Story One: The Beginning of the NED Pipeline

The Northeast Energy Direct Pipeline and Kinder Morgan

By early October 2014, was nearly impossible to ignore the many “Stop the Pipeline” and “Save Our Commonwealth” signs that lined the country roads of western Massachusetts in protest of the Northeast Energy Direct (NED) natural gas pipeline. While citizens began to organize a movement to stop the pipeline, the inherent complexity of the energy system began to impede their ability to act. In this light, this series of articles seeks to breakdown key issues in the natural gas system and familiarize readers with Kinder Morgan, the energy transportation company that is leading the construction and management of the NED pipeline.

NED’s Origin Story

The NED project had a quiet beginning, a beginning that can be traced to a series of events that began on Aug. 26, 2013. That was the day that the energy consultancy Black & Veatch published a study requested by New England States Committee on Electricity (NESCOE). The study, titled “Natural Gas Infrastructure and Electric Generation: Proposed Solutions for New England,” was designed to explore future scenarios of energy availability and cost in light of New England’s electric energy reliance on natural gas for the years 2014 — 2029. Three future scenarios were included in the study, described by Black & Veatch as a, “Base Case (most likely outcome from current outlooks), a High Demand Scenario (increased gas use through market and policy drivers) and a Low Demand Scenario (flat or declining gas use across all sectors).” Black & Veatch determined that, based on New England’s history, the high-demand and/or base scenarios will most likely play out in reality, which means that New England will require both short and longterm infrastructure projects to meet its energy needs.

We can see the emergence of NED in the language of the study:

Black & Veatch recommends the construction of a Cross-Regional Natural Gas Pipeline as a longterm solution. Through the construction of incremental pipeline capacity, this project has the potential relieve New England’s gas electric reliability issues through at least 2029.

And Black & Veatch describes that the CrossRegional Natural Gas Pipeline, “originates at the existing Tennessee Gas Pipeline and Iroquois Pipeline interconnect in Schoharie County, New York, and terminate at Tennessee Gas Pipeline’s interconnect with Maritimes & Northeast Pipeline in Middlesex County, Massachusetts.” According to the study, it will transport Marcellus Shale gas and provide economic benefits that are, “substantial and increase significantly over time.” These benefits outweigh the other longterm option mentioned in the study described as, “a FirmBased Canadian Energy Imports solution,” which involves building a new electric transmission line capable of importing mainly hydroelectric energy from eastern Canada.

NED Gains Momentum

From this point, NED continued to generate political support. In December of 2013, governors of the six New England states authored a letter titled “New England Governor’s Commitment to Regional Cooperation On Energy Infrastructure Issues” to express their support and collaboration with ISO New England (Independent System Operator New England) and NESCOE for infrastructure that will build an economically stable energy future for New England. About the same time, the New England US Senate delegation wrote a letter to Department of Energy Secretary Dr. Ernest Moniz expressing concern about the fragile nature of the New England energy system due to the lack of natural gas pipeline infrastructure.

While the study and the letters established a clear demand for natural gas infrastructure, the question remained: Who could generate the supply? And there was one likely candidate: Kinder Morgan, owner of the Tennessee Gas Pipeline.

We know that Kinder Morgan was aware of the opportunity because Spectra Energy and Kinder Morgan both offered NESCOE feedback following Black & Veatch’s initial study. However, Kinder Morgan didn’t appear on the local scene until February 2014, when the company began NED’s “open season.” The “open season” is the project phase in which Kinder Morgan enters communities in which the project will take place and tests the waters with citizens, local officials and businesses. Ending on March 28, Kinder Morgan describes NED’s open season as a success, stating the prospect of a pipeline, “generated significant interest from local gas distribution companies (LDCs), electric generators, producers, industrial end users in New England and Atlantic Canada, as well as developers of liquefied natural gas projects.” NED was a go.

Since the end of March, much has happened as citizens of Franklin, Berkshire, Worcester and Middlesex counties have imagined a future in which a pipeline running below their gardens may also result in access to stable winter heat and manageable electricity bills. Activists have walked the pipeline’s hypothetical path and held a rally in Boston. Governor Deval Patrick asked NESCOE to make a followup study to Black & Veatch’s that explores the low demand scenario. Holyoke Labor Union 596 signed an agreement with Kinder Morgan. Anti pipeline activist groups like No Fracked Gas in Mass and Massplan have been organized. National Grid Electric announced that electric rates will increasing by 37 percent on Nov. 1. ISO New England released the news that four large New England coal, oil and nuclear power plants are planning to retire in the next few years, putting further strain on New England’s existing energy infrastructure. Kinder Morgan representatives have given presentations to selectmen and residents in towns across the state. And recently, Kinder Morgan requested to use an expedited “prefiling” process for the NED project with FERC, the Federal Energy Regulation Commission, and on Oct. 3 2014 FERC approved their request.

Kinder Morgan: Some Background

However, some of the most interesting recent events have less to do with local goings on and more to do with Kinder Morgan’s larger activities. First, here is a little background on Kinder Morgan. Kinder Morgan was founded in 1997 and in the past 17 years has gone from being worth $325 million to a combined enterprise value of $125 billion today. Kinder Morgan also has a stronghold in the natural gas transportation industry. The company’s Web site states, “We own an interest in or operate approximately 80,000 miles of pipelines and 180 terminals,” and claims to be “the largest natural gas pipeline and storage operator in the US.” Kinder Morgan’s remarkable business growth most likely has much to do with its strategic planning and aggressive project management.

While the NED project may be the loudest, clearest blinking light on the radar of western Massachusetts residents, they are likely one group among many. Kinder Morgan is also pushing large energy infrastructure projects through western Canada (Trans Mountain Expansion), lower Massachusetts and Connecticut (Connecticut Expansion Project), Ohio, Michigan and Ontario, Canada (UTOPIA Project), as well as Washington, DC to Louisiana (Palmetto Project).

Continued Expansion

And, when viewing Kinder Morgan’s recent activity on the stock market, there are signs that the company is positioning itself for even more growth. Kinder Morgan recently made investment news by breaking out of its MLP, masterlimited partnership, investment structure. Then, on Sept. 25, Kinder Morgan entered into a bridge loan agreement for up to $5 billion to “unify its energy empire into a single company” and KMI, Kinder Morgan’s parent company, is slated to purchase its child companies: Kinder Morgan Energy Partners, L.P. (KMP); Kinder Morgan Management LLC (KMR); and El Paso Pipeline Partners, L.P. (EPB). Alison Sider and Russell Gold quote Richard Kinder, the CEO of Kinder Morgan, in The Wall Street Journal as saying,

Kinder now is so big that the MLP structure is limiting . . .combining all four of its publicly traded units into one corporation will allow us to further expand the reach of the kind of projects we can do.

When viewed from this angle, the NED project symbolizes something more than a natural gas pipeline running through the state of Massachusetts. It exposes a larger change in the US energy system, and possibly beyond.

*this series is based on research about the Northeast Energy Direct Project. While the research was executed in 2014, the project to build the NED pipeline is still underway in the state of Massachusetts, and beyond. More information about the research process, read this:

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