State Corporation Commission report says Chickahominy Pipeline must face state regulation

Virginia News

Questions raised over "corporate alter egos" that may have been part of strategy to avoid oversight

A caution sign identifying a natural gas underground pipeline

A caution sign identifying a natural gas pipeline in Illinois. (Photo by Tim Boyle/Getty Images)

CHARLES CITY COUNTY, Va. (WRIC) — On Nov. 15, the State Corporation Commission (SCC) dealt a blow to the Chickahominy Pipeline Company, issuing a preliminary report against its request to be preemptively exempted from regulatory oversight.

The pipeline, which is designed to exclusively serve the proposed Chickahominy Power Station in Charles City County, would stretch across five counties in central Virginia. It would transport gas from a major interstate pipeline in Louisa County to the power plant in Charles City County.

Construction on that power plant was delayed after the company decided to pursue its own pipeline instead of relying on preexisting infrastructure built by Virginia Natural Gas (VNG). VNG opposes the project, saying it impinges on their state-mandated exclusive service territory.

This map shows the proposed path of the pipeline. (Map courtesy of Louisa County)

The SCC’s Ruling

On Nov. 15, hearing examiner D. Mathias Roussy, Jr. wrote in his opinion that “Chickahominy would be a ‘public utility’ within the plain language of Code § 56-265.1(b) of the Utility Facilities Act,” rejecting the company’s request that they be declared exempt from the regulations usually applied to public utilities.

The commission will accept comment on the report from the concerned parties before the full panel of commissioners reaches a final decision.

The preliminary report was a win for the counties, environmental organizations and community groups that filed briefs with the SCC calling for them to reject the petition, but Roussy made it clear that this was not a final decision on the project.

“The analysis below does not involve, much less address, whether the planned pipeline should be built,” he wrote.

What the report does mean is that to proceed with construction, the Chickahominy Pipeline Company will likely have to undergo a rigorous regulatory process to receive a Certificate of Public Convenience and Necessity (CPCN).

The Chickahominy Power Station – a nominally separate project that would be served by the pipeline – has already received a CPCN, but the pipeline would need to receive its own approval or be included in an amended CPCN for the plant, a process the company has worked to avoid.

It’s unclear at this time whether the company will seek a CPCN, with a company representative telling 8News, “The SCC procedures are ongoing and being handled by counsel, so it would be premature to comment at this time.”

The Company’s Case

The company’s argument centers on just two words in the Utility Facilities Act: “for sale.”

In a press release posted to the company’s website after the ruling, they said, “Chickahominy Pipeline does not, nor will it, own the natural gas being sold from third parties to Chickahominy Power Generation Station. Chickahominy Pipeline is to provide a service and not to sell a product.”

Essentially, they argued that the gas the pipeline transports is not “for sale” because the company does not sell it to the plant – the interstate pipeline company sells it to the plant, and Chickahominy will simply be an intermediary transporting it.

During oral arguments on Nov. 3, Greg Buppert, attorney for the Southern Environmental Law Center, observed, “Of course, the gas in the pipeline would be gas for sale; it certainly hasn’t been given to the power plant for free; it must be purchased.”

If the full commission endorses the report, it will leave the company with little choice but to seek regulation and approval.

A Corporate Alter Ego?

One question raised by both the environmental respondents and local governments was the nature of the relationship between the Chickahominy Power Station and the Chickahominy Pipeline Company.

The two are nominally independent companies, and during oral arguments Eric Page, attorney for the pipeline, said he didn’t know anything about arrangements made between the two companies, “There obviously will have to be some arrangement between CPLLC, and Chickahominy for the delivery of that natural gas, but I don’t actually, I don’t know if those arrangements have already been made. I’m unaware of them.”

But Buppert pushed during oral arguments for more information on the companies, arguing that it might be useful to hold a discovery process, during which the company would be compelled to hand over certain records. The purpose, Buppert argued, would be to ensure Chickahominy Pipeline was “not merely the alter ego of Chickahominy Power for the purpose of avoiding Commission jurisdiction.”

“We think if Chickahominy Power had proposed this pipeline, it would clearly require a certificate,” he added.

There’s good reason to believe the companies are merely “corporate alter-egos”. According to opencorporates.com, which aggregates data from the SCC, Chickahominy Pipeline, LLC, Chickahominy Power, LLC and a third company, Chickahominy Partners, LLC, all share an address in Herndon and have the same registered agent – Irfan K. Ali.

And NS Energy, an energy industry publication, reports that Chickahominy Power is a subsidiary of Balico, LLC – of which Ali is the managing member.

In an email statement, a representative of Chickahominy Pipeline denied any connection, saying, “As for the relationship among the entities, each is an individual, stand-alone entity; Balico provides developmental services.”

Cautious Celebration

Buppert wrote to 8News that he was “pleased” with the hearing examiner’s report and that the SELC, other environmental organizations and community groups “look forward to the Commission’s final decision in the case.”

Glenn Cox, a landowner who has been opposed to the pipeline since he first learned of the proposal, welcomed the decision. Just five days before the ruling, he and other landowners received another letter from the pipeline company.

“They ‘want us to want’ the pipeline,” he wrote in an email to 8News, quoting the letter. “Geez, I don’t want this pipeline. I don’t like their chance of trying to convince everyone to help them.”

According to Mary Finley-Brook, a University of Richmond professor who provides technical support to Concerned Citizens of Charles City County, the letter is “full [of] mistruths.”

In the letter, the pipeline company writes, “Chickahominy Pipeline is not seeking regulation by the State Corporation Commission as a Utility.”

While that may have been true at the time, the company nmay be left with few alternatives to seeking a CPCN – a fact that landowners may not be aware of.

The letter also claims that “more than 160 of your neighbors have already granted us permission to begin our survey.”

Citizens Against Chickahominy Pipeline urged landowners in a Facebook post not to make any decisions without consulting a lawyer. Without a CPCN, the pipeline does not have the power of eminent domain and must seek permission from landowners to conduct surveys and, ultimately, begin construction on the pipeline.

Read the full report below:

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