Dominion Sells Gas Business and Cancels Atlantic Coast Pipeline, in Clean Energy Pivot.

Dominion and Duke Energy will walk away from controversial pipeline project as U.S. utilities grapple with future role of natural gas.

U.S. utility group Dominion Energy agreed Sunday to sell most of its natural gas business and abandon its multi-billion dollar Atlantic Coast Pipeline project with Duke Energy meant to supply its home-state market of Virginia. 

The announcement marks a major shift for Dominion away from competitive natural gas markets and toward state-regulated utilities focused increasingly on clean energy. Those utilities include Dominion Virginia, its flagship which faces a new state mandate to achieve 100 percent clean energy by 2045, and is asking state regulators to approve a long-range energy plan that vastly increases its stake in solar power, energy storage and offshore wind.

Dominion will sell its 7,700 miles of natural gas storage and transmission pipelines and about 900 billion cubic feet of gas storage facilities to Berkshire Hathaway Inc. for about $9.7 billion including debt, giving a major boost to its goal to reach net-zero emissions of carbon and methane by 2050. The deal still requires approval by federal regulators. Dominion will retain a 50-percent stake in its Cove Point liquefied natural gas (LNG) facility in Maryland while Berkshire Hathaway will acquire a 25 percent stake.

With the sale of 100 percent of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission and 50 percent of Iroquois Gas Transmission System, Dominion expects up to 90 percent of its future operating earnings will come from regulated electric and natural gas utilities serving about 7 million customers in Virginia, the Carolinas, Ohio, and Utah. Those include South Carolina utility SCANA Corp., acquired last year, and Questar Corp., a natural gas utility serving Utah. 

Dominion has long held significant political influence in its home state; laws passed in 2015 and 2018 limited oversight of customer rates and large capital projects from the Virginia State Corporation Commission (SCC). But things have been changing quickly in the Mid-Atlantic state. 

Last year Democrats took control of Virginia’s legislature, and in March passed a 100-percent clean energy law that will force Dominion to supply 30 percent of its power from renewables by 2030 and 100 percent by 2045, compared to about 5 percent today. Dominion Virginia now gets about 25 percent of its power from coal, one-third from natural gas and more than one-third from nuclear power. 

Dominion Virginia’s new integrated resource plan (IRP) submitted in May calls for nearly 16 gigawatts of solar, more than 5 gigawatts of offshore wind, and 2.7 gigawatts of energy storage over the next 15 years. It’s a major turnaround from previous plans rejected by the SCC that would have increased its reliance on newly built natural gas plants, although the new plan doesn’t commit to closing existing natural gas plants. 

Company-wide, Dominion plans to retire more than 4 gigawatts of coal- and oil-fired electric generation by 2025. “Over the next 15 years we plan to invest up to $55 billion in emissions reduction technologies including zero-carbon generation and energy storage, gas distribution line replacement, and renewable natural gas,” CEO Thomas Farrell II said in a statement Sunday.

Dominion’s renewable plans part of a national shift 

Also on Sunday, Dominion and Duke Energy announced the cancellation of the Atlantic Coast Pipeline “due to ongoing delays and increasing cost uncertainty which threaten the economic viability of the project.”

The 600-mile pipeline project across West Virginia, Virginia and North Carolina, has faced years of delays and court challenges, although the U.S. Supreme Court ruled last month that the project could cross the Appalachian Trail, and has seen its costs climb from an estimated $5.1 billion when it began in 2015 to as much as $8 billion, according to estimates this year. 

“As they abandon this dirty pipe dream, Dominion and Duke should now pivot to investing more in energy efficiency, wind and solar — that’s how to provide jobs and a better future for all,” Gillian Giannetti, an attorney for the Natural Resources Defense Council’s Sustainable FERC Project, said in a statement. 

Duke Energy, another huge investor-owned utility, has also vowed to cut its greenhouse gas emissions by 50 percent by 2030 and eliminate its carbon emissions by 2050. But Duke, like Dominion and other utilities making similar pledges, faces significant challenges in finding clean and reliable replacements for natural gas-fired power. 

Berkshire Hathaway Energy, part of the holding company managed by Warren Buffett, already owns large-scale natural gas infrastructure, as well as utility PacifCorp, which provides electric and natural gas service to about 1.9 million customers in six Pacific Northwest and Rocky Mountain states. PacifiCorp has also taken steps in the past year to reduce its reliance on coal and increase its share of renewable energy and energy storage.

Offshore wind farms to be built by Dominion in ocean tracts it holds the lease rights to play a major role in its renewable energy plans. By 2026, Dominion plans to finance, build and own up to 2.6 gigawatts of offshore wind, and it's nearing completion of the country's second offshore wind facility, the 12-megawatt Coastal Virginia pilot.

5 July 2020

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