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Marcellus/Utica Pipeline Project Expected to Generate Millions For State Economies

Construction and operation of the Atlantic Coast Pipeline is expected to have a significant economic impact in West Virginia, Virginia and North Carolina, according to a study commissioned by the four utility companies behind the project.

The roughly 550-mile pipeline, designed to transport Marcellus and Utica shale gas produced in West Virginia to power plants and businesses in Virginia and North Carolina, would cost an estimated $4.6 billion. Construction is expected to begin in 2016 and continue through 2019, with a tentative in-service date of 2018. Dominion, Duke Energy, Piedmont Natural Gas and AGL Resources announced the project in September and have since made a prefiling with FERC and expect to file a formal application next summer (see Daily GPI, Oct. 31).

Land acquisition and expenses related to the construction of the pipeline and associated compressor, measurement and regulation stations are expected to account for the bulk of the project costs. Those one-time construction costs, according to a study conducted by Virginia-based Chmura Economics & Analytics, would generate a combined annual average of $456.3 million for all three state economies and support about 2,900 jobs during development from 2014 to 2019.

After that, once the pipeline is operational, the study said it would have a combined annual economic impact of $69.2 million and support roughly 271 jobs throughout the region. Chmura examined the income taxes, increased sales and the revenue generated by distributing natural gas to businesses and residential customers, among other things, to calculate its direct and indirect estimates.

Virginia is poised to benefit the most, according to the study, as more than half the pipeline, or 292 miles, will be situated there. Another 78 miles would run through West Virginia and 178 miles would be located in North Carolina. As a result, about $2.5 billion in capital expenditures will be made in Virginia, which the study would generate $236.5 million in economic impacts.

The pipeline would help pair growing natural gas demand in Virginia and North Carolina with increasing supplies in West Virginia. According to Dominion, from 2008 to 2013, demand for gas-fired electric power generation grew by 459% in North Carolina and 123% in Virginia. The U.S. Energy Information Administration's 2014 Annual Energy Outlook reported that overall, demand for natural gas for all uses grew by 50% and 37% in North Carolina and Virginia, respectively, between 2008 and 2012.

Dominion also said property taxes -- based on current tax formulas in each state and locality -- paid to counties and municipalities by the pipeline could ultimately exceed $25 million per year. Dominion has estimated that counties and municipalities along the proposed route would receive $23 million in property tax payments in 2020 and increase to more than $25 million beginning in 2021, when the full value of the project is ultimately reflected in tax payments.

Chmura estimated that the ongoing operation of the pipeline could generate annual tax revenue of $418,443 for all three state governments beginning in 2019.

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