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FERC Grants Approval to $1.13B PennEast Pipeline Project

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PennEast pipeline – a controversial project where Southern Company (SO - Free Report) is one of the stakeholders – recently received the Federal Energy Regulatory Commission’s (FERC) approval. Though the decision was lauded by industry advocates and natural gas users, environmentalists have severely criticized the move.

PennEast is a joint venture between Southern Company, New Jersey Resources Corp. (NJR - Free Report) , South Jersey Industries (SJI - Free Report) , Spectra Energy Partners L.P. (SEP - Free Report) and UGI Corp. Each of the companies carry a 20% stake each in the project.

Though the pipeline has been approved, the project is expected to face various challenges before construction work commences this year. One of the major impediments to the pipeline is the expected opposition from the New Jersey Department of Environmental Protection and the Delaware River Basin Commission.

PennEast requires environmental permits from both authorities before the start of construction. New Jersey’s review could halt the pipeline construction and deny a 401 permit on account of violation of the Clean Water Act as the pipeline is expected to traverse 38 cleanest streams of the state, raising concerns.

However, the FERC believes that the benefits from the pipeline will outweigh the environmental concerns. FERC views the pipeline as a vital project for the mid-Atlantic, linking domestic supplies to growing local markets in need of additional clean natural gas. It believes that the 116-mile pipeline will transport natural gas more efficiently and economically from Marcellus Shale area to the residential and business complexes of Pennsylvania and New Jersey in the Mid-Atlantic Region. 

Natural gas is used mainly for electricity generation. Hence, low cost natural gas will lower electricity charges. It will meet the growing demand for clean-burning natural gas in the region and reduce bottlenecks in the interstate pipeline grid.

The $1.13-billion pipeline project is expected to deliver gas to about 4.7 million households at a rate of roughly 1 billion cubic feet per day.It will help in creating additional job opportunities and a reliable fuel supply for the future.

However, despite the FERC approval various green-campaigners and other regulatory authorities are determined to block the project on environmental concerns. In fact, the environmentalists have been censuring the project since its introduction in 2014. Thus a cloud of uncertainty looms over the project.

About Southern Company

Headquartered in Georgia, Southern Company is an electric utility company. The buyout of energy services holding company AGL Resources, Inc. has helped Southern Company to significantly increase the customer base, while diversifying its business by adding gas distribution assets. However, continued delays and cost overrun issues over two large construction projects — Vogtle and Kemper — have weighed on the company’s fortunes. As such, the company is grappling with huge leverage ratio of over 60% which restricts its financial flexibility.

Southern Company carries a Zacks Rank #4 (Sell). Shares of the company have declined 8.5% over a year, underperforming the industry's rally of over 2%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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