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Critics slam latest Palmetto Pipeline filing

  • Photo by JON-MICHAEL SULLIVAN/STAFF - People cheer applaud after a public comment by Au­gusta Chron­icle Publisher Wil­liam S. Mor­ris III at GDOT's final public hearing on Kinder Morgan's proposed Palmetto Pipeline held in Waynesboro, Ga., on Thursday, May 7.

In an eleventh-hour effort to show its Palmetto Pipeline is needed in Georgia, energy giant Kinder Morgan last week filed an addendum to its needs application with the Georgia Department of Transportation.

But critics say the Houston-based company still hasn’t convinced them it merits the authority to condemn property along the petroleum pipeline’s proposed 210-mile route through the Peach State.

In its new 98-page filing, Kinder Morgan argues the pipeline could benefit Georgia by increasing competition and lowering gasoline prices; would meet the future need for more motor fuel; and would reduce truck traffic and thereby improving highway safety.

The $1 billion project would route gasoline, ethanol and diesel from the Gulf Coast and from South Carolina to North Augusta, Savannah and Jacksonville, taking a buried steel pipeline through 12 Georgia counties. In the first of a two-step process, DOT must approve the company’s needs certificate before it can use the power of eminent domain.

Kinder Morgan originally applied Feb. 13 for its certificate of public convenience and necessity; it made its third and largest filing with only 10 days left in the 90-day public process.

“It provides additional data and information regarding what we believe is the public purpose and need of the project,” said Kinder Morgan Vice President Allen Fore on May 7. Fore said the company had filed that afternoon in an effort to do so before the last public hearing that same day in Waynesboro.

The filing came the same day Gov. Nathan Deal stated his opposition publicly.

The company’s last-minute timing undercuts public participation, said Steve Caley, a senior attorney with GreenLaw who has asked the DOT to reject it.

“This stealth filing is tardy, contrary to any acceptable notion of fundamental fairness, and shows the lengths to which Kinder Morgan will go in order to try to get its way,” said Caley, whose firm is representing environmental groups including the Ogeechee and Savannah Riverkeepers and the Center for a Sustainable Coast.

Read the comments in opposition to the pipeline through GreenLaw.

 

Lower prices questioned

Kinder Morgan aims squarely at consumers’ pockets in its latest filing, claiming it will cost 25 percent less to transport a gallon of fuel to Savannah from Baton Rouge than it would by the currently dominant method of piping it to Macon or North Augusta and then trucking it to the retail outlet. About 75 percent of the Savannah area’s fuel is delivered by this latter method.

The pipeline company has repeatedly indicated it can’t control prices that its customers, oil companies such as Exxon Mobil and Marathon, set at the pump.

“Palmetto will not own the product transported in the pipeline and will not set the price of gasoline at the pump, and therefore has no ability to raise or lower fuel prices,” the company writes in the current filing.

Nevertheless, it puts forth possible savings as a project benefit: “Palmetto is needed to reduce fuel transportation costs to consumers,” its submission states. Economists Michael Toma and Richard D. McGrath, both professors at Armstrong State University, note that the company’s limited analysis omits the last key element of fuel delivery.

“The Kinder Morgan savings estimate seemingly assumes consumers will be able to drive their cars up to the pipeline terminal and draw gasoline directly from the pipeline, for it ignores the local cost of trucking fuel from the pipeline terminal to retailers,” they wrote in draft public comment to be filed with the Ga. DOT today. The economists were hired by Savannah-based Colonial Oil Group to critique Kinder Morgan’s application.

In its own comments filed Wednesday, Colonial dove directly into the presumed cost saving. Using the limited information provided by Kinder Morgan, they calculated the savings to the shipper amount to $.0014 per gallon.

“While it is by no means clear that a public necessity justifying the use of eminent domain is implicated by the mere potential for fuel transportation costs savings for unknown shippers (that may or may not be passed on to consumers), Kinder Morgan has nevertheless failed to establish any evidence on the record that the pipeline will yield meaningful transportation cost savings period,” wrote Attorney Harold Yellin of Hunter, Maclean, Exley & Dunn, which represents Colonial. Kinder Morgan has not provided actual costs to ship products on the pipeline. It knows those costs; its tariff schedule was approved by the Federal Energy Regulatory Commission on May 1, but Kinder Morgan has declined to release the information. It required companies that bid on pipeline capacity to sign confidentiality agreements about the rates. What’s known is that the rates are tiered and favor large shippers over small ones.

The fact that the rate structure favors large shippers argues against competition driving prices down in the long run, said Colonial Oil Vice President Ryan Chandler.

“They could ship at a loss until they get rid of the competition in Savannah and potentially in Jacksonville,” he said.

Once that competition is gone, it wouldn’t come back knowing it could easily be crushed again. Colonial, Chandler said, would likely shift its petroleum tanks to accommodate some other commodity.

Then, if ocean freight ever again became the cheapest supply method as it was just five years ago — and Chandler predicts it will be again — the Savannah area would have difficulty taking advantage of it.

“If and when the pendulum swings back — and it will — and ocean freight becomes a viable and dominant source of supply in the South Atlantic there will be infrastructure controlled by an oligopoly to prevent the coastal market from ever taking advantage of it,” Chandler said.

 

Future needs

The Palmetto Pipeline will be designed to carry up to 167,000 barrels a day. Of that, Kinder Morgan estimates about 25,000 barrels will be delivered to the Richmond Hill terminal.

Georgia counties near Jacksonville and those near North Augusta will benefit from the fuel delivered to those two out-of-state terminals, the company has previously stated.

In its May 7 filing, Kinder Morgan makes a new argument that the pipeline is necessary to serve Georgia’s future needs.

The 23 east and coastal Georgia counties near the pipeline will see a 43 percent increase in motor fuel use to 72,000 barrels per day by 2040, the company predicts, backing its prediction with statistics from a 2010 report by the University of Georgia’s Carl Vinson Institute.

Critics smashed Kinder Morgan’s crystal ball, noting the cited study is five years old and its data even older.

Toma and McGrath call the study severely flawed, in part because it failed to account for the effects of federally mandated increases in fuel efficiency. An increase in fuel consumption trending with population growth is also at odds with recent reality.

“Total fuel consumption in Georgia began trending down five years before the Great Recession hit,” they wrote. “In these five years of economic growth prior to the recession, Georgia’s economy grew by 11.7 percent, employment grew by 644,000 workers, and population grew by 10 percent, while total fuel consumption fell 3.8 percent.”

Greenlaw’s Caley was similarly dismissive:

“Vinson’s projections, made in 2010 are comparable to making 25-year horse deployment projections in 1910 at the advent of the automobile’s mass production or 25-year computer and Internet growth projections in the 1990s,” he wrote in public comment filed Wednesday.

The authoritative U.S. Energy Information Administration has projected that consumption will decline through 2040, and so far, its projections of less consumption have been correct.

Two of the Carl Vinson report authors also indicated their data no longer looked viable.

“The numbers are an artifact of a growth period, and the projections were based on a period of high growth,” said Matt Hauer and Wes Clarke in an email, noting both miles traveled and population have proven lower than projected.

“Along with lower than anticipated population growth, there was a decrease in fuel consumption.”

Kinder Morgan did not contact either researcher “to provide context or additional information,” they said.

 

 

Highway safety

Most of the fuel delivered to eastern and coastal Georgia currently comes by pipeline to either Macon or North Augusta and is delivered from there by trucks. The new pipeline with terminals closer to those counties would mean fewer fuel tankers on the roads, with related decrease in congestion and highway accidents and less wear and tear on the roads.

“If the Palmetto Pipeline supplies just half of the current 15,000 barrels per day of fuel to the Savannah area, it will eliminate 13,500 tanker truck trips and 3.9 million miles driven by those trucks annually,” the company’s new filing states.

In its highway math, the company fails to account for the fact that gasoline will still have to be delivered from the terminal to local gas stations. The pipeline wouldn’t remove a single truck from Chatham County roads because suppliers will still have to make those deliveries.

It also incorrectly states that 17 counties would be closer to a Richmond Hill terminal than to existing terminals in Macon and North Augusta, S.C. In fact, Screven and Toombs are equidistant or closer to existing terminals, depending on the route taken.

Toma and McGrath note that for large trucks, it’s the short hauls of under 50 miles that show the highest concentration of fatalities, according to a 2003 U.S. Department of Transportation study. Almost 27 percent of fatalities occurred on short hauls.

“None of which would be avoided should the pipeline be constructed,” they write. A more recent study suggested a more mixed picture.

“Kinder Morgan’s highway safety convenience argument does have some validity, however, it should not be over-stated,” Tom and McGrath conclude.

 

For the record

DOT spokeswoman Jill Nagel said Kinder Morgan had not filed any additional information as of Wednesday afternoon. Public comment will be accepted on the project through Friday. DOT commissioner Russell McMurry is expected to make his decision on the certificate Tuesday.

If it’s granted, Georgia law does not allow an appeal. If it’s denied, however, the company can appeal that decision to superior court in the county where the pipeline company has an agent and place of doing business, most likely Fulton County in this case.

The company would have 30 days from Tuesday to petition the court, whose review would be “determined on the basis of the record before the commissioner.”

If the denial is supported by “substantial evidence” Georgia law instructs that the court shall affirm the commissioner’s action.

Kinder Morgan’s Fore said on May 7 that the company would appeal a denial.

More Info

Breakout Box: 

THE LATEST

What’s in pipeline company Kinder Morgan’s latest filing?

While Kinder Morgan’s May 7 filing with the DOT was 98 pages, only a small portion directly addresses the question of public convenience and necessity by providing new material.

The first 22 pages are previously submitted materials. The last 52 pages are appendices, including the full text of a 2010 Carl Vinson Institute study from which the company pulled two statistics.

A pipeline map, while listed as an appendix, was not included in a printed copy of the comments Kinder Morgan distributed at the final pipeline hearing, nor was it included in an electronic copy obtained from the company.

Read the document online at www.savannahnow.com/palmettopipeline

 

COMING FRIDAY

Check Friday’s Savannah Morning News for a Palmetto Pipeline fact check examining company claims about the project. 

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