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Spire pipeline flap in Missouri reveals deeper questions about natural gas

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Natural gas arrives at Spire's Laclede/Lange Delivery Station in north St. Louis County in July 2021. Credit: Robert Cohen/St. Louis Post-Dispatch via AP

Spire Missouri has spent weeks telling its St. Louis-area natural gas customers that they might go without heat this winter, all because of a legal challenge to a pipeline one of its affiliate companies built in 2018.

The claims have prompted rebuke from clean energy advocates and elected officials who say the utility is needlessly and disingenuously spreading alarm and fueling threats against an environmental organization.

As the back-and-forth reached a fever pitch last week, a development Thursday at the Federal Energy Regulatory Commission pointed to a likely extension of the pipeline’s emergency permit, cooling the issue for now. 

The temporary resolution, though, will do little to settle a broader if lower-profile debate simmering in the state over the role of natural gas. 

Demand for natural gas in the St. Louis area is projected to remain flat or decline, as filings by Spire and its opponents have acknowledged. Clean energy advocates say rather than building new pipelines and natural gas infrastructure, the state should be investing in energy efficiency, electrification and renewable electricity generation that can replace natural gas. 

As they see it, Spire was hoping to build public support for natural gas by stirring up emotions over the pipeline permit even though there was virtually no chance FERC would order the pipeline shut down during the winter. 

“The (STL) pipeline is part of the industry’s larger goal of putting infrastructure in the ground to make it harder to make the necessary transition, the transition we have to make if we are going to battle catastrophic climate change, away from their very dangerous product, methane gas,” said Michael Berg, Missouri Sierra Club political director. “It’s part of a larger strategy of Spire and the gas industry.”

Some customers clearly did see the challenge to the pipeline permit as an attack on natural gas, as shown by messages sent to the Environmental Defense Fund, which filed the lawsuit on behalf of Illinois landowners in the pipeline’s path that led to the court decision.

“I can’t afford to fix my thermostat, and convert my house heater into an electric one, so the gas wall heater is the only thing keeping this disabled person from freezing to death this winter,” said one note. Others were much more menacing.

Spire did not provide an interview or answers to emailed questions for this story.

‘Self-dealing’ without demand 

In 2016 when Spire sought approval for the new pipeline, there were five existing natural gas pipelines serving the St. Louis area and Spire had passed up chances for contracts with other proposed pipelines. This was noted by a federal appeals court judge in a June 2021 opinion that ruled the pipeline never should have received federal approval. 

Spire Missouri sought to contract with an affiliated company, Spire STL Pipeline LLC, to build a $220 million, 65-mile-long pipeline from a hub in Illinois to St. Louis. Spire Missouri would pay Spire STL to transport gas, charge its customers for the cost and a 10% to 14% rate of return. 

In 2018, FERC approved the plan and the pipeline was built.

The federal appeals court blasted the approval, with Judge Harry Edwards writing the commission “ignored record evidence of self-dealing and failed to seriously and thoroughly conduct the interest-balancing required” to decide if the pipeline was in the public interest. He noted that the commission is only supposed to approve projects that show “market need,” so that existing customers are not subsidizing construction that won’t benefit them.

The federal court accused FERC of having an “ostrich-like approach” on the case, and said that FERC’s decision was “arbitrary and capricious” given evidence that “the proposed pipeline is not being built to serve increasing load demand and that there is no indication the new pipeline will lead to cost savings.”

The pipeline’s cost ultimately ballooned by about 30% to $287 million. In its lawsuit EDF noted that by contracting with its affiliated company to transport gas in the pipeline, Spire was essentially paying itself but charging ratepayers and earning a return on investment from that same revenue.  

“Thus ratepayer costs which may not be justified by ratepayer demand are being converted into shareholder return,” the lawsuit argued.  

Raising alarm

The court’s decision vacated FERC’s approval and mandated the commission reconsider the case.

An email Spire sent to customers this fall said a “New York-based environmentalist group challenged the government agency’s approval process,” referring to the Environmental Defense Fund.

The email went on to warn of service disruption if the permit isn’t extended and said: “We’ve created an emergency plan to reduce the potential impact for residential customers and businesses that provide critical services. And we’ve been coordinating with local authorities and emergency management professionals, so the St. Louis community is prepared.” 

Spire also launched a website warning residents they might lose gas or need to turn down their thermostats and avoid using appliances, and asking them to contact FERC. 

Berg said he and other advocates believe Spire’s campaign may be intended to build support for natural gas and antipathy toward electrification initiatives more generally. 

“Spire’s got an interest in keeping this pipeline open indefinitely or making sure they don’t have terms on the pipeline that lessen their profit margin,” said Berg. 

“Now that it’s been built, there is literally no party asking (the permit extension) not to be approved – that’s been known for months, and yet they are launching a massive PR campaign to scare the people of the St. Louis region into thinking New York environmentalists are trying to make them freeze in the winter and Spire is protecting them. 

“They’re setting this up to blame people other than themselves for their own bad decisions in order to protect their profits. Everything about this is reckless and irresponsible and should not be allowed.”

In 2019, a state appeals court ruled that Spire had wrongfully billed ratepayers for replacing service pipes that were not worn out, and ratepayers should be refunded. In response, the state legislature in 2020 passed a law that gives utilities more leeway to replace pipes even if they are not degraded. 

Berg said he sees this as one more way the utility is sinking ratepayer money into infrastructure in hopes of cementing reliance on natural gas and their profits into the future. 

The bigger picture

Proposing the STL Pipeline in 2016, Spire argued that while demand was not increasing, the new pipeline would increase reliability and avoid reliance on “mature natural gas basins.” 

Henry Robertson, an attorney for a Missouri resident who filed suit, noted that the Rockies Express pipeline accessed by Spire’s STL draws gas from Wyoming, Colorado and Appalachia, where fracking has caused massive environmental damage. 

“This perpetuates drilling for fracked gas, that’s destructive and polluting,” he said. While it’s not clear what options FERC and opponents have now that the pipeline is operating, Robertson said, “At the very least they need to make the shareholders pay for it rather than the ratepayers. And at some point we’ve got to stop approving new fossil fuel projects. Electrification with renewable energy is the way to go.”

The Missouri state legislature put up an electrification roadblock this year when it passed a law preventing local governments from prohibiting natural gas hookups in new construction. Some cities nationwide have done so, most notably in northern California, but no such local laws were in the works in Missouri, experts say. The city of Columbia had included incentives for electrification of home heating in its climate action plan, and some Missouri environmentalists have hoped to further the conversation around using electricity — ideally generated by wind and solar — to heat homes and water. 

When the state legislature passed HB 734 last spring, Missouri became one of at least 19 states that explicitly ban local ordinances mandating electrification of new buildings, according to S&P Global, which noted that such laws “prohibit the very policy that the IEA (International Energy Agency) now endorses as a viable and efficient pathway to achieving net-zero emissions by 2050.”

Missouri’s neighbors Kansas, Iowa, Arkansas, Oklahoma, Kentucky and Tennessee also have such bans in state law. Indiana legislators last spring passed similar legislation, to the outrage of consumer advocates who note that, as in Missouri, no local entities had yet proposed electrification ordinances.

Carolyn Amparan, chair of the Osage Group Sierra Club in Columbia, said residents are proud of the climate plan that also includes the state’s most ambitious energy efficiency codes and a target of 30% renewable energy by 2029 and 100% by 2050. The plan calls for incentives for developers to install electric heating in new buildings. Environmentalists are also pushing the city to opt for electric heat in its own new city buildings, Amparan said.

Missouri currently gets about 70% of its electric power from coal, so electrifying heating will only be a meaningful way to reduce greenhouse gas emissions when more renewables come online.

Amparan said she and other residents prefer incentives to mandates around electrification in the near-term, but they are angry the “ban the ban” state law takes away local control and puts constraints on their opportunities to push for cleaner energy.

“It actually does save the developer or buyer more money upfront to not have to put in the natural gas connections,” she said. “And natural gas actually causes quite a bit of indoor air pollution that most of us are not aware of. Third, there’s the safety factor with natural gas connections in your home. You do have issues with potential fires, explosions, carbon monoxide. 

“There seem to be very compelling reasons besides climate change to move away from gas. We’re going to persevere, to do what we can to incentivize people to make the switch, to work with developers to create energy efficient homes that also are electric homes.”

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Bob Meinetz's picture
Bob Meinetz on Nov 24, 2021

"Clean energy advocates say rather than building new pipelines and natural gas infrastructure, the state should be investing in energy efficiency, electrification and renewable electricity generation that can replace natural gas."

The world of clean energy advocates is a wide one, full of people who understand energy and people who don't. The ones who don't believe renewable energy replaces natural gas. It doesn't - it requires more natural gas consumption. And more, and more.
Multiple studies, in the U.S., France, and elsewhere, show adding wind and solar to a power grid increases gas consumption and carbon emissions. Though that might be a tough pill to swallow for advocates, it's time they take their medicine and stop talking about things they don't understand.

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