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Shoreham questions International Paper on proposed gas pipeline

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Posted on July 8, 2013 |
By John Flowers



MIDDLEBURY — After several months of relative silence, International Paper Co. officials last week gave one of their most extensive public pronouncements to date on why the company is banking on a proposed, controversial Addison County natural gas pipeline to help drive down costs for what they termed as the most costly paper mill in the world to operate in terms of energy consumption.

“(Natural gas) gives us a survival chance,” IP spokeswoman Donna Wadsworth said, adding, “the (profit) margins in paper are very small. It’s very, very competitive.”

Wadsworth was one of around a dozen panelists who assembled for a July 2 public forum in Shoreham that focused on a proposed natural gas pipeline that would extend from Middlebury through Cornwall and Shoreham — then underneath Lake Champlain — to IP’s mill in Ticonderoga, N.Y.

The forum, called by the Shoreham selectboard, included various experts and interested parties in the $70 million pipeline project, including state regulators and environmental officials, farm representatives, town officials, and a real estate agent. Vermont Gas Systems, which is proposing the project, was not invited to be a part of the panel. But the main beneficiary of the proposed project (International Paper) was. Wadsworth’s presence gave the more than 50 mostly Shoreham residents in the audience an opportunity to ask her sometimes pointed questions about the paper company’s economic status, future plans and recent environmental track record.

Audience members and panelists also discussed such pipeline-related issues as utility easements, natural gas carbon emissions, potential impacts on property values and nearby organic farms, and how the massive application will move through the state’s regulatory process.

Middlebury, Shoreham and Cornwall residents are keenly interested in the proposed IP pipeline, one of two Vermont Gas is hoping to build within the next few years. Vermont Gas has already filed plans with the Vermont Public Service Board for permission to build a pipeline from Colchester to Middlebury and Vergennes starting next year. Vermont Gas has yet to file plans for the Middlebury-to-IP segment, though it is in the later design stages. The IP pipeline is drawing substantial criticism from many Cornwall and Shoreham residents who don’t like the idea of their property being bisected by a conduit carrying a volatile gas that would primarily benefit one corporate customer. Some residents in Cornwall and Shoreham villages will have the option of patching in, but rural locations will not be afforded tap-ons into the 10-inch transmission line.

Some attendees of the July 2 forum questioned the Ticonderoga mill’s future, given the escalating cost of fossil fuels, reduced reliance on paper products and the high operating expenses for the mill. Residents said they were concerned about the prospect of seeing a pipeline go in only to have IP close its doors within a few decades.

“You seem to be in a rather fragile position,” Shoreham resident Val Szymkowicz said to Wadsworth. “Why should we (property owners) bear the costs, environmentally, ethically, personally with all the disruption to provide you a pipeline that may not even sustain your future?”

“Because we’re your neighbor,” Wadsworth replied. “And because I think there’s an environmental benefit, as we look at the greenhouse gas emissions … The air we all breathe is an important factor. We believe the benefit of this project is substantial.”

Some residents saw some irony in Wadsworth’s environmental pitch. It was only seven years ago that IP conducted a trial burn of tire-derived fuel as part of the company’s search for a cheaper fuel source. Vermonters opposed the tire burn en masse. IP pulled the plug on the tire burn after early monitoring revealed the practice would violate air quality permitting parameters.

Wadsworth called the pipeline a “high-stakes risk for us,” and one with the potential of “saving the future of the mill.” But she also said the mill is located within a “prime wood basket” and that it has carved out a niche producing high-end paper that can only be made from wood produced in a band of mills running from Maine to Wisconsin.

“Those particular grades of paper are not declining,” Wadsworth said, noting the mill is also close to major markets like Boston, New York City and Montreal. “We feel pretty good about that.

“Our location, the fiber availability and the skilled workforce are all advantages for us,” Wadsworth said. “Energy costs are not an advantage.”

Wadsworth said IP employs around a dozen Vermonters out of a total 600-person workforce at its Ticonderoga location. But she said there are around 200 independent loggers, truckers and landowners “who directly earn their living bringing fiber to the mill.”

She said around 15 percent to 20 percent of the company’s paper fiber is sourced from Vermont forests.

Wadsworth said natural gas is not the only alternative to No. 6 fuel oil that is being explored by IP. The company recently contacted two vendors about potentially installing some solar panels at the plant, according to Wadsworth. She also mentioned liquefied and/or compressed natural gas as options.

Around 53 percent of the mill’s fuel mix is made up of renewables such as bark, wood chips and black liquor (pitch) that is a byproduct of the papermaking process, according to Wadsworth.

“What we have done for the past five to eight years is try to reduce our fuel consumption with efficiency projects,” Wadsworth said. “We have probably invested around $29 million in energy efficiency projects over the past few years, but you can only go so far with efficiencies and then you have to look at your fuel mix. So for us, natural gas is a very viable option.”

Wadsworth said the company looked at getting natural gas through New York, but the closest connection is 65 miles away in Plattsburgh.

“(Natural gas) is an opportunity for us to have a positive impact on the environment by reducing our greenhouse gases at the burner,” Wadsworth said. “We are estimating (reducing) between 25 percent to 30 percent in greenhouse gases, at the burner. It’s also an economic approach for us to reduce our dependency on No. 6 fuel oil and the volatile, high cost of that.”

Wadsworth declined to state exactly how much in annual savings IP would garner through conversion to natural gas, saying the company does not want to tip off its competition. But she did say the savings would not be “anywhere near” the recently published estimates of the IP saving $20 million per year. That number is inflated, she said, because IP can buy its oil more cheaply on the global market and because the company must factor in its debt for the pipeline project as well as the $8 million to $10 million it would cost to convert its mill equipment to receive natural gas.

“That $70 million (cost of the pipeline) gets factored into our cost for gas; it’s part of our bill going forward,” Wadsworth said.

Wadsworth called the Ticonderoga mill “the highest-cost mill in the world for energy costs,” because of its northern location and dependence on No. 6 fuel oil.

Even with access to natural gas, the Ticonderoga mill would still be the most expensive (for energy) mill within IP’s portfolio, according to Wadsworth. Plans call for IP to supplement natural gas with No. 2 fuel oil and/or vegetable-based fuel oil, as there are times during the winter when residential demand would preclude the mill from getting all the gas it needs.

Resident Norton Latourelle said such economic facts about the plant are cause for concern. And he noted IP officials have stated there are no plans to expand the Ticonderoga mill.

“Why would IP invest $70 million in an industry that the product is declining in demand, and why would they put money into an aging plant that, to its own admission, is struggling and will not be expanding?” Latourelle said. He also voiced concern that a financially crippled or closed IP mill in the future could lead to the pipeline being sold or tapped by other business interests along the corridor.

Wadsworth said IP would not and could not become a distributor of natural gas.

“We won’t own the pipeline,” she said. “Any future use of that pipeline is predicated on Vermont Gas.”

She added that the Ticonderoga mill operates within the confines of the Adirondack State Park and thus would be unlikely to get permission to expand on-site.

“The mill is going to stay the size that it is now,” Wadsworth said.

Some residents at Tuesday’s meeting asked what Shoreham could gain from hosting the pipeline.

The answer, they were told, is the potential for a 40-percent savings in heating bills (compared to fuel oil) for town buildings connected to the system; a net of around $130,000 annually in municipal property taxes from pipeline infrastructure; and a potential economic development tool of giving prospective business access to cheaper natural gas.

Shoreham Planning Commission member Bob Fisher said the local elementary school could shave $10,000 off its annual $25,000 heating bill if it were to connect to natural gas. He said heating costs for the town barn could similarly drop by 40 percent, for a $1,000 annual savings.

Fisher, Shoreham selectboard Vice Chairman Steve Goodrich and International Paper’s Wadsworth were the only ones to deliver pro-pipeline comments at the meeting.

PANDORA’S BOX?

Some residents were also concerned about the potential for other utilities to use a pipeline right-of-way secured by Vermont Gas.

“In many instances, a right-of-way used for one utility has been a gateway for use by other utilities,” resident Ginny Van Hazinga, said, citing electricity projects as an example. “How can any right-of-way easement be guaranteed to be for only one project?”

Resident Barb Wilson’s, whose property is located within the current pipeline route, echoed the thought: “If another utility comes in and says it’s for the public good, and we don’t have a lot of say in where the pipeline is going, who’s to say that a power line wouldn’t utilize an existing easement?

“It kind of opens up Pandora’s box,” she added.

Panelist GC Morris, a gas engineer with the Vermont Department of Public Service, said it often doesn’t make sense to co-locate utilities on a common easement.

“There are no restrictions about what can coexist with (a gas pipeline), but there are certainly restrictions to interference and interactions between other facilities — whether it be roads, electric lines and waterways,” Morris said. “All of those things have to be addressed, and frankly, sometimes the best way to address them is to make them separate.”

Another panelist, selectboard Chairman Paul Saenger, urged property owners to face Vermont Gas Systems as a unified front.

“One of the things we are hoping here is that the people impacted by the pipeline… will get together and not battle these easements by yourself, but collectively as much as you can,” Saenger said. “Because part of the strategy of a land agent is to pick you off one at a time. If you could all be collectively together on what you want in an easement, I think you’d be farther ahead.”

Reporter John Flowers is at johnf@addisonindependent.com.

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