Vermont Gas pipeline will be on time and on latest budget, despite delays

By John Herrick

For Vermont Digger 

Vermont Gas Systems reported last week the cost to build a natural gas pipeline from Colchester south to Middlebury is unchanged from the company’s latest cost jump announcement, despite a prolonged completion schedule and a pending regulatory proceeding involving the company’s permit to build the project.

The total cost to build the pipeline is still $154 million, according to the company’s quarterly report filed with the Public Service Board on April 17. Though the total project cost remains consistent, the company reported some new costs and savings.

Construction costs have declined by more than $1.1 million since January. Material costs dropped by $1.7 million. The rising cost of construction is one of the top reasons why the total project cost had jumped 78 percent — from $86 million to $154 million — since it was first permitted in 2013.

The cost to obtain easement agreements has also dropped by $740,000, a reverse in rising right-of-way costs reported earlier this year. The company has spent $7.5 million on obtaining property rights to build the pipeline. The project will pass through about 221 properties, of which 31 are without right-of-way agreements. The company filed to begin eminent domain proceedings with two Monkton landowners this month.

New costs balance out the savings. The company expects to pay $4.7 million more on project management costs because of three factors: lost savings associated with the second phase of the company’s pipeline extension, abandoned in February; a postponed completion date from early to late 2016; and the regulatory review of the company’s latest cost estimate.

The company says it has spent $61.5 million on the pipeline, which now stretches 5 miles from Colchester to Williston. The project is scheduled to be completed by the fall of 2016.

“We are committed to remain on budget and on time,” said Beth Parent, a spokesperson for Vermont Gas.

The Public Service Board could revoke the company’s state permit, change it, or approve it again.

Chris Recchia, commissioner for the Department of Public Service, said the latest cost estimate was good news.

“I do think that Vermont Gas has figured out how to manage these costs. I do not expect variations to occur from here on out,” he said.

Competition for pipeline construction has eased since low gasoline prices suppressed domestic oil and gas extraction, according to Recchia. As a result, he said the high demand for labor has eased.

The company abandoned a plan to build a pipeline to connect Middlebury to the International Paper mill in Ticonderoga, New York, after the paper mill withdrew its financial support for the project due to rising costs. The company spent $9.5 million on the project, which was never permitted.

“Phase 2 costs include payment of invoices for work performed prior to December 31, 2014, project work performed in 2015 prior to termination of the Facilities Development Agreement with International Paper, and expenses related to closing down Phase 2,” said Jim Sinclair, Vermont Gas’ vice president for system expansion.

NG Advantage, a Colchester-based compressed natural gas delivery company, announced last Wednesday that it has contracted with International Paper to deliver gas to the plant by truck.

Story via Vermont Digger