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DELAWARE RIVERKEEPER NETWORK925 Canal Street, Suite 3701Bristol,
PA 19007
Office: (215) 369-1188fax:
(215)[email protected]
June 29, 2015 Ms. Kimberly Bose Federal Energy Regulatory
Commission Office of the Secretary 888 1st Street, NE Washington,
DC 20428 Re: Docket No. PF15-1-000: Comments Regarding PennEast
Pipeline Project, Scoping Period Dear Ms. Bose, Attached please
find an expert analysis which, among other things, concludes: Based
on these documents and an independent investigation of natural gas
supply and demand in New Jersey and Pennsylvania, natural gas and
electricity costs in New Jersey, and heating oil use and costs in
New Jersey, I conclude that there is inadequate justification for
approval of the PennEast project. I furthermore find that the
Request for Approval is misleading and disingenuous. It is clear
that PennEast Pipeline Company, LLCs true intent is not to provide
gas principally to markets in Pennsylvania or in New Jersey but,
rather, to deliver gas to interconnecting pipelines or shippers1
that will deliver gas to other downstream markets2 that do not
include Pennsylvania or New Jersey. The proposed PennEast volume of
1 Bcf/d would create a 53% supply surplus above the current level
of consumption.
, it is doubtful that the true intent of the PennEast Pipeline
is, in fact, to supply gas to New Jersey but, rather, to deliver it
to interconnecting pipelines bound for other downstream
markets.
Sincerely, Maya K. van Rossum the Delaware Riverkeeper
20150629-5252 FERC PDF (Unofficial) 6/29/2015 4:13:13 PM
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1
June 18, 2015 Professional Opinion on the Proposed PennEast
Pipeline Project Updated June 18, 2015 I have reviewed all relevant
documents pertaining to the proposed PennEast Pipeline project
including Request for Approval of Pre-Filing Review dated October
17, 2014 (Request for Approval). Based on these documents and an
independent investigation of natural gas supply and demand in New
Jersey and Pennsylvania, natural gas and electricity costs in New
Jersey, and heating oil use and costs in New Jersey, I conclude
that there is inadequate justification for approval of the PennEast
project. I furthermore find that the Request for Approval is
misleading and disingenuous. It is clear that PennEast Pipeline
Company, LLCs true intent is not to provide gas principally to
markets in Pennsylvania or in New Jersey but, rather, to deliver
gas to interconnecting pipelines or shippers1 that will deliver gas
to other downstream markets2 that do not include Pennsylvania or
New Jersey. Insufficient Need for Natural Gas in New Jersey and
Pennsylvania Based on current natural gas supply and demand in New
Jersey and Pennsylvania, there is no apparent need for the gas that
would be transported via the proposed PennEast pipeline. The
proposal is vague about what portion of the approximately 1 billion
cubic feet per day (Bcf/d) would be delivered to consumers in
southeastern Pennsylvania versus New Jersey. It is equally unclear
as to what proportion of proposed PennEast gas volumes would be
used to supply gas to markets beyond Pennsylvania and New Jersey.
In The Request for Approval, the stated purpose of the PennEast
Pipeline is to deliver natural gas to growing natural gas markets
in eastern Pennsylvania, southeastern Pennsylvania, New Jersey and
other downstream markets.3 Pennsylvania natural gas demand has
grown since the boom in Marcellus Shale production (Figure 1).
1 Request for Approval of Pre-Filing Review, PennEast Pipeline
Company, LLC, p.2, October 7, 2014. 2 Request for Approval of
Pre-Filing Review, PennEast Pipeline Company, LLC, p.1, October 7,
2014. 3Request for Approval of Pre-Filing Review, PennEast Pipeline
Company, LLC, p.1, October 7, 2014.
-PSOH-BOFt4VHBS-BOE59
Labyrinth Consulting Services, Inc.
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2
Figure 1. Pennsylvania annual natural gas consumption. Source:
EIA. Pennsylvania is a net exporter of natural gas to other states
so it has no unfilled demand for natural gas (Table 1).
Table 1. New Jersey and Pennsylvania net natural gas deliveries
by interstate pipeline. Source: EIA. Pennsylvania exported 2.5
Bcf/d in 2013 and 2.8 Bcf/d in 2014. It must, therefore, be assumed
that most, if not all, of the gas for the proposed PennEast
Pipeline would go to New Jersey. Since Pennsylvania is a net
exporter of natural gas, I limit the remainder of my analysis to an
assessment of potential natural gas needs of New Jersey beyond
present usage. Existing interstate pipelines supply all of New
Jerseys natural gas demand and New Jerseys natural gas market is
not growing. Natural gas consumption for New Jersey has been
relatively flat for the past four years at average rate of 1.8
billion cubic feet of gas per day (Bcf/d), somewhat below the
higher levels of the late 1990s (Figure 2).
0"
0.5"
1"
1.5"
2"
2.5"
3"
3.5"
1997" 1998" 1999" 2000" 2001" 2002" 2003" 2004" 2005" 2006"
2007" 2008" 2009" 2010" 2011" 2012" 2013"
Billion
s'of'C
ubic'Fee
t'of'G
as'Per'Day''
Pennsylvania'Natural'Gas'Consump:on'
Bcf/d 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
2003 2002 2001 2000 1999 1998 1997New3Jersey 1.8 1.8 1.7 1.7 1.3
1.3 1.2 1.4 1.2 1.1 1.1 1.1 1.1 1.1 1.0 1.0 1.1 1.1Pennsylvania
?2.8 ?2.5 ?1.6 ?1.2 ?0.2 0.0 0.0 ?0.7 ?0.3 0.0 0.0 0.0 0.0 ?0.4 0.3
0.3 0.4 0.6
Net3Natural3Gas3Pipeline3Deliveries
20150629-5252 FERC PDF (Unofficial) 6/29/2015 4:13:13 PM
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3
Figure 2. New Jersey annual natural gas consumption. Source:
EIA. Although consumption increased slightly in 2013 compared to
the three previous years, New Jersey cannot be called a growth
market as the Request for Approval states. For the entire year
2013, the amount of daily increase over 20120.099 Bcf/dwas less
than one-tenth of what the proposed PennEast Pipeline would deliver
(1.00 Bcf/d). New Jersey gas supply is shown above in Table 1. The
small difference between supply and consumption is accounted for by
processing and transportation loss, and compression needs. The
proposed PennEast volume of 1 Bcf/d would create a 53% supply
surplus above the current level of consumption. Marcellus Shale
Over-Supply Marcellus Shale production today can only be described
as an epidemic of over-production. When the play began in earnest
in 2005, the northeastern United States relied on pipeline gas
deliveries from the Gulf Coast. At that time there was a positive
differential price in the Northeast relative to Henry Hub Gulf
Coast pricing. As production has increased, the northeastern gas
market is now near saturation and spot prices are presently at a
negative differential of at least -$1/ million cubic feet compared
with the Henry Hub. The over-supply from the Marcellus Shale is
expected to increase as more wells are drilled. Our forecast calls
for production to increase from approximately 12 Bcf/d in 2015 to
almost 17 Bcf/d by 2020 (Figure 3).4
4 The U.S. Department of Energy EIA Drilling Productivity Report
cites Marcellus gas volumes of 16.5 Bcf/d. That volume refers to
what the EIA calls the Marcellus Region that includes all gas
productionnot just Marcellus gas53 counties in West Virginia, 9
counties in New York, 2 counties in Maryland in addition to 41
counties in Pennsylvania. Our forecast is based on the latest
production data from the Pennsylvania Department of Environmental
Protection.
0.00#
0.50#
1.00#
1.50#
2.00#
2.50#
1997# 1998# 1999# 2000# 2001# 2002# 2003# 2004# 2005# 2006#
2007# 2008# 2009# 2010# 2011# 2012# 2013#
Billion
s'of'C
ubic'Fee
t'of'N
atural'Gas'Per'Day'
New'Jersey'Natural'Gas'Consump;on'
20150629-5252 FERC PDF (Unofficial) 6/29/2015 4:13:13 PM
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4
Figure 3. Total Marcellus (Pennsylvania gas production estimate.
Source: Labyrinth Consulting Services, Inc. The only relief for
producers is to export gas outside of Pennsylvania via new
pipelines and by reversing flow in existing pipelines. The plan to
export gas through the proposed PennEast Pipeline benefits
producers who have consciously destroyed value in Pennsylvania by
providing them with additional markets for their gas. It is unclear
if there is any benefit to the public. Based on the analysis in the
sections above, it is doubtful that the true intent of the PennEast
Pipeline is, in fact, to supply gas to New Jersey but, rather, to
deliver it to interconnecting pipelines bound for other downstream
markets. Although it is certainly the right of mineral owners to
over-produce natural gas at a loss if they choose to and can
justify it to shareholders, it is unclear why FERC should grant
them the means to remedy the unfavorable price environment that
they have deliberately brought upon themselves. Assessment of Fuel
Oil Use in New Jersey Because of the lack of need for additional
supply of natural gas in New Jersey based on the current
supply-demand balance discussed above, I investigated the potential
need for additional supplies of natural gas to replace fuel oil5 as
a source of residential heating need. New Jersey has already made
considerable progress in converting heating use from fuel oil to
natural gas. Today, only 10% of New Jerseys residential heating use
comes from fuel oil (Figure 4). Neighboring Pennsylvania and New
York, by comparison, rely more on fuel oil for 21% their
residential heating needs. At 10% fuel oil use for heating, New
Jersey is near the national average of 6%.
5 Fuel oil is also called heating oil or No. 2 heating oil.
These terms all refer to the same petroleum product widely used for
heating in the northeastern United States and elsewhere.
0
2
4
6
8
10
12
14
16
18
2008 2010 2012 2014 2016 2018 2020 2022 2024
Total,G
as,,P
rodu
ction,Ra
te,,B
cfd
Date
Total,Marcellus,(Pennsylvania),Gas,Production,EstimateBased,on,Type,Wells,&,Well,Schedule
Type,Well,Before 2012.254.1,Bcf/well
3.75,MMscfd,IPb,=,1.25Di,=1.85
Forecast,Assumes,97,Wells Added,
Per,Month(current,avg)
Type,Well,2012.25U2013.25
6.4,Bcf/well5.75,MMscfd,IP
b,=,1.25Di,=1.85
Type,Well,2013.5,Onward8.1,Bcf/well7.3,MMscfd,IP
b,=,1.25Di,=1.85
Actual,Data
Assumes,drilling,stops,once,160,acre,spacing,is,
reached(flatter plateau,expected,
than,modeled)
20150629-5252 FERC PDF (Unofficial) 6/29/2015 4:13:13 PM
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5
Figure 4. Comparison of heating fuel use in New Jersey,
Mid-Atlantic states (Pennsylvania and New York) and the U.S.
average. Source: EIA. Also shown in Figure 4, 74% of New Jerseys
heating needs are already met by natural gas. This is far above the
national average of 48% and above the 54% usage for neighboring
mid-Atlantic states. Furthermore, use of heating oil in New Jersey
is declining rapidly. Figure 5 shows that heating oil use has
declined by almost half (46%) since 2008 and has declined by 59%
since 2000.
Figure 5. New Jersey sales of heating (fuel) oil to residential
customers. Source: EIA. Fuel oil price is indexed to crude oil
price and, since crude oil prices collapsed beginning in June 2014,
fuel oil prices have dropped (Figure 6). The EIA forecasts that
crude oil prices will not reach 2014 levels again until 20286 so
heating oil prices should be reasonable compared with natural gas
prices for at least the next decade.
6 EIA Annual Energy Outlook 2015.
48%$54%$
74%$
37%$
16%$
12%$
6%$
21%$
10%$5%$ 4%$
2%$4%$ 5%$1%$
0%$
10%$
20%$
30%$
40%$
50%$
60%$
70%$
80%$
90%$
100%$
US$Average$ Mid8Atlan
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6
Figure 6. New Jersey fuel oil prices, 2011-2015. Source: EIA.
Based on this data, it is difficult to make a case that New Jersey
needs more natural gas to replace heating oil used for residential
heating above its current supply that amply meets existing demand.
In no case can it be argued that New Jersey needs, much less is
capable of absorbing, the volumes of gas from the proposed PennEast
Pipeline project. Assessment of Natural Gas and Electric Power Cost
in New Jersey Because:
New Jerseys natural gas market is not growing as stated in The
Request For Approval, and New Jersey already uses far more natural
gas for heating than the U.S. national average and than
in adjacent states, and New Jersey does not need to reduce
reliance on fuel oil beyond present low and decreasing
levels,
the cost of natural gas and electric power are the only other
avenues of investigation necessary to understand why New Jersey may
need additional natural gas supply from PennEast or from any other
source. The argument here is that New Jersey customers might reduce
their cost for natural gas or for electricity if natural gas prices
were lower because of more supply or because natural gas might
replace currently more expensive sources of electric power
generation. First, New Jersey natural gas prices are currently only
slightly above the national average as shown in Figure 7.
$0.00$
$0.50$
$1.00$
$1.50$
$2.00$
$2.50$
$3.00$
$3.50$
$4.00$
$4.50$
$5.00$
Jan$04
,$201
0$
Mar$04,$201
0$
May
$04,$201
0$
Jul$0
4,$201
0$
Sep$04
,$201
0$
Nov
$04,$201
0$
Jan$04
,$201
1$
Mar$04,$201
1$
May
$04,$201
1$
Jul$0
4,$201
1$
Sep$04
,$201
1$
Nov
$04,$201
1$
Jan$04
,$201
2$
Mar$04,$201
2$
May
$04,$201
2$
Jul$0
4,$201
2$
Sep$04
,$201
2$
Nov
$04,$201
2$
Jan$04
,$201
3$
Mar$04,$201
3$
May
$04,$201
3$
Jul$0
4,$201
3$
Sep$04
,$201
3$
Nov
$04,$201
3$
Jan$04
,$201
4$
Mar$04,$201
4$
May
$04,$201
4$
Jul$0
4,$201
4$
Sep$04
,$201
4$
Nov
$04,$201
4$
Jan$04
,$201
5$
Mar$04,$201
5$
Dolla
rs'Per'Gallon'
New'Jersey'Residen3al'No.'2'Hea3ng'Oil'Prices'2010
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7
Figure 7. Comparison of natural gas prices among all states.
Source: EIA. Furthermore, New Jersey gas prices are slightly less
than Louisiana and only slightly more than Texas, the two largest
gas-producing states in the U.S. Considering that New Jersey
produces no natural gas of its own, it is somewhat remarkable that
its gas costs are comparable to the two largest producing states.
By analogy to Texas and Louisiana, it is unlikely, therefore, that
more supply would result in lower gas prices to consumers. Second,
New Jersey electric power costs are currently below the national
average (Figure 6).
Figure 6. Comparison of U.S. residential electric power costs.
Source: EIA. The only reason costs are higher than in Texas or
Louisiana is that a very large percentage of electric power in New
Jersey comes from nuclear power plants (Figure 7).
$0.00$
$2.00$
$4.00$
$6.00$
$8.00$
$10.00$
$12.00$
$14.00$
$16.00$
$18.00$
$20.00$
Florida$
Verm
ont$
Alab
ama$
Maine
$Ge
orgia$
Rhod
e$Island
$Arizo
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$Ham
pshire$
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rolina$
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f$Col.$
New
$York$
North$Carolina$
Virginia$
Marylan
d$Pe
nnsylvan
ia$
Washington$
Oregon$
Miss
ouri$
Louisia
na$
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$Jersey$
Arkansas$
Texas$
United$States$
Kansas$
California$
Kentucky$
Oklah
oma$
West$V
irginia$
Tenn
essee$
Ohio$
Nevad
a$Michigan$
Miss
issippi$
Alaska$
Iowa$
New
$Mexico$
Wisc
onsin
$Indian
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Neb
raska$
Illinois$
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sota$
South$Da
kota$
Wyoming$
Idah
o$Mon
tana
$Co
lorado
$North$Dakota$
Dollars'Per'M
MBT
U'
Residen2al'Natural'Gas'Prices'
0"
1"
2"
3"
4"
5"
6"
7"
8"
9"
10"
New
"Ham
pshire"
Wyoming"
Conn
ec>cut"
Maine
"MassachuseB
s"Ke
ntucky"
Rhod
e"Island
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rmon
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Mon
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Neb
raska"
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rolina"
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na"
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ouri"
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"Jersey"
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irginia"
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Tenn
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Residen'al*Electric*Power*Costs*
20150629-5252 FERC PDF (Unofficial) 6/29/2015 4:13:13 PM
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8
Figure 7. New Jersey sources of electric power. Source: EIA.
Nuclear power is essentially a fixed percentage of use because of
long-term capital expenditures that were passed on to New Jersey
ratepayers by the plant operators. Electric power from nuclear
sources is not subject to significant modification because of
additional natural gas supply. As things stand now, natural gas
used for electric power generation is increasing at the expense of
coal, as shown in Figure 7. Summary and Conclusion The stated
purpose of the proposed PennEast Pipeline is:
To deliver natural gas to growing natural gas markets in eastern
Pennsylvania, southeastern Pennsylvania, New Jersey and other
downstream markets.7
It is designed to bring lower cost natural gas produced in the
Marcellus Shale region in eastern Pennsylvania to homes and
businesses in Pennsylvania and New Jersey.8
The Request for Approval reveals that this stated purpose is, at
best, misleading and, at worst, false as far as Pennsylvania and
New Jersey are concerned. I have shown in preceding sections that
there is no justification based on need or cost to bring additional
natural gas to New Jersey via PennEast or any other source. I have
further shown that New Jersey is not a growing natural gas market
and that it already uses far more natural gas as a percentage of
its residential heating use than the national average or in
adjacent Pennsylvania and New York. I have also shown that there is
no compelling case that additional volumes of natural gas are
needed to displace fuel oil or to lower the cost of natural gas or
electricity. It is, therefore, reasonable to assume that the true
objective of the project is neither Pennsylvania or New Jersey as
stated in The Request for Approval but to deliver gas to other
downstream markets outside of Pennsylvania and New Jersey.
7 Request for Approval of Pre-Filing Review, PennEast Pipeline
Company, LLC, p.1, October 7, 2014. 8 Request for Approval of
Pre-Filing Review, PennEast Pipeline Company, LLC, p.2, October 7,
2014.
54%$ 57%$ 56%$
32%$33%$ 38%$
11%$ 8%$4%$
2%$ 2%$ 2%$
0%$
10%$
20%$
30%$
40%$
50%$
60%$
70%$
80%$
90%$
100%$
2010$ 2011$ 2012$
New$Jersey$Sources$of$Electric$Power$
Geothermal$
Hydroelectric$Power$
Total$Petroleum$
Solar/PV$
Biomass$
Coal$
Natural$Gas$
Nuclear$Electric$Power$
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9
Despite mention of local stakeholders that are listed in Exhibit
D9 of The Request for Approval, it is apparent that the primary
stakeholders of the project are:
Marcellus and Utica Shale natural gas producers seeking outlet
markets for an over-supply of natural gas at better pricing,
and
Interconnecting pipelines or shippers that will deliver gas to
other downstream markets that do not include Pennsylvania or New
Jersey.
I quote from The Request For Approval: The Project is designed
to meet the needs of shippers10 seeking:
(i) additional supply flexibility, diversity and reliability;
(ii) liquid points for trading in locally produced gas, including
Marcellus Shale and Utica Shale gas; (iii) direct access to premium
markets in the northeast and mid-Atlantic regions; (iv) the ability
to capture pricing differentials between the various interconnected
market
pipelines; and (v) firm access to long-lived dry gas
reserves.11
Principal interconnecting pipelines that PennEast would supply
include: Columbia Gas Transmission, LLC, Texas Eastern
Transmission, LP, Algonquin Gas Transmission, LLC, and Transco.
These pipelines currently deliver gas to the Boston and New York
markets and may eventually be reversed to carry Marcellus gas to
southeastern markets. Although there may be legitimate reasons for
the PennEast Pipeline project based on supply needs in the
northeast and elsewhere in the U.S. and for potential export, the
proposal is disingenuous in its claim to provide gas for
Pennsylvania and New Jersey. It should, therefore, be rejected in
its present form and sent back to PennEast for revision prior to
further consideration.
Arthur E. Berman Petroleum Geologist
9 Request for Approval of Pre-Filing Review, PennEast Pipeline
Company, LLC, p.53-86, October 7, 2014. 10 My italics for emphasis.
11 Request for Approval of Pre-Filing Review, PennEast Pipeline
Company, LLC, p.2, October 7, 2014. I added bulleted format for
clarity.
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Page 2 of 2
REFERENCES [1] Fifty Years of Paper Making A Brief History of
the Origin, Development and Present Status of the Warren Mfg.
Company 1873-1923; Published by the Warren Mfg. Co., Boston, 1923
Story of Papermaking, Edwin Sutermeister, 1954; Published by S.D.
Warren Co. Chemistry of Pulp and Paper Making, Edwin Sutermeister
ISBN 10: 1230859330/ISBN 13: 9781230859330 Digital Sanborn Maps,
1867-1970; Sanborn fire insurance maps contain not only detailed
information on urban structures and property boundaries, but
detailed process drawings/piping layouts process chemicals employed
for many mfg. facilities/mills [2] Agency for Toxic Substances and
Disease Registry (ATSDR) --Chlorinated Dibenzo-p-dioxons (CDDs)
(extensive information and references to other related
publications). As noted in Summary, They (mainly 2, 3, 7, 8 TCDD)
may be formed during the bleaching process at pulp and paper mills.
--Toxicological profiles: National Technical Information Service
--ATSDR, Public Health Statement for Mercury --Numerous US EPA
Publications including Dec. 1997. Mercury Study, Report to Congress
and subsequent amendments/revisions --Scientific/Engineering
publications cited in the Engineering Index, 1880-present [3]
PennEast Pipeline Company, LLC Pipeline Project, Proposed and
Revised Location Map; online [4] News release, August, 2014; US
EPAs proposed plan to remove and replace soil in residential yards
which contained more than 250 ppt of dioxins; Cleanup of
floodplains down river of Dow Chemicals Midland, Mich. Facility [5]
Records on file with the Hunterdon County Historical Society [6] A
History of PSE&G, the Energy People, by James C. G. Conniff and
Richard Conniff; published by Public Service Electric and Gas
Company, 1978 ISBN: 0-9602014-1-6
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Document Content(s)
DRN Supp PennEast Expert Analysis
6.29.15.PDF.........................1-11
20150629-5252 FERC PDF (Unofficial) 6/29/2015 4:13:13 PM
DRN Supp PennEast Expert Analysis 6.29.15.PDFDocument
Content(s)