The Virginia Peninsula: utility cul de sac
by James A. Bacon
I don’t envy the poor blokes in charge of economic development for the Virginia Peninsula. The Newport News-Hampton-Williamsburg area has major infrastructure issues — constrained electricity, water and gas capacity — that are hindering economic growth. Any one of these deficiencies would put the 500,000-person sub-region of Hampton Roads at a competitive disadvantage in the economic development game. The concurrence of all three knocks it out of the running for recruiting a broad swath of new industrial prospects.
The Peninsula has landed no new investments so far this year, and only one industrial expansion worthy of a gubernatorial announcement: a $25.7 million expansion of a PrintPack facility, creating 50 new jobs. There was no new-company news last year either, although TE Connectivity and Canon USA did announce expansions.
Hampton Roads lagged the national averages during the current economic recovery, due in large part to a slowdown in military spending. If the Peninsula wants to diversify its economy, it will need to attract new industry. To do that, it must address its infrastructure bottlenecks.
Electricity. In the previous post (“What’s the Hold-up on the Surry-Skiffe’s Permit?”) I noted that the Peninsula faces the likelihood of recurring blackouts next summer after Dominion Virginia Power is compelled to shut down its two coal-fired boilers at the Yorktown Power Station. Even if Dominion gets the go-ahead from the U.S. Army Corps of Engineers (ACOE) to build a controversial high-voltage transmission line across the James River, it will take a year or longer to complete construction. While there will be sufficient capacity from other transmission lines to supply the region with electricity most of the time, hot summer days will put the regional electric grid under severe strain, in which a single mishap could trigger an uncontrolled, cascading blackout. To prevent a worst-case scenario PJM Interconnection, which governs the 13-state transmission grid of which Dominion is a part, will require the company to implement controlled blackouts during periods of peak demand. If temperatures are as warm next summer as this year’s, there could be as many as 20 such incidents.
The ACOE cannot say when it will complete its permitting review process, in which it must balance economic considerations with harm to priceless cultural and historic resources. Local conservation groups and their national allies say that running a transmission line across the James River near the original Jamestown colony would blight the viewshed of the cradle of American history. If ACOE turns down the permit request, the likely fallback option would be extending a high-voltage line from the Chickahominy River to Williamsburg, but Dominion rejected that option previously because of the disruption it would pose to historical and environmental resources as well as residential neighborhoods.
Water. At least there are potential solutions to the Peninsula’s electricity straitjacket. There is no obvious remedy for the region’s constrained water supply. Hampton Roads draws much of its water from an aquifer complex lying under Virginia’s coastal plain. At present, industrial and municipal users are draining the aquifer system faster than it can be replenished by rainfall. Although the underground water should last another 50 years at current rates of usage, it will not be sustainable if big new users start drawing from it. Accordingly, the Department of Environmental Quality has placed tough conditions on any industrial customer filing for a water permit.
Difficulty in acquiring new permits will make it challenging for water-intensive industries to locate in eastern Virginia, states a recent report by the Joint Legislative Audit and Review Commission (JLARC). (See “Amidst Abundant Rain, Eastern Virginia Still Faces Water Shortages.”)
“About 85 percent of local economic developers responding to a JLARC survey reported that availability and affordability of water were important factors for at least one new project during the past three years,” the report says. Survey respondents told JLARC of three incidents in which projects did not materialize due to water permitting issues.
Natural gas. The entire Hampton Roads region, both north and south of the James, is constrained by limited supplies of natural gas. While supply is adequate for the present, Virginia Natural Gas (VNG) had to cut supplies to its interruptible customers (who enjoyed a lower rate in exchange for accepting supply cuts in extreme cases) during the freezing conditions of the so-called Polar Vortex in 2014. VNG is not currently in a position to accommodate new industrial customers requiring a steady, uninterruptible supply of gas.
When Dominion Virginia Power was exploring alternatives to the Surry-Skiffes transmission line, it studied the option of converting the Yorktown coal boilers to natural gas. The company issued a Request for Information from the gas transmission companies serving Virginia (including sister company Dominion Transmission), according to Glenn Kelly, in charge of generation system planning for Dominion. VNG submitted the lowest cost proposal, which would have supplied 300,000 dekatherms per day to connect with the giant Transco interstate pipeline, add some compressors, widen the right of way, and lay new pipe. The project would have cost an estimated $70 million a year over a 20-year contract — some $1.4 billion in all. Dominion ruled it out as uneconomical.
The proposed Atlantic Coast Pipeline (ACP) would link Virginia and North Carolina energy markets with the Marcellus gas fields; a spur would run down to Hampton Roads and plug into VNG’s gas distribution system in Chesapeake. VNG has contracted for 75,000 dekatherms daily to accommodate the next eight years of normal population and economic growth.
Could VNG accommodate a new industrial customer on the Peninsula? Most likely, yes, unless it were on a scale of a power plant or petrochemical facility, says Ken Yagelski, managing director of gas supply for Southern Company Gas, which owns VNG, The ACP has some spare capacity not contracted for, which, assuming it is built, it could deliver as far as Chesapeake. VNG then would move the gas through its lower-capacity distribution system from Chesapeake to the Peninsula, which it could do thanks to the construction in 2010 of the 100,000-dekatherms-per-day Hampton Roads Crossing (HRX). Depending upon the circumstances, VNG might have to invest in new compressors, however, so it is impossible to say ahead of time whether any particular scenario would be economically feasible.
Of course, accommodating a big new industrial customer assumes that the ACP will be built. That project faces intense opposition in the Staunton-Wintergreen area where landowners are concerned about the impact of the proposed pipeline on water supplies, wildlife habitat, viewsheds, safety and property values. Foes say Virginia can meet its future electricity needs through a combination of renewable energy, energy efficiency and load management, none of which require acquiring peoples’ property against their will through eminent domain. The Federal Energy Regulatory Commission (FERC) is expected to rule on the ACP next year.
