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State, Advocates Call For Increased Scrutiny Of Vermont Gas Project

State officials and pipeline opponents are calling on regulators to reassess the merits of the Vermont Gas Systems pipeline after the company announced a second major cost increase in December.

“At some point, the costs of a project such as this could overwhelm the benefits,” wrote Louise Porter, an attorney for the state Department of Public Service, in a filing to state regulators. “The department cannot say at this time whether the second revised cost estimate approaches that tipping point – however, it is clear that the margin is shrinking.”

The Department of Public Service is one of a number of groups calling on the Vermont Public Service Board to open an in-depth inquiry into Vermont Gas’ project management, increasing costs, and ultimately whether the pipeline is still worth building.

Incoming Vermont Gas CEO Don Rendall announced in December that Phase I of the company’s pipeline project will likely cost as much as $154 million. That announcement came less than six months after the company announced an increase that sparked frustration among opponents.

The result was a 78 percent increase in the estimated cost of the pipeline in the second half of 2014. Now, environmental groups, the Department of Public Service and a fossil fuel lobbying group are all calling for increased scrutiny on the project.

The groups are also asking the Public Service Board to consider the project in light of new market developments, including falling oil prices, increasing natural gas prices and the increasing viability of cold weather electric heat pumps as alternatives to traditional heating.

For the most part, though, all the groups emphasize an increased need for oversight given that Vermont Gas has had to adjust its cost estimates twice in such a short period.

“The department bases this request not on any lofty legal principle,” Porter wrote, “but instead on the common sense principle that where two cost increases follow in such rapid succession, it is important to take a step back and thoroughly evaluate the company’s numbers and processes.”

The Vermont Fuel Dealers’ Association, a lobbying group representing fuel oil and petroleum distributors, argues that the financial information Vermont Gas put forward in order to get the project approved have proven wrong, and that the regulators who approved it need to reexamine whether the pipeline is worth building in current economic conditions.

“The economic expert for VGS [Vermont Gas Systems] predicted that the cost of oil would increase,” VFDA attorney Richard Saudek wrote in a filing to the Public Service Board. “In fact, it has dropped like a stone.”

Saudek argues that VFDA’s market predictions in earlier proceedings proved prescient while Vermont Gas numbers didn’t hold.

“VGS’ economic arguments and public relations campaign are built on numbers written in sand,” Saudek wrote.

The main number all parties are concerned about is the total price. When the project was approved by regulators in December 2013, the most recent estimates from the company, based on “quotes from equipment vendors, discussions with contractors familiar with the work and historical costs from similar projects,” were at $86.61 million.

Now, based on estimates that are expected to be fully explained by Vermont Gas on Thursday, the project is set to cost $154 million.

Vermont law allows the Public Service Board to require an amended "Certificate of Public Good" permitting a project when there are changes significant enough that they could cause the board to change its ruling on a project.

If, as Porter put it, “the costs of a project such as this could overwhelm the benefits,” the board could decide to reopen proceedings and ultimately revoke the Certificate of Public Good for the project.