline’s three-state region.