Court weighs whether doubled cost for pipeline merits new review

Vermont Gas
The Vermont Gas Systems headquarters in South Burlington. Photo by Erin Mansfield/VTDigger

A doubled cost is not a substantial change — at least not in the context of state approval for utility projects, Vermont Gas Systems argued before the Vermont Supreme Court on Wednesday.

The natural gas company was in court to defend against the Conservation Law Foundation’s attempts to relitigate the certificate of public good the state issued in 2013 for the company’s 41-mile natural gas pipeline to Addison County, which is now in operation.

In issuing the permit, regulators found the pipeline would promote the general good of the Vermont public.

That permit has shuttled back and forth twice already between the Vermont Supreme Court and the Public Utility Commission that originally approved it. In the end, the commission decided against reopening the permit.

This case is one of two now before the Supreme Court that concern Vermont Gas, a subsidiary of the $7 billion Canadian energy firm Gaz Metro. In the other case, AARP argues that existing customers in Chittenden County are being unfairly forced to subsidize future Vermont Gas customers in Addison County.

In the Conservation Law Foundation lawsuit, attorneys argue that a rough doubling of the cost of the pipeline constituted a substantial change.

The company originally told state regulators the price tag would be $87 million. The project ended up costing about $165 million, the company’s CEO has said. Vermont Gas ratepayers are picking up $134 million of the total cost.

Sandra Levine, the senior attorney for Conservation Law Foundation, says that Vermont Gas should have sought a new or amended permit when construction costs estimates doubled.

When a project approved by the PUC undergoes a substantial change, according to the commission’s rules, the permit must reflect that.

Craig Nolan, lawyer for Vermont Gas, argued that a substantial change to the price tag was not a substantial change to the project.

The certificate of public good authorizing the pipeline’s construction didn’t stipulate a cost for the pipeline, Nolan said. Rather, it approved a proposal consisting only of 41 miles of pipeline, several distribution lines and three gate stations, Nolan said.

“That’s what the CPG is — it’s a construction permit,” Nolan argued.

Justice Marilyn Skoglund appeared skeptical.

“The CPG is a certificate of public good,” she said.

Levine acknowledged the commission has argued on multiple occasions, in refusing to reconsider the certificate, that it actually did follow the rule regarding any substantial change in a project. That only shows the panel handled the case imperfectly, she said.

“We’re asking for the PUC to follow its own rule,” she said.

Since the pipeline has already been built, it may not make sense for the Supreme Court to pull the permit and require Vermont Gas to seek a new one, Levine said in an interview after the court hearing.

Instead, the court could impose new conditions, such as requiring Vermont Gas to add more methane from renewable sources to its supply, she said. The court could also cap how much of the pipeline’s cost Vermont Gas may recover from ratepayers, she said.

Nolan pointed to the previous reviews of the permit. Vermont Gas has followed the law, he said, and the permit has survived repeated scrutiny by Vermont authorities.

That was Vermont Gas spokeswoman Beth Parent’s take as well.

“The Addison Natural Gas Project has been reviewed thoroughly by our regulators three times and each time was found to be a good investment for Addison County,” Parent said. “It will also bring a much-needed boost to the local economy and help businesses stay competitive. We look forward to a resolution in this matter.”

Parent said nearly 600 customers have signed up so far in Addison County.

(This story was expanded Oct. 11 at 7:35 p.m. Also, an earlier version misstated the number of customers for the pipeline.)

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