Dominion Energy, a huge (one of the biggest) gas and electric utilities (and power generator) in the U.S., as well as a major pipeline company, issued its first quarter 2019 update last week. Our main concern and focus with the update is what Dominion said about the 600-mile, $7-$7.5 billion Atlantic Coast Pipeline (ACP) project. Given the ongoing lawsuits by radical green groups that have delayed the project and skyrocketed costs, Dominion CEO Tom Farrell said “it’s been a very frustrating process,” but “we are winding our way through it…and we’re making progress.” Farrell still plans to restart construction of ACP (currently stopped thanks to lawsuits) in the third quarter of this year.
We include the full Dominion 1Q19 update and slide deck at the bottom. Immediately below we’ve extracted from the conference call all of the passages dealing with ACP.
First up, from Tom Farrell’s prepared remarks:
And finally, with regard to Atlantic Coast Pipeline and Supply Header. As shown on slide 11 an appeal to the Supreme Court with regard to the Appalachian Trail crossing will be filed before the end of the second quarter. We believe that the Solicitor General of the United States will join that appeal.
We continue to pursue legislative and administrative options as well. Oral arguments on the biological opinion case are scheduled for next week with a decision expected within 90 days. We expect to recommence construction on the project in the third quarter. There has not been any change to expect the time line or costs since our last earnings call or Investor Day meeting.*
From the Q&A portion of the call…
A question about whether or not Williams’ proposed Transco “backhaul” solution may compete with ACP:
Greg Gordon
Two questions. One — and I appreciate if you’re limited in how much you can answer this. But as it pertains to options for ACP, it’s probably as if not more frustrating for investors as it is for you to watch this political process delay what is obviously a necessary piece of infrastructure. But the way that this — that you’re going to face construction here, is it possible that the portion of the pipeline that’s impacted by the biological permit, assuming that that’s resolved and you complete construction, could still become a functioning infrastructure asset by backhauling gas off Transco and still serve your customers should you have an extensive period of uncertainty with regard to resolving the Appalachian Trail issue?
Tom Farrell
Greg, I’ll start the answer. And Diane, can fill in any details. The Transco backhaul solution is not a solution, does not meet our customers’ needs on any kind of long-term basis. Our customers need infrastructure from a different supply basin. For example, the state of North Carolina has exactly one pipeline that serves the entire state, Transco. That’s why the policy-makers in North Carolina ask for additional gas infrastructure to be built into North Carolina that is not Transco. It’s in addition to Transco’s lines. We have full confidence in the biological opinion case. The Forest Service follow the guidelines that were given to them by the court and completed that reissuing of the biological opinion. And so we’ll see what happens, but we believe we’ll be under construction in the third quarter. Diane you can answer additional points on the timing.
Diane Leopold
No. We are talking with the customers and we have looked at phased-in service and we will — we’re in active negotiations with them. They have reaffirmed the need for a permanent solution to be able to have the independent infrastructure and supply to meet their needs.
Greg Gordon
Great. And just as a follow-up to that the — you’re very clear in your presentation that that Supreme Court path is the primary path here to hopefully get a solution. You continually allude to these other potential administrative options, but haven’t wanted to “negotiate against yourselves” in public by articulating what they might be. Is there anything at this point that you can articulate with regard to those solutions? Or are you still not feeling like that’s appropriate to discuss?
Tom Farrell
Greg, there are several. But at this point we think it’s better to stand where we are.*
When will Dominion disclose the “administrative fix” it has for ACP. After the U.S. Supreme Court decides whether it will take the case?
Shar Pourreza
Just a real quick update or just to follow-up on ACP. And obviously fully understand why you don’t want to negotiate with yourself as far as administrative or legislative. But as investors are sort of thinking about the timing, are you sort of waiting for a SCOTUS affirmation that they would take on the case, before coming out with something – before disclosing what the administrative fix is? Or are they – so I guess how are we thinking about the timing and versus what SCOTUS’ decision is?
Tom Farrell
It’s a very perceptive question. I think we need to just stand pat with what we’ve said about Atlantic Coast Pipeline Supply Header for now. We’re working through the process. As Greg Gordon mentioned a few minutes ago, it’s been a very frustrating process. But we are winding our way through it. Calendar is slipping and we’re making progress. We believe that the Solicitor General will join us in this appeal no guarantee of that. We believe that he will that has a very high percentage of acceptance by the Supreme Court. When that occurs – and that’ll take some additional time and there are other avenues that we just feel it’s better not to talk about right at the moment.*
Are you actively considering other alternatives if the courts say you can’t cross the Appalachian Trail?
Angie Storozynski
Okay. Thank you. And just one follow-up on ACP. So again, I understand that there are few comparisons between MVP and ACP. But MVP seems to be suggesting that rerouting the pipe through private lands was a potential alternative. And so could you comment if that’s a possibility for ACP like last resort? And if it is, why didn’t you consider that to start with? I’m talking about the crossing of the Appalachian Trail?
Tom Farrell
No I understand. There are a lot of possibilities, Angie. That is one. And what we may or may not have considered some years ago I’ll just — I’ll leave for after we have finished our court arguments for — after we finish with the courts on all these issues and/or get our solutions. We’ll be happy to talk through with folks all the process we went through over these last few years.
There — as I’ve said, there are lots of alternatives. And we just don’t think it’s useful at this time to talk about them. I appreciate the frustration level. Believe me. One thing Greg said about how he thinks the investor community is as frustrated as we are, I’m not sure that that’s a possibility.*
*Seeking Alpha (May 3, 2019) – Dominion Energy, Inc. (D) CEO Tom Farrell on Q1 2019 Results – Earnings Call Transcript
Dominion’s full, official 1Q19 update:
Dominion Energy Announces First-Quarter Earnings – May 3, 2019
…
Latest slide deck, used during the conference call:
Dominion-Q1-2019-earnings-call-slides-vTC
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