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PennEast Pipeline Would Have Saved Consumers $890 Million, Study Says

Report says consumers outside gas production region paid seven times more for fuel to heat homes this past winter

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The company that wants to build a natural gas pipeline from Pennsylvania’s Marcellus Shale formation to central New Jersey on Tuesday stepped up its campaign to win public support by releasing a report saying the pipeline would have saved consumers $890 million on energy bills last winter if it had been built then.

PennEast Pipeline LLC said residential and commercial energy users in New Jersey and eastern Pennsylvania have not been able to benefit from low Marcellus gas prices because there is a shortage of pipelines to take the abundant gas to market.

As a result, consumers paid an average of $17 per million British thermal units for gas in January and February last year, or more than five times the rate paid in the gas-producing region of Pennsylvania, according to a study by Concentric Energy Advisors, Inc., a consulting firm.

By the winter of 2015, the differential between the two prices had widened so that consumers in the areas studied were paying around seven times the rate in the production area, the report said.

Unless the 114-mile pipeline is built from Luzerne Co., PA, to Pennington, NJ, gas prices for New Jersey customers are likely to continue to rise as demand outstrips supply, the pipeline’s backers say.

“If the current situation continues to be capacity constrained, it’s only going to get worse and worse,” said Peter Terranova, chairman of the PennEast board of managers, at a presentation to launch the report.

Greg Reinert, a spokesman for the Board of Public Utilities, could not immediately confirm the gas prices cited by the study.

The consultants based their study on the 1 billion cubic-feet a day of natural gas -- enough to heat 4.7 million homes -- that would have been available through the pipeline. They then calculated the energy-price reduction based on lower electricity prices that result from generators burning natural gas rather than coal or oil; the savings by industrial customers buying natural gas; and the lower costs paid by customers of local distribution companies.

Some $530 million would have been saved in electricity costs, while the remainder would result from the lower natural gas directly purchased by homeowners and businesses, the report said.

It followed a February report on the pipeline’s economic benefits by another consultant, which concluded that the project would give a $1.6 billion boost to the areas served, including creating 12,000 jobs, as a result of increased spending by gas customers in response to lower energy prices.

Jim Benton, executive director of the New Jersey Petroleum Council, a trade group, said Marcellus Shale had produced 4 trillion cubic feet of natural gas in 2014, or a sixth of the national output, and had decades’ worth of gas that should be made available to consumers at affordable rates.

“The public expects us to deliver on this bountiful resource,” he said.

Environmentalists, who oppose the pipeline because it represents more fossil-fuel development and because it would run through preserved farmland, dismissed the earlier report, and did the same with the latest study.

“We need this destructive pipeline like we need another flood,” said Jeff Tittel, director of the New Jersey Sierra Club.

He rejected the company’s claims of price disparities because of a shortage of pipelines, saying that the price of natural gas is set nationally, and that other pipelines such as Columbia and Transco bring gas into the area.

“The consumer savings are false assumptions since the price of natural gas is set by the overall market, not just in one area,” Tittel said.

But Terranova dismissed Tittel’s argument, saying the new report shows the gas-price disparity that’s created by a shortage of pipeline infrastructure.

“The only way the differential is going to be eroded is if more capacity gets built,” he told NJ Spotlight.

In an earlier interview, Terranova blamed environmental groups including the Delaware Riverkeeper Network for fueling opposition to the pipeline by owners of land where the pipeline would be built.

“It’s an effort to slow the process down to the point where the project dies,” he said. “They know that by spreading misinformation among the landowners, they further their cause.”

He said the environmentalists’ objections were based on general opposition to fossil fuels and fracking, rather than to the pipeline in particular, and so were less “genuine” than those of the landowners.

Maya Van Rossum of the Delaware Riverkeeper said the organization has been offering landowners advice on eminent domain, and helping them understand that allowing a land survey is not the equivalent of giving their support to the project.

She said her group’s opposition to the pipeline is part of its objection to fracking for natural gas and to fossil fuels in general.

“If you are opposed to shale-gas extraction you need to be opposed to the pipeline that transmits it,” she said.

Terranova said he had been surprised by the strength of the landowners’ objections and would continue to work with them to find a solution.

Environmental groups have been trying to convince landowners that if they withhold permission for the pipeline to be built on their land, then the whole project will fail, Terranova said.

But if landowners say no, the company will either find an alternative route or acquire the land through eminent domain once the necessary permits have been issued, he said.

“What we focus on are the concerns of the people along the route, and those are the folks we are reaching out to and trying very hard to build a dialogue with,” he said. “We are trying to discuss what is the best way to go on your property, or whether we need to avoid it altogether.”

Jon Hurdle is a freelance writer based in Philadelphia.

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