BURLINGTON (AP) -- The cost of extending a natural gas pipeline south from the Burlington area to the Addison County communities of Middlebury and Vergennes is going to cost 40 percent more than first thought, the company planning the project said.

On Wednesday, Vermont Gas announced building the new gas line will cost $35.6 million more than originally planned, to a total of about $121.6 million.

Vermont Gas says the new estimate is due to increased costs that coincide with a surge in natural gas production and changes to the project to accommodate people living along the route.

Vice President Jim Sinclair said the cost increase for the pipeline expansion isn’t surprising.

"We made several route adjustments off public lands and design alterations requested by communities and landowners, resulting in higher easement and other costs," he said.

Sinclair said it is too early to determine how the cost increase could affect rates paid by future customers. In any event, the natural gas would still offer Vermont Gas’ future customers significant savings over other sources of energy.

Geoff Commons, director for public advocacy for the Department of Public Service, said the utility regulating Public Service Board will study the impact of the price increase on the economics of the project.

The project is the first phase of what is intended to be a three-phase project that will eventually extend natural gas service to Rutland with a spur under Lake Champlain to serve a paper mill in Ticonderoga, New York.