November 14, 2013

Analysts Talk Turkey on Northern Pass

The following was published by Washington Analysis, a financial analyis firm in DC, offering an opinion on Northeast Utilities' optimistic view of their Northern Pass project:

Northeast Utilities' Northern Pass: The Neverending Story [NU]

by Rob Rains [202-756-4431] and Tim VandenBerg [202-756-7714] -- We caution investors that Northeast Utilities' (NU-$42) Northern Pass transmission project, which would  transport 1,200 megawatts (MW) of hydro power supplied by Hydro-Québec from Canada into New England, likely faces significant delays and cost increases.  The New England Independent System Operator (ISO-NE) forecasts that, due to the retirement of more than 8,000 MW of generation, including Entergy's (ETR-$63) Vermont Yankee, the region will need 6,000 MW of generation by 2020 to replace it.  Coal consumption is rapidly decreasing in the region, with only six plants remaining, and if replacement power is not supplied by hydro then it will likely come from natural gas.

Regulatory hurdles and substantial political headwinds will likely prevent the project from going into service before 2018, at the earliest with delays until 2019-2020 very possible as well.  We simply disagree with Northeast Utilities' past statement that it expects Northern Pass to be in service in 2017 and that it will receive state siting approval in 2015. 

We also expect the firm to succumb to overwhelming political pressure from Gov. Maggie Hassan (D), Sen. Kelly Ayotte (R), and state lawmakers calling for them to bury more of the project underground in the northernmost portion of the state, beginning in Pittsburg and traveling through Coos County.  This will significantly increase the already $1.4 billion price tag of the project and the time to completion.  We note that Northeast Utilities' revised proposal, which called for burying just 7.5 miles of the 187-mile project underground, raised costs by more than 16%.  Although 147 miles of Northern Pass will be built on existing rights of way, the most contested portion of the project is a stretch beginning in Pittsburg near the Canadian border and making its way through Coos County and further south.  Residents are upset because an above ground transmission line would necessitate 100-150-foot towers that would obstruct residents' scenic views.  Political opposition is strong and bipartisan and we think the company will ultimately need to bury this stretch of the line in order to appease residents and move the project forward.

Delays and continued uncertainty should be viewed as a positive for natural gas fuel usage in the region, which already supplies 53% of the electricity to New England, even though transportation constraints during winter months remain an issue.  Hydro generation accounts for about 8% of net electricity generation in New England, but transmission remains a huge concern and natural gas pipelines could fill this need in lieu of this resource.  We note that from 2013-2016, New England will be bringing 1,193 MW of capacity online, and 50% of it will be natural gas, with 35% from wind. 

In addition to a lengthy review time for a presidential permit, approval from the New Hampshire Site Evaluation Committee (NHSEC) is also needed.  Northeast Utilities expects this process to take one year to complete, but we think it will take at least two years from the time of submission. 

Additional points for investors to consider include the following:

·        After more than two years, last week the DOE closed its comment period on the scope of an eventual draft Environmental Impact Statement (EIS) that  is unlikely to be published before late Q2 2014.  While the DOE received just ~5,600 comments, it has demonstrated a heightened sensitivity to the politics of this proposal, as evidenced by leaving the scoping comment period open for more than two years.

·        After the draft EIS is published, DOE will commence a 60-90 day comment period, and will likely hold at least one hearing (possibly more) within the state.  Earlier scoping hearings were very well attended, and the prevailing feedback was negative, increasing the uncertainty over the project's future.

·        A final EIS is unlikely before Q1 2015 and triggers an up-to 90-day interagency review process among federal agencies.  At this point, Secretary Ernest Moniz could make a decision sometime in 2H 2015, or else Q1 2016.  Given opposition to the project, this decision will likely be appealed in federal court, further increasing the uncertainty about the project's federal permits.

·        At the state level, Northeast Utilities may submit its application for NHSEC review with only the draft EIS.  This will be equal in importance to the DOE review, but it is less certain due to its structure. 

·        The NHSEC is a 15-member body of officials that work for other state agencies and convene for specific proposals.  Its statutory underpinning calls for decisions on projects within nine months, but this has routinely been surpassed for far smaller projects within the state with much less political headwind.  We believe that it will most likely be at least two years before the NHSEC approves Northern Pass from the date the application is submitted, which we expect by Q3 2014. In light of landowner and stakeholder opposition, an NHSEC decision is almost certain to be followed by requests for rehearing and then by appeals to the New Hampshire Supreme Court, which could easily take more than a year. 

·        Although NHSEC approves the project itself, it has no authority to exercise eminent domain.  We view this as material because there is a persistent legal question about whether or not Northeast Utilities must purchase any additional rights of way to fully complete construction.  We note that the Society for the Protection of New Hampshire Forests is likely to challenge this assertion in state court, fueling uncertainty about the completion of this project.

·        Unlike interstate natural gas pipelines that NHSEC has reviewed in the past, which carry federal eminent domain authority, this is not an option for Northern Pass.  The New Hampshire legislature closed that option in 2012 specifically for non-reliability projects like this. 

·        New Hampshire politicians, including Gov. Maggie Hassan (D) and Sen. Ayotte (R), oppose the project in its current state and have called for additional miles of the line to be buried underground.  We view the political pressure in the state as likely to force the company to bury more of the project to secure approval by the NHSEC.  The recent announcement of the 150-mile 1,000 MW TDI Blackstone (BX-$27) transmission line that will be buried under Lake Champlain has fueled the belief by many within the Granite state that Northeast Utilities can and should bury Northern Pass.

·        Once completed, the project will transport 1,200 MW, or more than 8% of New England's current electricity supply, of predominantly hydroelectric power, under a 40-year agreement with Hydro-Québec.

·        Recent plant shutdowns totaling more than 8,000 MW and the need for 6,000 MW of replacement power should drive additional natural gas consumption within the region.  We note that closures like Dominion's (D-$66) Salem Harbor-coal (740 MW), Brayton Point (1,500 MW), and Entergy's Vermont Yankee (640 MW) are all in the works.

Additional information is available upon request.

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November 7, 2013

Gamechanger: Is Northern Pass Obsolete?

As reported by a variety of sources, including AP reporter Wilson Ring, a New York company is proposing to build a 1,000MW transmission line to bring power from Hydro-Quebec to New England via Vermont. Unlike the 1200MW Northern Pass proposal, the $1.2 billion "New England Clean Power Link" would be placed under water and underground.
Given that the Vermont proposal would bring the same energy to the same market at a comparable price in a similar time frame, it would seem that Northern Pass will find it difficult to make a case for an overhead line that has met fierce public opposition.
"I would say Northern Pass is obsolete and I would add that it is politically untenable," Society for the Protection of New Hampshire Forests spokesman Jack Savage said. PSNH's only hope to hold onto a transmission project now would be to go underground using transportation corridors, he said.
"Northern Pass missed their window of opportunity ... because they have been fixated on existing right-of-ways...They have as much chance of building an overhead (transmission project) as the St. Louis Cardinals do of winning a game 7," he added.
Kathryn Marchocki's  story in the Union Leader can be read here:
Wilson Ring's AP story:
Montpelier--A New York company announced Thursday it hopes to build a 150-mile power line from the Canadian border under Lake Champlain and then across Vermont to the town of Ludlow where it would plug into the New England electric grid.
The $1.2 billion New England Clean Power Link line could carry up to 1,000 megawatts of Canadian hydro-electricity, enough to supply about 1 million homes, said Donald Jessome, president of TDI New England.
TDI New England is a subsidiary of the New York based investment giant Blackstone Group, which would provide funding for the project. Jessome said he expected it would take five years to complete the regulatory process and construction. The company hopes to begin transmitting power in 2019.
You can read the rest of the AP story here:

November 5, 2013

Forest Society Calls on DOE to Suspend Northern Pass Permitting Process

In her most recent comments on the scope of the Environmental Impact Statement, Forest Society President/Forester Jane Difley called on the Department of Energy to suspend the permitting process.

"We believe that the Department should suspend the National Environmental Policy Act (NEPA) process until the Applicant can establish that it has secured the legal rights to utilize the preferred and alternative routes," Difley wrote. "It would be a profound misapplication of the core principle of NEPA --- to assure that the public interest is served by the consideration of least damaging environmental alternatives --- if DOE itself enables continued consideration of the Applicant’s preferred or alternative corridors when neither can stand legally."

"The Amended Proposal preferred corridor proposes to bury 7 plus miles of the transmission facility in two separate segments in northern Coos County. These two underground segments are proposed for the sole reason that there is no other way for the project to connect its other 180 miles of overhead structures.The first underground segment of 2300 feet in the towns of Pittsburg and Clarksville includes approximately 500 feet of distance through land we own in Clarksville, land which presently hosts a right-of-way for US Route 3.This right-of-way was acquired in 1941, jointly by the towns of Pittsburg, Clarksville and Stewartstown for the purpose of hosting a road for public transportation purposes.It is our view that using our otherwise unencumbered land for a private electric transmission facility represents an additional servitude on our land that can only occur with our consent.Without our consent Northern Pass can only acquire this interest in real estate through eminent domain. 

"Given that the New Hampshire Constitution precludes such use of eminent domain by private developers; given that the New Hampshire Legislature has legislatively precluded Northern Pass from using eminent domain to complete its project;and, given that the Forest Society has not consented to the proposed use of this land in Clarksville for the Northern Pass project, we conclude that the Northern Pass proposal relying on our Clarksville land is fatally flawed. The assertion by
Northern Pass that it can simply override our private property rights raises significant constitutional issues.

"The Amended Proposal includes a second segment of 7 plus miles of underground transmission facilities along state and town roads in Clarksville and Stewartstown.The applicant submitted this proposal without consulting the State Department of Transportation, either of the local town governing bodies or the several landowners who actually own the land to the centerline of each of the roads included in the proposal.The Applicant asserts that this project is in the public interest, yet it fails to communicate with the public that will be most impacted by its amended proposal.We believe the DOE should not countenance such an encroachment on public and private property rights by allowing consideration of this “preferred” corridor.



November 4, 2013

98% of DOE Comment Cards Oppose Northern Pass

The Forest Society submitted comment cards to the Department of Energy today from a total of 2,159 different landowners representing 138 different towns in New Hampshire and several states. Of those, 2123, or 98 percent, express opposition to the proposed overhead transmission line. The balance, 36, or 2 percent, expressed support for Northern Pass.

Each of the cards is addressed to the Department of Energy expressing opposition to Northern Pass. Each card includes the name and address of the person, and their reasons for objecting to Northern Pass. The Forest Society sent the cards to the DOE, as well as tabulated results.

Of those who expressed opposition to Northern Pass, 45 percent said that they opposed it in any form while 48 percent indicated that they could support an alternate route buried along appropriate transportation corridors or that used the existing Hydro Quebec corridor from Canada to Massachusetts.

The respondents also indicated one or more reasons they opposed Northern Pass. Of those, "Impacts on our scenic landscape, tourism and our New Hampshire way of life" and "Impacts on the White Mountain National Forest and other conserved lands" topped the list with 86 percent and 85 percent respectively. Seventy-two percent indicated "The use of eminent domain against private landowners",  followed by "Impact on my land, including property values" at 53%.

The Forest Society believes the voice and will of the people matter when it comes to decision-making and permitting. We have asked the DOE to include as part of the Environmental Impact Statement (EIS) some measure of the overwhelming objection to Northern Pass as proposed, and some measure of what the impact would be if a permit were granted despite those overwhelming public objections. Though there is no binding popular vote on Northern Pass, public opinions need to count and be acknowledged in the EIS.

The primary purpose of a Presidential Permit is to make a determination that a project crossing an international border actually serves the public interest. The Forest Society believes the DOE should consider, based on public input, a conclusion that the public interest will not be served by granting a Presidential Permit for this project as proposed.  If the DOE reaches such a conclusion, it should reject the application and cease any further work on the EIS.

November 2, 2013

Underground Vermont Proposal May Bury Northern Pass

Union Leader reporter Kathryn Marchocki reports here about a new proposal to bury--under Lake Champlain and underground--a 150-mile, 1000MW transmission line that could make the Northern Pass proposal redundant.

Like Northern Pass, the so-called "New England Clean Power Link" would transmit electricity from Hydro-Quebec to Ludlow, VT, where it would enter the New England grid. (There are many who seriously question the description of the large-scale hydropower facilities as "clean", and typically there is no guarantee that power transmitted on such lines will always be hydropower.)

Northern Pass has consistently argued that burying such a line would be cost prohibitive, and that it's own overhead transmission line was the only economic alternative for those who see benefit in allowing Hydro-Quebec to export more large scale hydropower to the southern New England market. The new proposal adds to the growing evidence that burial of transmission lines is not only possible, but that there are transmission developers actively seeking to permit and complete the projects based on current projections.

Given that Northern Pass's lack of legal access to its preferred route, the growing political demand for an underground alternative along transportation corridors, the need for Special Use Permits to use the White Mountain National Forest, and the overwhelming public opposition to Northern Pass's overhead proposal and the determination to fight as long as it takes, it would seem that the underground proposal in Vermont has a far greater likelihood of success, even at this early stage.