Vermont Gas pipeline costs jump 7.8 percent to $165.6 million

Don Rendall, Vermont Gas
Don Rendall, president and CEO for Vermont Gas, announced a cost increase to build a natural gas through Addison County at the company’s South Burlington headquarters in December 2014. Photo by John Herrick/VTDigger

Vermont Gas announced Monday that a 41-mile natural gas pipeline extension through Addison County will cost $12 million, or 7.8 percent more than anticipated. The latest estimate pegs the total cost at $165.6 million.

It’s the fourth time Vermont Gas has upped the price tag. The company, a subsidiary of Montreal-based Gaz Metro, originally told state regulators that the cost of the project would be $87 million.

Vermont Gas is seeking permission from state regulators to increase the cost and filed a letter with the Vermont Public Service Board on Tuesday explaining why the project is running over budget. Company officials say most of the additional money would be for unexpected construction costs. Vermont Gas will submit more detailed filings with the board in mid-July.

The company says about $4.5 million of the additional costs are due to unanticipated construction costs for the pipeline. Of that amount, $525,000 is due to “interference” from protesters and eminent domain proceedings. The remaining $5.6 million is for a contingency fund.

Don Rendall, the CEO of Vermont Gas, says contractors for the company have had to blast more rock and ledge in the right of way corridor than anticipated. It has also been more expensive than anticipated to drill around environmentally sensitive areas, he said.

Last October, the Department of Public Service entered into an agreement with Vermont Gas that capped ratepayer liability for the project at $134 million. About 50,000 ratepayers in Chittenden and Franklin counties are subsidizing the pipeline, which will serve about 3,000 customers in Addison County.

“My top priority to customers is finishing the project and protecting customers from higher costs,” Rendall said in an interview. The Vermont Gas CEO says customers should not be liable for the risks associated “with a challenging and complex construction project in two counties, eight towns across 41 miles.”

“I’m very pleased the cost cap is in place and that we, Vermont Gas, will bear the responsibility for costs, not customers,” Rendall said.

Chris Recchia, the commissioner of the Department of Public Service, says ratepayers, for the most part, will not be liable for the cost overruns. “Boy, am I glad that we entered into that $134 million cap,” Recchia said. The agreement he said was “visionary.”

The memorandum of understanding between Vermont Gas and state regulators comes with certain loopholes for the company. Ratepayers, for example, must pay for delays caused by demonstrations and pushback from landowners. At this juncture, those costs are an additional half million dollars.

AARP-Vermont, a longtime critic of the project, said the MOU doesn’t go far enough to protect ratepayers.

Vermont Gas
Heavy construction equipment on the Cuneo property. Photo courtesy of Kari Cuneo.

“Their agreement with the Department of Public Service left loopholes you could drive a truck through,” David Reville, communications director of the senior citizen group. He said Vermont Gas can pass along “unavoidable delays” associated with land acquisition and protests.
“We don’t feel ratepayers should bear those costs.”

Reville questions why the company couldn’t better manage costs. “The department needs to do its job and closely scrutinize the effort,” Reville said. Ratepayers in Chittenden and Franklin counties are paying for the pipeline expansion and get no benefit, he said. The benefit, Reville said, goes to Vermont Gas’ bottom line. “We don’t think that’s fair to our members or to ratepayers,” he said.

Recchia, the department’s commissioner, says the company is within its rights to charge for delays caused by demonstrators and lengthy right of way delays. “People knew it would add to the cost,” Recchia said.

Contractors with Wisconsin-based Michels Construction began building the pipeline on June 6, and JM MacDonald has been preparing the right of ways. About 200 workers are in the field, Rendall said.

Meanwhile, two landowners — the family of Claire Broughton and the Town of Hinesburg — are fighting Vermont Gas eminent domain proceedings. The company plans to build around the two properties until the Vermont Public Service Board makes a decision in the proceedings this fall. Vermont Gas plans to finish the pipeline by the end of the year.

“We will continue to work with the Broughton family and Hinesburg to achieve resolution,” Rendall said. “It is important to have access to the parcels early this fall.”

Recchia said it’s hard to imagine that the Public Service Board would block the eminent domain proceedings for the two parcels when 200 other landowners have already agreed to allow the pipeline on their properties. The board will determine if the two properties are needed, and if Vermont Gas and the landowners can’t agree on a price that issue would be taken up in a separate proceeding, Recchia said.

Vermont Gas
Protesters hold a banner while disrupting a planned Public Service Board hearing Thursday evening in Colchester related to Vermont Gas Systems. Photo by Mike Polhamus/VTDigger
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  • Warren Baker

    No surprise here. Rendall’s corporate-speak is typically astounding. This whole thing has been a boondoggle from the beginning. Little accountability. If you or I had exhibited such poor performance and incompetence on the job, we would have been sacked. Remember the extension to Ticonderoga? Vt Gas should follow its own lead and bail. This project remains as environmentally and economically unsound as it was on day one.

  • “Boy am I glad that we entered into that $134 million cap,” Recchia said. The agreement he said was “visionary.”
    Visionary? VISIONARY??? To have helped this company get approval to build out an insanely expensive fracked gas pipeline at a time of climate crisis and to have allowed the cost to balloon out of control and blame the costs on the fact that they found more rock and ledge than they had expected?? You really consider that visionary????
    Visionary would have been if your department had capped the costs at the $67 million the project was originally proposed at so that when these “rock” and other discoveries happened (and it would have been long before this) the company would have baled on the project because it no longer made financial sense. (as did International Paper)

  • tom burke

    Once again rate payers are absorbing incompetent management by VT Gas. PSB passes approval allowing many costs to be passed onto ratepayers. First it was VT Gas with “whoops” cost overruns due to bad estimating and now by “delays” caused by demonstrators. Next it will be turtle crossings and delays due to leaves falling from maple trees. Time to write/call/petition the PSB to NOT allow VT Gas to pass yet another rate onto taxpayers.

  • Martha Molpus

    Bad idea just keeps getting worse.

  • Barb Wilson

    From $165M, Vermont could have weatherized 16,500 homes, assuming the average cost of weatherization was $10,000. In comparison, ratepayers are paying $165M to convert at most 3,000 homes (assuming their original target customers actually sign up for gas service) for an average of $55,000 per customer. And, this does nothing to improve the efficiency of the home. And, if today’s prices, they don’t even save any money. This just doesn’t make sense from an economic perspective. Not to mention, the extraction of fracked gas reduces vast amounts of methane, which is far worse from a global warming perspective than CO2. Just what are we trying to accomplish here? The math is simple. It sure isn’t to help Vermont or the planet. Could it be that Gaz Metro is trying to build a energy transmission pipeline through the state of Vermont to ultimately transport gas to the LNG export terminal that is being built in Quebec?

  • Katharine Hikel, MD

    Bravo to Digger for following this revenue-seeking travesty. It’s astounding that the Shumlin manarchy has OK’d all of this, even while calling for ‘fossil fuel divestment’. Meanwhile – “Natural Gas Watch” is tracking the continual explosions, leaks, and lawsuits involving this industry.

  • Mary Alice Bisbee

    When will the rate payers just wake up and say “No, we aren’t going to take it, or pay for it any more”!!

  • Jacob Gregory

    Will none dare to ask, “is Gaz Metro a trustworthy business partner for Vermont?”

  • Rachel Smolker

    Vermont Gas mismanagement is outrageous. I live in Hinesburg, and discovered that VGS had not even bothered to communicate with the town even as they were starting reconstruction in Williston last February. They had managed to convince the Select Board to accept the most pathetic agreement imaginable, but never finalized it. Then they wanted to rush it through the PSB like an afterthought! Oops we forgot to make a deal with Hinesburg! The Select Board was caught in the crossfire and handled it poorly, but we are not going to be held responsible for VGS mismanagement and cost overruns, nor are we going to roll over and allow the construction of this fracked gas transmission pipeline to rip through our only town park, with precious wetlands, habitat for rare golden winged warblers, and the health and SAFETY of our citizens. VGS has handled their project horribly. The thing that worries me is that their compliance with safety standards may end up to be just as atrocious as the rest we have so far seen. YIKES. I don’t live in the “incineration zone” but people I care about do!

  • Melanie Peyser

    Chris Recchia’s comment that DPS was “visionary” BEFORE any scrutiny or “scrubbing” (as he so aptly put it) of these purported costs sums up the problem with this project. DPS just doesn’t get it. Recchia should stop patting himself on the back and start paying attention!

    Was it “visionary” of DPS to declare that VGS’ $121.6 million increased cost estimate back in July 2014 was reliable? Was it “visionary” of DPS to declare that VGS’ 2015 claim that PwC’s “Monte Carlo method” of cost and contingency calculations had saved the day and therefore its $154 million cost estimate was absolutely accurate???

    Was it “visionary” for Recchia to support loopholes that allow VGS to get compensation for its lawyers’ failure to look up precedent or not realize that the company had no right to take property interests in a public park through eminent domain. Was it visionary for DPS to go along and not question why the Hinesburg Selectboard had voted and sign a stipulation with a VGS in secret???? The fact is that VGS should have picked a different route and gone through proper channels. Hinesburg should have held a Town vote in March. If VGS and DPS hadn’t done their usual backdoor dealing there would be no delay in Hinesburg and thus no cost to ratepayers at all. Recchia was visionary in setting up ratepayers to get screwed with costs he already knew or should have known were on their way!

    Was it “visionary” or “tyranny” for Recchia to try to quash dissent and free speech by allowing VGS to demand compensation every time someone demonstrates against the project? Recchia testified that he wanted “to send a message” to the opposition with that last loophole. Turns out, the postage stamp on that message just cost ratepayers $225,000. Thanks for being such a “visionary,” Chris.

    Perhaps the real vision in all of this was that Chris Recchia signed on to make sure that VGS would be able to request money the company should have returned to ratepayers but DPS supported them in setting aside into a special fund instead. VGS is only supposed to get access to that money AFTER the entire project is operational. DPS signed an MOU saying that VGS should be allowed to start withdrawing funds with only the first 11 miles operational. Just that segment has already cost ratepayers more than the original budget, and it accounts for less than 25% of the project itself. If Chris Recchia is visionary his vision, like Don Rendalls, has clearly been “laser focused” on getting as much money to over-priced and under-skilled consultants and on paying twice for as many pieces of the work as possible. Did I mention the fact that the ever-increasing “contingency” on this project has become so enormous that it may be an unbeatable record in the industry. VGS and DPS can play as many shell games as they want with this budget, but real “visionaries” would realize that everyone else has seen the writing on the wall since the beginning. This project is a sham, and ratepayers need to revolt before it’s too late! It’s not visionary to cheat families out of their hard-earned money. It’s visionary to say no to projects that are doomed to fail. That also happens to be DPS’ job.

  • Barbara Forauer

    It makes my stomach turn each time I see some piece of VTGAS equipment move through our normally peaceful village. The devastation to our natural landscape has been appalling here and in the towns to either side of us. VTGAS needs to be responsible for all the damage and disruptions they have caused. The cost overruns are just due to poor judgement by whomever came up with the estimates. Of course there are rocks in VT. Ratepayers should not have to bear this burden. Such a waste of our natural VT areas. And for what? You all know the answer to that.

    • Barbara Forauer

      The number of clients to be served in Addison County changes each time a VTgas Rep speaks! We know for sure that no one in the Chittenden County area where they have destroyed the earth will be served by any of this. We are just a dumping ground for the pipeline.

  • Janice Nadworny

    Governor Shumlin’s short-sightedness is mind boggling – why is Vermont adding fossil fuel infrastructure that will be in the ground for decades, pumping fracked gas through our beautiful state to serve the needs of a Canadian corporation? Over $160 million to provide natural gas for 3,000 people? Really dumb. And, by the way, a giant company, taking peoples’ land – and a public park – for their own profits? No “public good” here.

  • townsend peters

    Shame on Chris Recchia and the Public Service Board for punishing all ratepayers by charging them for the “costs caused by demonstrators and lengthy right of way delays.” The vast majority of the ratepayers are responsible for neither.

  • Nancy Baker

    I wish I could feel sorry for VGS and their stock holders, but my sympathy goes instead to the areas where trees that have been clear cut, the families that have lost their property, the wildlife that has lost their homes also and some their very lives, our air and streams that have and the defiled, all in the name of profit for the fossil fuel industry. I hope Governor Shumlin and the PSB understand that this is what they will be remembered for instead of working for renewable energy for the good of our citizens, state, and planet!

  • Jay Eshelman

    These numbers don’t add up.

    RE: “The company says about $4.5 million of the additional costs are due to unanticipated construction costs for the pipeline. Of that amount, $525,000 is due to “interference” from protesters and eminent domain proceedings. The remaining $5.6 million is for a contingency fund.”

    If the project cost increased 7.8% to $165.6 Million, the most recent previous price, then, was $152.7 Million (92.2 % of 165.6 Million). That’s a $12.9 Million difference.

    So, when I add the $4.5 Million in additional ‘unanticipated’ costs to the $5.6 Million ‘contingency fund’ reported above, I get $10.1 Million . Where is the $2.8 Million difference between $12.9 Million (the 7.8% increase) and the $10.1 Million line items (reported above) accounted for?

    And I wonder; if VT Gas was in the habit of putting ‘contingency funds’ in its previous projections, how much was already in the ‘contingency fund’ from the previous estimates?

    I suspect this is a question for our State Auditor to consider.

    • Melanie Peyser

      I found a different gas math problem. The BFP reported Don Rendall saying that VGS has laid 3000 feet of pipe since June 6th. That’s just .6 miles in two weeks or .3 miles per week. With 29 miles left to go, it would take VGS another 96 weeks or around 22 more months to finish. I’m pretty sure that would take the project out well past the end of this year, but maybe I’m wrong. Unlike VGS, I don’t have an extra million bucks to pay Pricewaterhouse Coopers to count or miscount (as the case may be the numbers).

      As for contingency, it was supposed to have been calculated by those same consultants using what they claimed to be the highly accurate “Monte Carlo” simulation method. Why simulation was necessary when contracts should have already been signed is a mystery to me, but regardless, all of that money spent for them appears NOT to have produced the accuracy promised.

  • Jane Palmer

    I have to wonder where the figures VGS is putting out their as “costs” not covered by the rate cap. (protests and land easement problems) Did they pull them out of their behinds? A few years ago I would have hoped the DPS would have checked up on something like this and would require some sort of documentation. But now, I fear Chris Recchia and company will just let it pass as gospel truth as he pats himself on the back for being such a visionary.
    There ought to be some sort of scrutiny too as to what was the cause of the easement “difficulties” VGS is experiencing with Geprag’s Park and the Broughton Estate. VGS’ army of attorneys either knew or should have known there would be a problem with taking public land by eminent domain years ago. So is this problem with the park caused by landowner resistance or is it a problem VGS created for themselves and should the associated costs therefore be something that should not be borne by ratepayers.
    This recipe for distribution of costs is something else Recchia should be (and has been) patting himself on the back for. How dare a landowner legally resist the taking of their land and how dare anyone use civil disobedience against something that threatens human life on this planet?

  • Pamela Wilcox

    Seems Vermont has been bought and paid for thanks to its officials and government leaders. When you thought our state was safe from corporate establishment we find out the hard way. Time to vote out the corporate establishment that has infiltrated our own state just like it has our government. Please visit http://www.RADVT. Org. to find all who are running for positions in our state that are not backed by super pacs and are not beholden to any corporations. This will be one of the ways we can weed out the officials running our state that have the people of Vermonts best interest at heart instead of the mighty corporations for profit. Another idea would be to cancel any gas account and switch to a renewable energy instead. Matt Dunne will be a fresh new voice as governor. Gone will be the days of corporate establishment one state at a time.