EQT Midstream Partners said Friday that a federal appeals court ruling affecting a water permit for a portion of its 301-mile Mountain Valley Pipeline was a setback that could delay the 2 Bcf/d natural gas project's construction timeline.
Industry research firm ClearView Energy Partners said in a note to clients that the decision may set the project's delivery back by as much as a year, potentially longer. MVP lawyers had previously suggested such an order could delay construction by at least eight months. For now, the operator, a partnership formed by top US gas producer EQT, said it is maintaining its fourth-quarter in-service target while it evaluates its options.
Any delay would be a blow for producers' push for more takeaway capacity from the Appalachian Basin as the project is seen as a key conduit to serve downstream markets, including LNG exports.
"MVP expects to file a request for rehearing," spokeswoman Natalie Cox said in an emailed statement. "And while disappointed with this temporary setback that affects stream and wetland crossings along approximately 160 miles of the route in West Virginia, the MVP team is evaluating options to understand its ability to continue with construction activities that do not include stream and wetland crossings along this portion of the route."
At issue is MVP's Clean Water Act Section 404 stream and wetland crossing permit issued by the US Army Corps of Engineers.
The Sierra Club and other environmental groups have argued that MVP cannot comply with a permit condition to complete four waterbody crossings within 72 hours, and they sought a stay of the permit while the court considers their objections. The operator has countered that the requirement doesn't apply to the waterbodies involved due to the protective method it plans to use to cross them. Late Thursday, the 4th Circuit US Court of Appeals granted the stay. In a brief order, the court said the stay would be in effect pending resolution of the underlying petition for review.
ClearView said that because oral arguments before the 4th Circuit in the full Sierra Club complaint aren't scheduled until the week of September 25, a delay of the project is all but ensured, even if the company, the Corps and the West Virginia Department of Environmental Protection ultimately prevail in defending the permit. How FERC responds to the stay also could affect MVP's schedule, as the environmental groups will likely seek a broader review of all 594 waterbodies the pipeline will cross.
"Although briefing on the case has been expedited, that does not ensure that the court will necessarily rule quickly," ClearView said. "A decision issued six months from oral argument (a relatively quick timeline for an appellate ruling, although timing can vary substantially) would arrive at the end of March 2019, coincident with the conclusion of key work windows limited by the Endangered Species Act and other statutes."
MVP's lawyers warned in a June 1 filing that granting the stay would cause "substantial harm" to the project. "Assuming FERC does not suspend its construction on the entire project should a stay be granted, MVP would be required to suspend construction entirely on 80.6 miles of pipeline in West Virginia, which is roughly 41% of the total pipeline mileage in West Virginia," the MVP filing said. "And the completion of construction would be delayed at least eight months."
MVP said in the filing it would be subject to hundreds of millions of dollars in additional expenses.
"These delays would also delay the date when MVP can begin recouping its substantial investment in the MVP project," the filing said. "When the MVP project is placed in service, MVP will earn $40 million-$50 million per month shipping gas. Each month the in-service date for the pipeline is delayed, MVP will lose the benefit of that revenue."
The court stay is the latest development in an aggressive fight by opponents of midstream infrastructure designed to move more shale gas supplies from the US Northeast to downstream markets.
While projects in the region have faced protracted federal permitting processes and hurdles at the state and local level, some of which have led to delays, work has ultimately been allowed to proceed on a number of pipelines.
OTHER HURDLES REMAIN FOR MVP AND EXPANSION PLANS
MVP -- designed to transport gas to markets in Virginia and North Carolina -- has faced other headwinds. On June 20, Blue Ridge Environmental Defense League asked FERC to halt, until further consultation can occur, construction through a farm in Virginia that the owners and local conservation groups say is archaeologically sensitive. FERC has yet to rule on that request.
The project is a joint venture of operator EQT Midstream, WGL Midstream, RGC Midstream, Con Edison Transmission and an affiliate of NextEra. Shippers include WGL Midstream, Roanoke Gas Company and EQT Energy, the marketing unit for gas producer EQT. A WGL spokesman declined to comment Friday, while Roanoke did not immediately respond to a message seeking comment. EQT Midstream's statement did not address any potential impact on EQT's production targets.
In April, EQT Midstream proposed to add an offshoot to MVP that would extend about 70 miles south from the mainline to new delivery points in North Carolina and service customers of utility PSNC Energy with Appalachian Basin natural gas. At the time, the company said MVP Southgate, which may be operated as a market lateral or an expansion project depending on the outcome of the open season, was expected to start up in late 2020.
