An Unlikely Energy Potentate

By Nov 20, 2012, 10:12 AM Author's Blog  

A new energy power has emerged in a remote, mountainous region along an international frontier. The residents of this region, which has an active separatist movement, now control the flow of fuel into a neighboring jurisdiction, where political turmoil has halted the extraction of natural resources.

We are talking about Vermont and New York.

International Paper, which employs around 600 workers at a mill in Ticonderoga, N.Y., has announced a plan to run that mill on natural gas instead of oil. This makes a lot of sense. New York, after all, has large reserves of natural gas that could be used to run the plant for less money and with less pollution.

But International Paper will not be using New York gas. Earlier this fall, New York Gov. Andrew Cuomo effectively blocked his state’s access to its portion of the estimated 489 trillion cubic feet of natural gas located in the Marcellus Shale formation, which stretches from Ohio and West Virginia northeast into southern New York. Following a wide-ranging, nearly-four-year study of practically everything related to the drilling process, including the potential public health hazards of hydrofracking, the governor made the surprising announcement that the results were inconclusive. Regulators headed back to square one, and the end date for the review process slipped years into the future.

As I wrote at the time, the move allowed Cuomo to appease environmentalists by blocking fracking in the Empire State for years, if not forever, without requiring him to take a position against drilling that could alienate landowners who want to cash in on gas reserves. It was the same strategy President Obama used last year to head off any decision on the Keystone XL oil pipeline.

So, instead of using gas from the Marcellus Shale, the edge of which is no more than a few hundred miles from Ticonderoga, International Paper will get its gas from wells in Alberta, Canada, more than 2,000 miles away. The paper manufacturer has struck a deal with Vermont Gas, a subsidiary of Quebec-based Gaz Métro, to extend the Vermont Gas distribution system beneath Lake Champlain to New York, where the IP mill could tap it. The agreement, however, requires approval after environmental reviews in New York and Vermont.

Vermont residents may be skeptical. Unlike New York, Vermont does not have any of its own natural gas resources to develop. The pipelines run by Vermont Gas reach only a small portion of the state. In the rest of Vermont, residents cook and often heat their homes with bottled propane that is delivered to each household by truck. While Vermont Gas is also seeking to expand its network to serve a few additional areas in Vermont, the spur beneath Lake Champlain would simply enable a Canadian company to deliver Canadian gas to New York, to support jobs and commerce in New York. This is not likely to be greeted enthusiastically in the Green Mountain State.

Then there’s a monster to be considered.

Lake Champlain is the reputed home of Champ, or the Lake Champlain Monster. First “sighted” in 1883, Champ is, unfortunately, as elusive as the better-known Loch Ness Monster. Despite more than 300 sightings, there is still no proof of the monster’s existence. (I was once sent by a feature-hungry editor to visit towns on the New York side of the lake where residents claimed to have recently sighted Champ. I came back convinced they were more interested in spotting tourists.)

This has not stopped those in the region from embracing their local monster. Champ is the mascot of the minor league baseball team, the Vermont Lake Monsters, and his alleged image graces many signs in the region. Champ’s reticence may pose serious problems for the environmental review boards charged with looking at the consequences of the pipeline. Without knowing more about the monster’s physiology, how will regulators determine whether the pipeline might disrupt his habitat? True, the proposed pipeline would run beneath the lake bed, not on top of it. But who’s to say a shy monster in an inland sea does not like to pretend he is a gopher?

Maybe Champ will make it into the environmental review, maybe he won’t. I think it’s entirely possible that a few researchers think the sightings are signs of an as-of-yet-undiscovered species living in the lake. But either way, Champ may be an apt symbol for the concerns environmental activists will inevitably raise.

Natural gas pipelines are quite safe, and the rare but spectacular accidents do damage when they happen in populated areas, not beneath bodies of water. In the unlikely event of a leak beneath the lake, any escaped gas would, at most, simply bubble up through the water and escape into the atmosphere. There is no danger of the sort of pollution that could be caused by a rupture in an oil pipeline. But the environmental crowd has become convinced that anything related to the burning hydrocarbons is bad, and some may resort to seeing a log as a monster to garner support. These “sightings” may not be enough to stop the project, but they could keep it tied up in regulatory review.

It’s possible that, even if New York was extracting natural gas from the Marcellus Shale, International Paper would find it more cost-effective to tap into the nearby Canadian network than to create new infrastructure to pump New York gas northward to Ticonderoga. But using its own reserves would at least give New York control over its own economic development, rather leaving it reliant on the whims of its neighbor.

For now, however, Montpelier will have its moment as the region’s unlikely energy potentate. New Yorkers just have to hope that Vermonters have never heard the expression “fuhgeddaboudit.”

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