Dominion’s responsibility to shareholders: Abandon the Atlantic Coast Pipeline

May 6, 2020 12:01 am
Dominion Energy's downtown Richmond building. (Ned Oliver/Virginia Mercury)

Dominion Energy, Virginia’s largest electric utility and a major U.S. energy company, is headquartered in Richmond. (Ned Oliver/Virginia Mercury)

By Freeda Cathcart

A petition asking shareholders to abandon the Atlantic Coast Pipeline is being circulated. Unfortunately shareholders won’t have the power to do so at this year’s annual meeting today.

The U.S. Securities and Exchange Commission has on record two shareholder proposals for the 2020 Dominion annual meeting (Climate Risk  and Human Rights and Climate Justice). However Dominion successfully petitioned the SEC to prevent them from being brought before the shareholders for a vote.

I was a SCANA shareholder. SCANA merged with Dominion on January 1, 2019. SCANA shareholders almost voted for bankruptcy instead of becoming part of the Dominion empire. We had already been burned by the V.C. Summer nuclear plant boondoggle and Dominion’s ACP venture raised concerns about being burdened with another stranded asset.

In a letter to the company’s Board of Directors, I asked Dominion to commission a current analysis to determine if there is an economic necessity for the Atlantic Coast Pipeline.  A current economic analysis would reveal how the impact of the rapid drop in cost of renewable energy would affect the demand for natural gas and if the ACP is needed as an additional transmission line.

The plans to build the ACP were made four years ago and the energy industry has changed significantly in recent years. SCANA shareholders and customers are still reeling over the abandoned V.C. Summer plant that left SCANA with $9 billion of stranded assets. Dominion shareholders and customers have valid concerns that the ACP costs ($8 billion and counting) might continue to rise, especially since court challenges have invalidated numerous permits.

If the pipeline isn’t completed then the shareholders will have the value of their shares decrease due to stranded assets. Another concern for shareholders is last week’s report “Social Cost and Material Loss: The Dakota Access Pipeline,” which concludes the final cost of DAPL was nearly double the initial project cost. “The banks that financed DAPL incurred an additional $4.4 billion in costs in the form of account closures, not including costs related to representational damage.”

Dominion Energy Virginia testified in front of the Virginia State Corporation Commission that it has never studied the need for a new pipeline in Virginia. In 2014 when the ACP was proposed DEV had plans to build more large gas powered electric plants. Since then DEV has canceled their plans to build the plants and have announced they have no plans to build them in the future.

Dominion Energy has a responsibility to their shareholders to not proceed with incurring more construction costs for the ACP until they can establish an economic need for the project, all the necessary permits are in place and all the legal challenges have been resolved.

If Dominion had done an economic analysis for the demand for natural gas then they should have taken action to protect shareholder values like Southern Company did, when it sold its stake in the ACP to Dominion. In December, The New York Times article, “Natural Gas Boom Fizzles as a U.S. Glut Sinks Profits,” warned against the need for new gas infrastructure:

“Nowhere are the declining fortunes of natural gas more in evidence than in Appalachia, where the Marcellus field centered in central and western Pennsylvania was once viewed as the most promising in North America,” it says.

Since my letter:

  • Projected cost of the ACP is now $8 billion.

  • Dominion sent a recent notice to the State Corporation Commission that after the passage of the Virginia Clean Economy Act, a “significant build-out of natural gas generation facilities is not currently viable.”

  • The ACP’s state air permit for its Buckingham compressor station by the  U.S. 4th Circuit Court.

  • Virginia’s AG submitted an amicus brief to the Supreme Court asking them to uphold the blockade of the ACP. It claimed “recent analyses indicate that the demand for natural gas will remain flat or decrease for the foreseeable future and can be met with existing infrastructure.”

  • Energy consulting firm ClearView Energy Partners LLC warned Judge [Brian] Morris’ decision that the Army Corps of Engineers is barred from using the process for issuing Nationwide Permit 12 for any pipelines nationwide.“Consequently, [Atlantic Coast Pipeline LLC]… could be at risk to schedule complications arising from new challenges under NWP 12.”

The ACP is destined to become a stranded asset. The Dominion board and officers have a fiduciary responsibility to act in the best interests of the shareholders by abandoning the ACP. If they don’t then shareholders could abandon Dominion by selling their shares.

Freeda Cathcart was a reinsurance specialist and is an energy investor who lives in Roanoke. She is a Dominion shareholder and a Berkshire Hathaway shareholder. 

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