Updated at 6:22 p.m.

Vermont Gas on Tuesday canceled a planned second leg of a controversial natural gas pipeline project that would have extended from Middlebury to Ticonderoga, N.Y.

The move came after increased costs prompted the project’s biggest funding source and customer, International Paper, to pull out of an agreement with Vermont Gas, according to Don Rendall, the latter company's president and chief executive officer.

“It was IP’s decision to withdraw,” Rendall said in an interview Tuesday afternoon. “We tried and could not get to a mutually beneficial outcome.”

IP spokeswoman Donna Wadsworth did not respond to a request for comment.

A new assessment of the project showed that costs had increased by more than $30 million, from $74.4 million to $105 million, according to Vermont Gas vice president Jim Sinclair.
 Pipeline opponents, who had argued the project was environmentally risky and that its costs were being understated, heralded the decision.

“I’m excited,” said Mary Martin of Cornwall, whose farm was on the proposed pipeline path. “The first thing we’re going to do is organize a party.”

The change will not affect phase one of the project, a 41-mile stretch under construction from Colchester to Middlebury, Rendall said. But opponents said Tuesday’s announcement gave them renewed drive to fight phase one.

Gov. Peter Shumlin, whose Department of Public Service had backed the project, said he supports the phase two decision, based on the new projections.

“I am determined to get natural gas to Vermonters,” Shumlin said at a press conference Tuesday afternoon. Still, he added, “It has to be affordable.”



Phase two of the project would have connected the pipeline to Ticonderoga’s International Paper plant with a link running under Lake Champlain. Phase one has also seen dramatic cost increases, prompting the Vermont Public Service Board to review whether it should pull the project’s certificate of public good.


The second leg of the project would have allowed Vermont Gas to more quickly connect natural gas to Rutland, a plan that had been dubbed phase three. Vermont Gas still has its eyes on Rutland, Rendall said.


“We will now focus our efforts on completing phase one of our expansion plan to serve Addison County as far south as Middlebury and explore creative options to more Vermont communities, including Rutland,” he said.

Rendall said “$8 million-plus” has been spent planning phase two. The bulk of that will be paid by International Paper, he said, but the exact bill for Vermont Gas has yet to be worked out.

“Our customers will not see a significant impact,” Rendall said.

Vermont Gas previously disclosed that the cost of phase one had increased from $86 million to $154 million, but company officials said they still consider the project viable.

“We are planning to complete phase one,” Rendall said.

The PSB will decide in the coming weeks whether the company will be allowed to do that.

Martin said opponents will continue working to defeat phase one.

"We'd like it thrown out," she said.


Paul Burns, executive director of the Vermont Public Interest Research Group, which opposes the pipeline, acknowledged it would be an "astounding" decision if either Vermont Gas or the PSB halts phase one. But, he said, "I think it's a very real possibility."



A coalition of organizations including Just Power, Rising Tide Vermont and 350 Vermont renewed calls Tuesday to cancel all phases of the pipeline.