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Virginia Law Encourages Utilities to Embrace Shales

Virginia's governor has signed into law legislation (SB 519) intended to incentivize the development of natural gas infrastructure so that residents and businesses can better take advantage of low-cost shale and coalbed methane gas supplies.

"Passage of the law signifies a recognition that this is the right time to plan for and build strategic assets that can bring lower-cost energy, economic development opportunities and other benefits to Virginia's citizens and businesses for decades to come," said Hank Linginfelter, executive vice president of distribution operations for utility holding company AGL Resources, parent of Virginia Natural Gas (VNG).

The law is designed to encourage utilities to build pipelines and other infrastructure in order to bring shale and coalbed methane gas into the state's markets, preferably under long-term arrangements that potentially will reduce gas supply costs and reduce price volatility for consumers.

The measure provides infrastructure cost recovery mechanisms and says that transportation of gas by pipeline, without providing service to end-users within the territory shall not be considered operating in the territory of another certificate holder. It bars the Virginia State Corporation Commission (VSCC) from approving the construction of a natural gas compressor station in an area without the locality's certification only if the area is zoned exclusively for residential use. And the law expands the definition of a strategic natural gas facility to include a natural gas transmission company that adds design day deliverability or designed sendout of at least 100,000 Dth/d in the aggregate.

"This is another in a series of strong public policy moves by a state government that understands the opportunity to support Virginia's economic growth around American, abundant, and affordable natural gas -- this legislation can help to alleviate transportation constraints, capture long-term value to reduce costs for our customers, and help to ensure price stability as well as supply reliability," said VNG President Jodi Gidley.

Under the terms of the legislation, VNG could obtain up to 25% of its supply to meet annual demand for gas through long-term contracts or other investments. Recovery on investments would be based upon the utility's authorized return on rate base and approved in advance by the VSCC. The utility said that over the coming months it will identify projects that qualify under the new legislation.

The legislation was sponsored by state Sen. Frank Wagner (R-Virginia Beach) and Del. Tim Hugo, (R-Centreville). It passed the Virginia General Assembly unanimously in February. The House companion bill was HB 949.

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