Yahoo Finance Williams (WMB) Abandons NESE Project Over Environmental Dispute
The Williams Companies, Inc. WMB has decided not to proceed with the Northeast Supply Enhancement (NESE) project. Transcontinental Gas Pipeline Company LLC (Transco), a subsidiary of Williams, had proposed the construction of a system of 26 and 42inch diameter natural gas pipeline stretching from Pennsylvania through New Jersey to a transfer point about three miles offshore from the Rockaway Peninsula in Queens, New York. The project was aimed to serve a gas utility, National Grid.
Per Williams’ claims, construction of the new pipeline was necessary to meet projected peak demands. The project received approval from Federal Energy Regulatory Commission (FERC). However, the project faced several setbacks including severe backlash from environmentalists.
Notably, New York State Public Service Commission asked National Grid to conduct an analysis and assess the long-term energy needs and potential alternatives to the NESE pipeline. An IEEFA report published in April 2020, marked a sizeable gap between National Grid’s peak demand projection and actual record highs of peak demand, questioning the need for the new infrastructure. The report also highlighted that ratepayers in several areas would have had to pay almost $193 million annually for 15 years.
IEEFA proposed cheap, non-pipeline alternatives and argued that the reasonable response to peak demand would be strategic planning not capital construction. The construction of an unnecessary pipeline would only benefit the pipeline developer and the utility company while ratepayers would need to pay inflated gas rates.
National Grid issued a new analysis in May 2020, citing an alternative that did not require construction of a new pipeline. Afterwards, both New York State Department of Environmental Conservation and New Jersey environmental agency denied water quality certificates for NESE, citing environmental concerns. New York State Department of Environmental Conservation considered the alternative suggested by the utility company involving existing infrastructure enhancements and energy efficiency measures.
Transco did not reassess the project despite water quality denials or the concerns flagged by environmental agencies. Instead, the company obtained a two-year extension from FERC in May 2021.
The pipeline project was scrutinized in the light of environmental, financial and energy-planning issues. Moreover, Moody’s highlighted the project's failure to gain acceptance. The credit rating agency identifies this as part of a trend as several fossil fuel infrastructure projects are losing market validity.
Many citizen organizations such as Sierra Club, 350 Brooklyn, Food and Water Watch, Sane Energy Project, Clean Ocean Action and others conducted campaigns over several years to engage the public and raise concerns about the risks posed by the proposed pipeline. They highlighted various issues, including environmental and climate risks, as well as financial arguments. However, the Williams pipeline was ultimately deemed not only environmentally risky but also a poor investment on behalf of the company.
In April 2023, Transco attempted to get another two-year extension to pursue the project, despite making no efforts to secure necessary approvals from the states. This time, FERC granted an extension only until May 3, 2024. The agency did not reassess the key pipeline issues and disregarded important new information that hinted the project was unnecessary.
However, FERC cautioned Transco that any further extensions would require the company to provide additional proof that suggests that it is actively involved and working on the project, which includes obtaining water quality certifications or redesigning the project to avoid such approvals. In conclusion, Transco decided to abandon the project and not invest more resources into it.
Zacks Rank and Key Picks
Currently, WMB carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the energy sector are Archrock Inc. AROC, SM Energy SM and Eni SpA E.Archrock and SM Energy presently sport a Zacks Rank #1 (Strong Buy) each, while Eni carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
SM Energy is an upstream energy firm operating in the prolific Midland Basin region and the South Texas region. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
Eni is a leading global integrated energy company with a prominent focus on liquefied natural gas businesses. As natural gas has a lesser carbon footprint compared with other fossil fuel, it will play an important role in the global energy transition process. Eni’s participation in the natural gas market will allow it capitalize on the mounting global demand in the future.
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