Pipeline fund battle continues: Lawmakers seek further review of Governor’s deal with Dominion

Pipeline fund battle continues: Lawmakers seek further review of Governor’s deal with Dominion

Documents show economic benefits were in doubt; schools still waiting on money

- in Environment, Top Story
Tom Betts, vice-chairman of the Nash County Development Commission, spoke in Garysburg earlier this year in support of the pipeline. He promised the project would bring jobs. (File photo: Lisa Sorg)

The $57.8 million carrot is wilting.

The purpose of the voluntary fund, agreed to by Gov. Roy Cooper and Dominion Energy last January as part of a deal involving the controversial Atlantic Coast Pipeline, had already been derailed. But several factors, including some of the governor’s own making, have exposed the agreement to legislative outrage, a power struggle, and election-year opportunism — all on full theatrical display yesterday when Republican lawmakers formed an oversight committee to investigate how and why the fund and its memorandum came about.

“Why did Gov. Cooper think he had the right to appropriate and get these funds?” asked Sen. Paul Newton, a Cabarrus County Republican, at yesterday’s Joint Commission on Government Oversight. Among the lawmakers’ arguments is that Cooper has no constitutional right to raise or appropriate funds. “There have been inconsistencies and omissions.” (Newton also committed his own omission: He neglected to mention that he used to work for Duke Energy, a co-owner of the pipeline.)

“This is starting to smell,” added Sen. Ralph Hise, who himself has been the subject of an ethics complaint involving finances.

This is starting to smell Click to Tweet

The fate of the funds has been in limbo since March when legislators passed a law redirecting the money to public school districts in the eight counties along the route: Northampton, Halifax, Nash, Wilson, Johnston, Sampson, Cumberland and Robeson. Since the original MOU was voluntary, it’s unclear if the utilities will still offer the funds when they are due.

Environmental advocates and concerned landowners along the eight-county pipeline route have posed many of the same questions — and have raised many of the same suspicions — as Republican lawmakers: That the timing of the release of the Memorandum of Understanding — which occurred within a day of the Department of Environmental Quality’s issuance of final water quality permits — was problematic. Adding to the controversy, the governor’s office hired former Dominion federal lobbyist Lee Lilley within a week of the MOU’s signing.

Taken in sum, these actions gave the appearance that the governor was either trying to blunt the inevitable criticism from the environmental community or use Dominion’s contribution as a quid pro quo for state approval of the permits.

(Where the interests diverge is over the Department of Environmental Quality’s repeated requests for additional information from the utilities before issuing the various permits. Significant omissions in the permit applications to the state were well-documented; even on the federal level, the Environmental Impact Statements had major information gaps, especially regarding environmental justice.)

Thus far, there is no evidence of a pay-to-play arrangement. DEQ officials have repeatedly stated that they did not coordinate the permit approvals with the governor’s office. According to notes taken during internal meetings at DEQ, agency officials were discussing a news release on the permit decision as early as Jan. 4 — three weeks before the MOU was finalized.  (The Blue Ridge Environmental Defense League, which obtained the documents from DEQ under the Public Records Act, shared them with Policy Watch.)

Earlier confidential versions of the MOU were drafted in mid-December, but it’s unclear if they were shared.

“The permitting was completely separate,” Gov. Cooper’s Chief of Staff, Kristi Jones, told lawmakers yesterday. “There has been no secrecy in the executive branch.”

There has been no secrecy in the executive branch Click to Tweet

The $57.8 million was to ostensibly help jump-start economic development and renewable energy in eastern North Carolina, while mitigating some environmental impacts of the Atlantic Coast Pipeline. Half the money was to be paid by Dominion and Duke when federal regulators issued final construction approval; the other half was due at the completion of the project. The financial commitment was voluntary and could not be enforced.

The fact that economic development was part of the deal confirmed many critics’ longstanding contentions that the pipeline’s economic promise was overblown. The utilities and business representatives publicly touted the financial windfalls that the pipeline would bestow upon the counties, but privately, the claims were starkly different. In a Feb. 15, 2018, letter to lawmakers, Jones noted that, “Discussions about the fund began in 2017, when eastern North Carolina economic developers and others expressed concerns about whether the pipeline would bring the economic growth it promised.”

Notes from a conference call between DEQ and Dominion about the pipeline and economic development. The notes were obtained by the Blue Ridge Environmental Defense League and shared with Policy Watch, which highlighted the passages.

 

These concerns were validated in notes from a conference call between DEQ and Dominion, dated Nov. 7, 2017. In those notes, which paraphrase Dominion, the company’s rep reportedly said that, “If someone wants to buy gas it is available, but there are no buyers right now … not foreseeable.”

Most of the gas is going to “power generation” — to fuel the former coal-fired plants — the notes say, and to add “reliability.”

“It does provide opportunity,” the notes go on, again paraphrasing Dominion, “but someone needs to build the industry to create the development.

Therese Vick of the Blue Ridge Environmental Defense League, which opposes both the pipeline and the governor’s agreement, said “communities impacted by the Atlantic Coast Pipeline deserve answers from Governor Cooper. Why would he approve an agreement  that made claims he knew were not accurate?”

Part of the money would have ostensibly helped industry, such as manufacturing plants, defray millions in expenses associated with tying into the pipeline. However, at least one county along the route won’t have any connection points. Jennifer Lantz, executive director of Wilson County Economic Development Council, told Policy Watch that “my understanding is the pipeline being built is similar to an interstate being built through Wilson County without exits. The ACP will not have gates or access points in Wilson County.”

And most of Wilson County, Lantz said, already receives natural gas through existing pipelines — and has for more than 20 years. The lack of the ACP has not slowed manufacturing in that county: In just the last 18 months, Wilson has attracted the U.S. headquarters of the Swiss company Neopac, and its manufacturing plant, which is supposed to create an estimated 44 jobs. The pharmaceutical company Fresenius Kabi is expanding its manufacturing to create another 445 jobs over five years, according to state Commerce Department reports.

Duke Energy spokeswoman Tammie McGee said that anyone receiving electric service from Duke Energy or gas service through Piedmont Natural Gas, Public Service — or their local municipality’s service, like the city of Wilson and Rocky Mount — will have access to the Atlantic Coast Pipeline’s resource through these organizations’ extensive distribution networks.

Chris Johnson, who leads the Johnston County Economic Development Office, supports the project, even though the area already has natural gas from an east-west line. The ACP, Johnson said, “would provide additional backup.”

“We’ve missed out on projects,” Johnson said. He said he couldn’t name the industries that have passed on the county, because “we never make it past the initial exploration.”

Recent state Commerce Department figures show that the jobless rate for Johnston County is 3.7 percent, below the statewide average of 4.1 percent. Census data list the poverty rate in Johnston County at 14.6 percent, again, below the North Carolina average of 16.1 percent. However, many communities east of I-95, are disadvantaged, Johnson said, “and that’s what keeps me up at night.”

McGee said Piedmont Natural Gas and Public Service Gas Company will also use the new supply to serve homes and businesses. In turn, manufacturers can receive that gas through existing transmission and distribution systems. “The ACP will not only expand supply,” McGee said, “but just as importantly, it will provide additional pressure needed by new industrial customers to locate their operations in the state.”

School districts waiting for funds

House Bill 90, which is now law, reallocated the $57.8 million to the school districts according to a formula that includes the number of students enrolled and the miles of pipeline in the county. For example, the pipeline will run 11 miles through Northampton County, where the school district enrolls only about 1,700 students. It is slated to receive $3 million. The pipeline route is 37 miles through Cumberland County, whose school district enrolls roughly 50,000 students. It could receive as much as $15 million.

However, none of the districts has received any money. If the utilities decide to abide by the original agreement with the governor, they are not scheduled to allocate any funds until federal regulators issue a final approval for construction. At that time, half the amount — $29.8 million — would be due. The Federal Energy Regulatory Commission has approved construction for two-thirds of the North Carolina route, said Tammie McGee, Duke Energy spokeswoman, but not the entire route.

Earlier this month, FERC ordered construction to stop along the entire pipeline route after the Fourth Circuit Court of Appeals ruled that permits issued for areas in Virginia by U.S. Fish and Wildlife Service and the National Park Service were inadequate. Dominion did not return calls seeking comment.

However, a spokeswoman for the Virginia governor’s office confirmed that the utilities have not paid any funds under that state’s agreement because FERC has not issued a notice to proceed for that segment of the pipeline. Unlike Gov. Cooper’s MOU, the Virginia agreement is between the Department of Environmental Quality and Dominion.

The North Carolina Department of Public Instruction is scheduled to release a report by Sept. 1 on any monies received. That report will be short.

And the governor’s office, said Chief of Staff Jones, is no longer involved in the fund.

“You passed House Bill 90,” she told lawmakers. “It’s in your hands now.”