Atlantic Coast Pipeline Closure and Dominion Energy Divestiture Highlight Impact of Environmental Factors on Utilities
Duke Energy and Dominion Energy recently cancelled their Atlantic Coast Pipeline (ACP) project, a natural gas pipeline planned to traverse West Virginia, Virginia, and North Carolina. Dominion coupled this announcement with another that it would be divesting its natural gas transmission and storage segment.
- The utilities announced the pipeline in 2014, and including project exit costs, Dominion and Duke will have spent an estimated $4.3–$5.3Bn in the development and construction of the ACP project
- During the development phase, the ACP project encountered numerous regulatory hurdles, primarily related to state and federal environmental permits. The impacts of these and other hurdles include:
- In parallel to this announcement, Dominion made public that it would sell its natural gas transmission and storage segment to Berkshire Hathaway, underlining the utility’s shift toward its state-regulated businesses—notably its downstream natural gas and increasingly clean energy focused utility segments.
- As Dominion highlighted in its presentation of the sale to investors, a strategic theme the divestiture supports is the utility’s commitment to net-zero carbon and methane emissions by 2050, as the sale will enable Dominion to immediately reduce its emissions footprint.
- Both decisions highlight the impact of environmental issues on a utility’s decision making.
- The cancellation of the ACP project by Duke and Dominion demonstrates how environmental-permitting challenges drove regional risk to pipeline development.
- Dominion’s divestiture demonstrates how some utilities may position their businesses to meet environmental targets and refocus toward state-regulated segments.
 CNN, Energy companies cancel construction of Atlantic Coast Pipeline, https://www.cnn.com/2020/07/05/us/duke-dominion-energy-cancel-atlantic-coast-pipeline/index.html
 Charlotte Business Journal, Duke Energy, Dominion abandon the $8 billion Atlantic Coast Pipeline, https://www.bizjournals.com/charlotte/news/2020/07/05/duke-energy-dominion-abandon-the-atlantic-coast-p.html
 Construction Dive, $8B Atlantic Coast Pipeline project canceled due to legal uncertainties, https://www.constructiondive.com/news/supreme-court-ruling-advances-8b-pipeline-project/579974/
 Duke Energy, Dominion Energy and Duke Energy cancel the Atlantic Coast Pipeline, https://news.duke-energy.com/releases/dominion-energy-and-duke-energy-cancel-the-atlantic-coast-pipeline
 Oil and Gas Journal, Atlantic Coast Pipeline hires main construction contractor, https://www.ogj.com/pipelines-transportation/article/17250126/atlantic-coast-pipeline-hires-main-construction-contractor
 Dominion Energy, July 06 2020 8K SEC Filing, https://d18rn0p25nwr6d.cloudfront.net/CIK-0000715957/b951da4d-8add-45e4-9b20-4bee407d5780.pdf
 Dominion Energy, Dominion Energy Agrees to Sell Gas Transmission, Storage Assets to Berkshire Hathaway Energy– Strategic Repositioning Toward ‘Pure-Play’ State-Regulated, Sustainability-Focused Utility Operations, https://news.dominionenergy.com/2020-07-05-Dominion-Energy-Agrees-to-Sell-Gas-Transmission-Storage-Assets-to-Berkshire-Hathaway-Energy-Strategic-Repositioning-Toward-Pure-Play-State-Regulated-Sustainability-Focused-Utility-Operations
 Dominion Energy, July 6 2020, Dominion Energy Investor Update Call Transcript, p 4-5; https://s2.q4cdn.com/510812146/files/doc_downloads/2020/07/2020-07-06-DE-IR-Dominion-Energy-Investor-Update-Conference-Call-Transcript-6-July-2020-9_00-AM-ET-vTC.pdf
 Dominion Energy, July 6 2020, Dominion Energy Investor Update Call Transcript, p 3; https://s2.q4cdn.com/510812146/files/doc_downloads/2020/07/2020-07-06-DE-IR-Dominion-Energy-Investor-Update-Conference-Call-Transcript-6-July-2020-9_00-AM-ET-vTC.pdf
Additional Contributing Author: Mike Kerrigan
Welcome to ScottMadden!
Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.