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How Pipeline’s Cancellation Could Impact the Mountain Valley Pipeline

Source: Pittsburgh Business Times, July 6, 2020

Although the projects were from different companies, the now-canceled Atlantic Coast Pipeline and the Mountain Valley Pipeline had similarities.

They both started in West Virginia and went through Virginia. ACP was to end in North Carolina while an extension of the Mountain Valley Pipeline, approved only last month, would extend it there as well. Both projects began in 2014 and were to carry Appalachia natural gas, which needs the increased access to market. And both were bitterly opposed by residents and environmentalists, and faced legal hurdles that led to billions of dollars of extra spending and years of delays.

The legal and regulatory hurdles are still holding back the completion of the Mountain Valley Pipeline, even as it and ACP had benefited from a Supreme Court ruling last month that allowed ACP to cross the Appalachian Trail. MVP is further along in its construction: The 303-mile route is about 92% built. But MVP and Equitrans Midstream Corp. (NYSE: ETRN), the Pittsburgh-based company that is building and will operate MVP, are awaiting a biological report from the federal government, an appeal of a federal courts stay on a nationwide stream and wetland crossing permit and a stop-work order issued by the Federal Energy Regulatory Commission.

Even with those challenges still ahead, analysts believe MVP will still be built. Even with the ACP cancellation and the legal challenges both pipelines shared, it’s still almost complete and the company has outlined a path to overcome the remaining challenges.

“It doesn’t make a lot of sense to cancel the project because most of the spend on the capital project is behind you,” said Matthew Lewis, senior director of East Daley Capital. “The big question is when.”

MVP said Monday it was committed to putting its pipeline into service in early 2021.

“From the beginning, ACP and Mountain Valley Pipeline have been very different projects, as evidenced by the fact that MVP is roughly 92% complete,” MVP spokeswoman Natalie Cox said Monday. “MVP’s transportation capacity has been fully subscribed since the onset of the project and MVP will play a critical role in meeting the growing demand for a reliable, affordable, clean-burning source of domestic energy in the mid-Atlantic and southeastern United States.”

But MVP has been delayed before, at the cost of both MVP and its partners. The price has jumped to $5.2 billion from a 2014 estimate of between $3 billion and $2.5 billion, and MVP’s in-service operation date has slipped from 2018 to 2021 in the face of vociferous opposition from environmentalists and some residents and court battles.

MVP’s legal hurdles remain but were simplified only last month when the U.S. Supreme Court allowed ACP to cross the Appalachian Trail.

“MVP was waiting on the results of that ruling to make a decision on next steps for their Appalachian Trail crossing, and a favorable ruling for ACP was also a favorable ruling for MVP,” said Anna Lenzmeier, an energy analyst at BTU Analytics. Lenzmeier doesn’t think ACP’s cancellation will have an impact on MVP.

More uncertain is the fate of what is called the Nationwide Permit 12, which allows pipeline companies to cross bodies of water using one single federal permit instead of getting approvals for each crossing. In June, the U.S. Court of Appeals for the Ninth Circuit denied the U.S. Army Corps of Engineers’ attempt to overturn a lower court ruling. Dominion Energy (NYSE: D) and Duke Energy Corp. (NYSE: DUK), which were building the Atlantic Coast Pipeline, cited the Nationwide 12 permit challenges as a specific reason to cancel the project.

Equitrans would prefer to have the single permit but executives have said on previous conference calls that they’re ready to go ahead with separate permits for each water crossing if that’s what it takes to get MVP completed.

Lewis said it’s an open question as to whether Equitrans decides to wait for a Supreme Court ruling on the Nationwide 12 permit or whether it would move ahead one by one.

“This would add time and cost to the project, but with the majority of MVP construction already completed except those waterbody crossings and the Appalachian Trail crossing, it is more likely that MVP pushes forward with alternative methods for permitting,” Lenzmeier said.

But one crossing could get tripped up by legal or regulatory challenges if that’s the approach Equitrans takes.

“There’s a big parallel there between ACP and MVP in that they both face that permitting challenge but that’s not the only permitting issue,” said Peter Anderson, Virginia program manager for Appalachian Voices, a group that fights for clean air and water in the region.

Anderson said the opposition to ACP is much the same as the coalition that is battling MVP as well. He said the region doesn’t need the natural gas from ACP or MVP.

“It’s not supported by any true additional need for pipeline capacity,” Anderson said.

Tom Sanzillo, director of finance for the Institute for Energy Economics, noted MVP was facing significant cost overruns and said the rising costs are putting to risk the rate of return.

“Future delays will impact final decisions. This factor may be offset by the wider customer base that is part of its business model,” Sanzillo said. “The ultimate fate of the pipeline is uncertain.”

Sunday’s news about the cancellation of the Atlantic Coast Pipeline was joined by Monday’s court ruling that shut down the Dakota Access Pipeline, another major pipeline in the United States.

“We are deeply troubled by these setbacks for U.S. energy leadership,” said American Petroleum Institute President and CEO Mike Sommers. “Our nation’s outdated and convoluted permitting rules are opening the door for a barrage of baseless, activist-led litigation, undermining American energy progress and denying local communities the environmental employment and economic benefits modern pipelines provide.”

Kurt Knaus, a spokesman for the Pennsylvania Energy Infrastructure Alliance, a group of skilled labor organizations and chambers of commerce, said the commonwealth and others would be feeling the impact of the ACP cancellation.

“It is catastrophic in terms of the billions of dollars in investments that are lost and the thousands of jobs that are gone,” Knaus said. “And this sudden jolt to the market comes at a time when our national economy could use a lift. The entire Appalachian region will feel the effects over the long term until other energy interstates open up to get our gas to market.”