Supreme Court lets PSB re-open investigation into Phase I pipeline

MONTPELIER — The state Supreme Court on Feb. 9 gave the green light to the Public Service Board to launch a wide-ranging second investigation into Vermont Gas Systems’ budgeting practices for Phase I of its Addison Rutland Natural Gas Project.
By granting remand, a process by which a higher court sends a case back to a lower tribunal, the Supreme Court ceded jurisdiction to the Public Service Board to consider whether to alter or revoke its December 2013 approval of the project, a 41-mile pipeline through Chittenden and Addison counties.
Monday’s remand differs from a remand the Supreme Court issued for the case last fall because it is not limited by a 30-day deadline, and also it permits the PSB to conduct an inquiry that evaluates not just the cost of the project, but other factors.
Opponents of the project asked the Public Service Board to investigate after incoming Vermont Gas CEO Don Rendall announced this past December a $33 million increase in the budget for Phase I, the second increase of more than $30 million since July 2014. The total cost of the project, now $154 million, is 78 percent more than the figure regulators approved in 2013.
In explaining its reasons for granting remand, the court said the board was free to conduct its investigation “without limitation to its scope,” which project opponents have requested. In its previous investigation, the PSB evaluated only the cost of the project, and not other factors.
The Department of Public Service encouraged the PSB to evaluate whether the project still deserves a Certificate of Public Good, or if that CPG should be amended to reflect substantial changes to the project.
“The facts and assumptions underlying the CPG have potentially changed to such a degree that it is imperative that the Phase I Project be reconsidered in a manner that would allow the Board to evaluate whether it continues to meet the criteria set forth in (Section 248),” wrote Department counsel Louise Porter Jan. 12.
Vermont Gas attorneys argued that the investigation should be narrow in scope.
“The appropriate scope of review should be limited to evidence directly related to VGS’ revised cost estimate,” company attorneys Kimberly Hayden and Danielle Changala wrote Jan. 21.
The July cost hike prompted the initial remand of the case back to the PSB in September. The board wrapped up its investigation Oct. 10 by declining to alter its approval of the project, and allowing it to proceed as scheduled.
The Public Service Board has yet to detail how it plans to conduct its investigation this time around, but the inquiry last fall included testimony and exhibits filed by Vermont Gas, the Department of Public Service and opponents who are party to the case.
Project opponents hope the new investigation includes a discovery phase, during which new evidence may be introduced. They argue that in the 13 months since the project was approved, the economic variables of the project have shifted to the degree that they cannot be relied upon today.
Vermont Gas attorneys oppose introducing new evidence, arguing the process would be an “expansive investigation into numerous facts and circumstances that have allegedly changed.” Instead, the company urged the board to conduct a limited investigation, much as it did this past fall.
Rendall, the Vermont Gas CEO, said he wasn’t worried about the reconsideration of the CPG.
“We have a healthy regulatory process,” he said. “We’ve been up front with the PSB on the cost … and I look forward to an appropriate discussion on the benefits of Phase I.”
The Supreme Court stated that there is no time limit on the remand, but the PSB must update the court on the case every 30 days, starting March 15. Construction on the project is suspended while the ground is frozen, but Vermont Gas plans to send crews back to the site in the spring. The company projects to complete Phase I by the spring of 2016.
On Tuesday Vermont Gas announced that it would not proceed with Phase II of the Addison Rutland Natural Gas Project, a proposed pipeline extension from Middlebury to the International Paper mill in Ticonderoga, N.Y. Vermont Gas officials said the estimated cost of that project had risen from $74.4 million to $105 million, and that IP did not consider it economically beneficial.
Rendall said he believed the PSB would make a decision on the Phase I CPG in a timely manner so that Vermont Gas could proceed with construction of the pipeline. He said that not having Phase II cleared the decks for the company to focus on Phase I.
“We’ll be able to focus on the construction cycle for Phase I,” Rendall said. “It provides us with a greater degree of clarity on our path forward in Phase I.”
Additional reporting by John S. McCright.

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