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The Michigan Legislature is considering allocating $250 million to help utilities build out natural gas infrastructure, while a separate proposal would require the state to study the use of biogas, which the utilities have branded “renewable natural gas.”
The subsidy, which was approved by the House Appropriations Committee on Thursday and will likely be voted on Tuesday, is strongly opposed by environmental groups and some Democrats.
“This is crony capitalism at its worst and this is not what the government should be doing with these dollars,” said Democratic House Floor Leader Yousef Rabhi. “The utilities have raked in $2B in profits during the pandemic, and they should be spending that money to ensure more people have access to gas. It shouldn’t be up to the taxpayers.”
The bill is largely designed to expand natural gas infrastructure to areas of the state’s Upper Peninsula with homes that are now predominantly heated with propane. With the impending shutdown of the Line 5 gas pipeline, which delivers propane to about 15% of the region’s homes, propane suppliers will soon be forced to truck in propane, which may slightly increase costs.
The shutdown order sparked a conversation about energy delivery in the Upper Peninsula. Gov. Gretchen Whitmer’s Upper Peninsula Energy Task Force on March 31 delivered ideas on how to improve energy delivery and reliability in the region. Among its suggestions are electrification, increased coordination among utilities, and investment in energy efficiency projects. The task force did not call for expanding infrastructure for natural gas, which heats about 57% of the peninsula’s buildings and homes.
The legislation would create a “natural gas expansion fund.” The state’s private utilities could pull from the $250 million pot for projects that expand service to currently “underserved or unserved” areas. The bill claims that the program would help improve “reliability and stability of energy delivery” to those parts of the state while lowering customers’ energy costs.
The fund would be managed by the Michigan Public Services Commission, which would consider utilities’ requests for money. The funding could also be used by utilities to pay for customer assistance programs, though that isn’t a requirement.
The program will be paid for out of the state’s general fund, which is supplemented this year with $2.5 billion in federal COVID-19 relief money. The state’s contribution to the general fund this year is less than $1 billion, so the proposal is viewed by opponents as a giveaway of pandemic relief funds.
It’s drawn fierce opposition from environmental quarters.
“We don’t think it’s a good use of tax dollars from an affordability perspective, from an air quality perspective or from a climate perspective — we do not want to be investing new dollars in gas infrastructure,” said Charlotte Jameson, program director for legislative affairs, energy, and drinking water policy at the Michigan Environmental Council.
The propane industry is likely to oppose it, the bill could win support from the Michigan State Utility Workers Council union and private utilities. It was introduced by Appropriations Committee Chair Thomas Albert and backed by House Republican leadership, and may have enough bipartisan support to pass both chambers. If it lands on the governor’s desk, Whitmer could use a line-item veto because it’s part of the larger budget, but she would also face pressure from labor groups.
However, the bill is relatively new, and it’s difficult to gauge whether it has enough support to pass the Senate, Rabhi said.
“It’s a lot of money for a new program and there might be more opposition once more light is shed on it, so it might end up being a little bit more of an uphill battle than legislators and utilities are thinking,” Jameson added.
The subsidy comes as environmental groups push for the state to invest more in renewable energy and divest from natural gas, which the utility industry calls a “bridge” to renewables. DTE Energy, the state’s largest private utility, is building a new natural gas plant in St. Clair County, and has spent billions on acquiring natural gas pipelines in Pennsylvania and Louisiana during the last five years.
The bill claims that expanding natural gas service “supports the state’s carbon abatement goals,” but environmental groups say that’s clearly untrue.
“Giving $250 million to Michigan’s utilities to expand their fossil fuel infrastructure will be a climate disaster and immediately increase pollutants that disproportionately affect communities of color who have also suffered the most from the pandemic,” said Matt Kasper, research director with the Energy and Policy Institute, a utility industry watchdog. “Instead, our government and utilities must work rapidly to reduce emissions, allocate resources to renewable energy, and boost weatherization programs.”
The money could also fund the build-out of biogas infrastructure. Utilities brand the gas captured from burning organic matter or during off-gassing from landfills or other sources as “renewable natural gas,” and label it a form of clean energy. A separate line item would require the Michigan Public Services Commission to study the feasibility of expanding biogas infrastructure.
Jameson said that the Michigan Environmental Council also opposes that. While there are some beneficial uses such as capturing gas from landfills, the process is generally too expensive, and there are cheaper and better alternatives, such as electrification, she said.
“It’s a little ‘pie in the sky,’” Jameson added.