This is a reply to the “commentary” by Sens. Kevin Mullin and Peg Flory, both Republicans representing Rutland County, on the Vermont Gas Systems/International Paper proposed pipeline project called “Phase 2” that appeared in the July 21 edition of the Addison Independent.
To start let me make three things clear:
• The Town of Cornwall does not oppose getting natural gas to Rutland.
• The Town of Cornwall does oppose the VGS/IP pipeline.
• The Town of Cornwall does oppose the “happy talk” about this project which muddles informed public dialogue and leads to bad public policy.
The Mullin-Flory essay was singularly unhelpful. By attempting to pit one Vermont community against another and either by misunderstanding or distorting the facts Mullin and Flory have done a disservice to their constituents and the state. The content reads as little more than shilling for VGS’s corporate PR “spin” … plus a gratuitous insult to Cornwall residents. It will likely be best remembered for the indifference to facts and an enthusiastic, uninformed and uncritical embrace of VGS’s story line. The endlessly repeated, self-serving and fanciful tale about “Phase 2” providing easy money to “get gas to Rutland faster” is apparently irresistible to some politicians.
Here’s why it’s a “fanciful tale”:
• First, there is no coherent single project to get gas to Rutland.
• Second, “Phase 1” and “Phase 2” are fundamentally different projects.
• Third, “Phase 2” is all about corporate profit.
• Fourth, claimed “regional benefits” verge on nonsense.
• Fifth, absent meaningful benefits to Cornwall there are unacceptable costs.
Taking each in turn….
First, “… no coherent single project…” Originally, the Addison Natural Gas Project was to extend the gas pipeline from Shelburne to Middlebury. Period. Then the International Paper scheme surfaced with the original project re-named “Phase 1.” A new spur pipeline to IP’s Ticonderoga, N.Y., paper mill was dubbed “Phase 2” … as if it were somehow a natural extension of “Phase 1.” Recently we’ve seen a new name — “Addison Rutland Natural Gas Project.” But there’s no “Phase 3” yet — no planned route, no cost estimate and certainly no timetable — just vague intentions, promises and, only last week, announced “route planning discussions.” The story about “reducing the time to get gas to Rutland by 15 years” has no substance other than how often it’s repeated by VGS officials.
To be absolutely clear, a pipeline to Rutland could be initiated tomorrow — if VGS and/or its parent corporation, GazMetro, would finance it. The question Mullin and Flory should be asking is: Why has VGS taken so long to meet Rutland’s need?
Second, “Phase 1” and “Phase 2” are fundamentally different projects. Phase 1 meets the test of being an actual public utility project; it will provide gas service to both residential and commercial locations along its route and thus will serve the general public. “Phase 2” fails that test. Phase 2 is purely and simply a “service drop” to an enormous customer — an opportunistic business deal. If constructed the pipeline would deliver 99 percent of its gas to one business in Ticonderoga, N.Y.
Third, “Phase 2” is all about corporate profit. First, understand that Phase 1 will be paid for by VGS customers in Franklin and Chittenden counties, the result of a 2011 deal struck between VGS and the Public Service Board (PSB). Simply put, the PSB allows VGS to hold back a portion of natural gas price decreases from their current customers to fund VGS expanding service to more Vermont residential and commercial locations. To date VGS customers have contributed $14.2 million to be spent to pay for Phase 1.
Again, Phase 2 is entirely different from Phase 1. By any measure Phase 2 is a commercial project, NOT the provision of a public utility service to Vermonters. According to VGS testimony to the PSB — and using their original budget amounts — they have a deal wherein IP pays $64.4 million to get gas to its Ticonderoga, N.Y., mill. Of that amount, $2.4 million goes to pay for enlarging the Phase 1 pipeline to meet the paper mill’s demand. The remaining $62.0 million would be spent to build the Phase 2 pipeline from Middlebury through Cornwall and Shoreham and then under Lake Champlain. Why would International Paper pay all that money? According to filings with the Securities and Exchange Commission, in 2013 the IP Ticonderoga mill spent more than $47 million for No. 6 fuel oil. Natural gas is touted as being 40 percent cheaper. You can do the arithmetic: $47 million x 40 percent = $18.8 million that IP would save. Each year! That would pay back the investment in less than 4 years. After that it’s pure profit.
And of course VGS would do just fine, too. Adding a single customer the size of International Paper (1.4 billion cubic feet of gas per year) is equivalent to adding the Rutland market.
Fourth, claimed “regional benefits” verge on nonsense. Where do those millions of dollars in IP cost savings go? Not to the “region”; they go to IP corporate headquarters in Memphis, Tenn., and from there to IP shareholders. “Regional benefits” that “expand exponentially”!? Gimme a break! IP management has a fiduciary responsibility — that is, a legal duty — to maximize returns to shareholders. That means IP is most unlikely to pay Ticonderoga mill workers or loggers or anyone else more generously because they saved fuel costs. And, by the way, IP says in its public statements to investors that the Ticonderoga mill is already doing just fine.
So, no benefits to the workers at the mill or to the loggers. What about Vermonters? Phase 2 would serve precious few Vermont customers. If built, the proposed pipeline would pass by fewer than 15 percent of Cornwall households. How about property taxes filling town coffers? Not with 80 percent of property taxes going to the state for education. Other environmental “regional benefits” touted by VGS are a frothy mix of exaggerations based on questionable assumptions and optimistic projections. And, by the way, VGS insists on being the one (not your town’s listers) to define the value the pipeline, equipment and required rights of way and to impose easement terms on landowners that would make future development of affected parcels problematic.
Fifth, absent meaningful benefits to Cornwall there are unacceptable costs. While taking advantage of all legally available public utility regulatory protections, VGS’s Phase 2 pipeline would deliver 99 percent of its natural gas to a New York paper mill. By any measure this is a commercial scheme NOT the provision of public utility service to Vermonters. In order to do this VGS is prepared to take Cornwall landowners’ property rights through eminent domain. Sen. Christopher Bray, D-Addison County, has presented elsewhere a compelling argument that the simple facts of the Phase 2 proposal — an overtly commercial enterprise using eminent domain — raise fundamental Vermont constitutional issues.
VGS spins the project with the rationalization that they will use their substantial profits to extend gas service to the Rutland area “15 years sooner” (than when?). In essence they admit Phase 2 is a financing device to grow their business.
From the outset Cornwall residents listened carefully and critically. After hearing the VGS pitch and seeing VGS in action they concluded Cornwall does not want the pipeline, as proposed by VGS, coming through our community. The town meeting vote was 88 percent opposed. Five of the six directly affected landowners have refused to agree to easements. The Cornwall selectboard is unanimously opposed to the project as currently constituted.
VGS is owned by GazMetro, an enormous Canadian utility holding company with substantial financial resources. Cornwall has minuscule resources. Consequently we have proceeded along two parallel courses. We have attempted to engage VGS in a full and creative exploration of alternatives. Those attempts have been rebuffed. Concurrently we have expressed — and will continue to express — our opposition through the Public Service Board’s process, a quasi-judicial legal labyrinth which by its very nature heavily favors those with the deepest pockets.
Early last year it became clear that VGS saw Phase 2 as a cheap and politically appealing way of financing its expansion to Rutland and, moreover, appeared willing to do whatever necessary to get a Certificate of Public Good from the Public Service Board. The Cornwall selectboard asked the governor to use the resources at his disposal to require that other financing alternatives be explored. We respectfully reiterate our request.
Cornwall has made clear that, if a pipeline is to be forced through our community, we insist on two things:
First, environmental indemnification from the first shovelful to the decommissioning of the pipeline in the distant future. In plain language that means that whatever gets screwed up gets fixed by VGS at their expense.
Second, compensation commensurate with the financial benefits realized by Vermont Gas and International Paper, the two commercial entities in this transaction.
This project bears no resemblance to any other “phase” of VGS expansion to Rutland. If approved as proposed, “Phase 2” stands to establish a ruinous precedent: That an out-of-state entity with deep enough pockets can purchase the public good over the objections of directly affected towns and landowners. None of us should want this. The Town of Cornwall does NOT oppose getting natural gas to Rutland but the costs must be borne by the entities — political, individual or commercial — who are the direct beneficiaries of the project.
Editor's note: Bruce Hiland is chair of the Cornwall selectboard.