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STATE BY STATE N e w s 12 DECEMBER 2014 | FUEL OIL NEWS | www.fueloilnews.com of have paid for the existing infrastructure that they are utilizing. FON: Most businesses, including those in our industry, have to find ways to pri- vately fund their expansions. And natural gas utilities are hardly unprofitable. Herb: You have a system that is rigged. These are basically uneconomic invest- ments that are able to come to fruition because of subsidization. We hear about how the government has subsidized solar projects or wind projects and this is very much the same thing except this is subsi- dized by ratepayers instead of taxpayers. Northeast Utilities is a $17.5 billion pub- licly traded commodity with a guaranteed rate of return. Therefore, they have no com- petition and they always make money. They have a tremendous amount of sway, and we saw, in my opinion, the governor campaign within a hair of illegal fundraising. Utilities are considered contractors and therefore they cannot contribute to the governor's campaign, but they did give money to a fed- eral political action committee that in turn brought that money back to Connecticut. They took a long way around, but the money still ended up for the same purpose and clearly violated at least the spirit of the law. It's also, in my mind, a much more man- ageable industry politically with more natural gas. The government has to deal with two companies—three natural gas utilities, but two of them owned by one company—so it's almost one-stop shopping for the govern- ment. They don't have to do a lot, because they already have a whole agency designed to regulate the utilities. When you have to deal with heating oil and propane dealers you have to work harder. FON: What function does the envi- ronmental angle play as a legal weapon in the fight? Herb: Because it was the governor's plan that was codified by the legislature and sent to the regulators, there is a law called the Connecticut Environmental Protection Act. It's been around since the late 1970s, and basically what it says is that if you are going to engage in any project that is going to have a significant environmental impact then a plan needs to be devised to mitigate that. They failed to do that environmental impact evaluation. We did not file this suit initially because the only conversions that were hap- pening were "on main," so there were no new pipes. It was when we started getting feedback that some activity was starting we said they are going to start on this 900 mile expansion, and now they need to comply with the laws. And if they are not, we need to have the courts compel them to do so. FON: While you use any legal option you can to achieve an outcome, I would think the issue at stake rises above a legal technicality. Herb: One of the basic underlying reasons of the suit is that in Connecticut, if you have an underground storage tank it needs to be removed every 30 years whether it's leaking or not. If you have an above- ground storage tank, you had to spend tens if not hundreds of thousands of dollars to upgrade them to SPCC compliance. Part of this lawsuit is just that it is fundamentally unfair for billion-dollar corporations to not have to comply with the law, when small mom-and-pop operations have to. If you have a guaranteed rate of return I would almost argue that you would have to live up to a higher standard. They are leaking about 300,000 metric tons of methane per year in Connecticut, and we believe the law will require them to repair that. FON: Aren't they supposed to be main- taining their systems anyway? Herb: One observation we've had is that utilities, under almost any circumstance, do not want to spend their own money. They like giving dividends to their shareholders, and the retained earnings, but they do not like to spend money. The one thing we think that will at least come through this lawsuit is that they will be required to fix leaking lines, and instead of willy-nilly ripping up people's front yards and state forests they are going to have to make alternative plans. Which, at the end of the day, could significantly drive up the cost of the product, and they are going to have to determine whether they want to invest their own money to make some of these things happen, or in some cases not do them at all. I'm not sure what the courts will compel, but I do know that the law will be clearly a driver in them making decisions. If they don't have to comply with the law, they can basically do whatever they want. FON: What is the outcome you want to achieve with the lawsuit? Herb: As information gets out we've seen projects pause or stop in Massachusetts and Vermont, because the more informa- tion people have about the costs to be paid over many years they decide that maybe this isn't the best solution. We're hoping some of that comes to Connecticut. The more time that goes by the more we see these prices [oil and natural gas] mov- ing toward each other the better off we are. At the end of the day, natural gas expansion going into Connecticut was being driven by ideologues that finally had the unique point in time where gas was finally less expensive. I think that once there is less economic justifi- cation, it's going to be harder and harder to get consumers to make the choice to convert, especially since gas is not cleaner anymore. FON: So how is this going to play out in the coming months? Herb: Right now the lawsuit is in some- what of a holding pattern. We filed it about a month ago, and at this point we have another 60 days for the state to respond. We anticipate there will be a motion to dis- miss, and if that is granted then we're out of the court battle. Our attorneys believe we have at least a 50-50 chance of overcoming that, and if we overcome that our chances of success appreciably increases. It becomes a much easier to convince the court that they need to comply with the law. We're going to know that around the first of the year, maybe at the holiday period, and we will continue to be advocates throughout the regulatory process and legislative pro- cess. I don't believe, with the governor being reelected and our current climate, that we are going to see significant policy changes. But, we do have a number of friends in the legislature and the more educated policy- makers become about methane and the damage that occurs when it leaks—that's been a slow learning process but now it's become more mainstream.