Lebanon — Opponents of a natural gas pipeline proposed for Lebanon and Hanover are praising recent state approval of the project, saying regulators set stringent terms for construction to move forward.
The Public Utilities Commission last week awarded Liberty Utilities a franchise needed to build a pipeline between the two Upper Valley communities. That decision, however, comes with heavy strings attached, according to municipal officials and environmentalists.
In its ruling, the three-member commission moved much of the risk for construction and operation of the pipeline away from utility ratepayers and onto Liberty’s shareholders, meaning revenue shortfalls might not be easily recouped.
“I would say this should give Liberty considerable pause in whether to pursue this, as they will bear most of the risk (instead of ratepayers here and elsewhere) of their proposed investment not succeeding as projected,” City Councilor Clifton Below, who represented Lebanon before the PUC, wrote in an email last week.
Liberty petitioned the PUC for a natural gas franchise in 2016, after regulators denied an earlier, similar request from the company to build a pipeline.
Construction would be completed in two phases, the company said in filings. It would start with a “turn-key supply operation” near the Lebanon landfill on Route 12A and then eventually build into downtown Hanover.
Liberty predicted construction would cost $9.7 million in the first five years. Officials said about 50 percent of the costs could be met by securing a single, large customer to anchor demand.
But the notion of relying on one business to fuel pipeline construction was too fraught for the PUC, which called the idea an “unacceptable risk.”
In its ruling, the commission worried the project’s costs would fall on the backs of the utility’s ratepayers if that anchor customer backed out.
The PUC also registered concern that Liberty had not “adequately gauged the viability” of a project in Lebanon and Hanover, where municipal officials were not welcoming to the proposal.
During proceedings in September, Below argued the pipeline wouldn’t be consistent with Lebanon’s Master Plan, which promotes utilization of sustainable energy.
Hanover Town Manager Julia Griffin also argued the project was in contradiction to a Town Meeting vote last year, when residents agreed to transition the community’s electricity to 100 renewable sources by 2030. Heat and transportation in the town were set to meet that goal by 2050.
To assuage those concerns, the PUC told Liberty its shareholders would be on the hook for revenue shortfalls, if their pipeline customer base falls below 40 percent of what it needs to pay off the project’s costs.
The PUC decision also utilized part of a settlement between state regulators and Liberty in August. That agreement allowed Liberty to move forward only when it obtained enough customers to pay off half the project’s costs over the first 10 years.
Emails requesting comment from Liberty were not returned last week.
Below, a former PUC commissioner, said the ruling signaled the proposal is “much more speculative” than other pipeline projects in New Hampshire, where utilities hope to expand existing services.
He also said it was “somewhat unusual” for the commission to add significant conditions to an already existing settlement, which could reflect the amount of community opposition the proposal garnered.
“What the commission really has said is ‘If you really want to go ahead with this in light of the lack of enthusiasm, which includes no customer commitments, then you really need to proceed at your own risk,’ ” Below said.
Donald Kreis, the state’s Consumer Advocate, also said the ruling suggests there’s skepticism among regulators that the pipeline will be viable. He said it’s also not unheard of for commissioners to add conditions to a settlement.
“I think it’s clear that the PUC had the same concerns that we did and it decided that it was going to go further than we did,” said Kreis, whose office signed the August agreement.
Many observers of the process expected Liberty to obtain a franchise, but most weren’t expecting the terms to be so strict, said Jonathan Chaffee, an intervenor in the proceedings.
“This is a pretty stringent provision and it raises the stakes for Liberty to assess its cost and its projected revenues,” said Chaffee, the former executive director of the Lebanon Housing Authority, last week. “It makes the project even more sensitive to community opposition.”
Chaffee also questioned how the utility company plans to beat the pricing of competitors considering it plans to first truck natural gas to a distribution facility before piping it to Lebanon and Hanover.
Any large company, such as Dartmouth-Hitchcock, is already are being offered competitive pricing and has a large buying power, he noted.
It’s also likely officials will continue to discourage use of natural gas as the pipeline project next looks for local zoning and planning approvals.
“The municipality itself, along with Dartmouth College, does not feel that fracked natural gas is safe nor is it a renewable form of energy,” Griffin, Hanover’s town manager, said in an email last week. “Natural gas does not have a place in our goal.”
Griffin said she’s hopeful the PUC ruling will be enough to discourage Liberty from moving forward, saying the utility should instead turn to developing community solar and battery storage projects.
“On that front, Liberty has our full support,” she said.
Tim Camerato can be reached at tcamerato@vnews.com or 603-727-3223.