MVP Completion Target Delayed Again as Costs Rise

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Equitrans Midstream has bowed to environmentalist pressure once again, announcing in a Nov. 3 earnings call that it will delay opening Mountain Valley Pipeline (MVP) until the second half of 2021. Officials also pumped up the gas line's estimated cost to as much as $6 billion -- $2.3 billion more than its original budget. MVP's travails are considered a cautionary tale by the sector that realizes it could be the last gas transportation project built in the Northeast or Mid-Atlantic due to roadblocks that have derailed a number of projects -- most recently Dominion Energy's 600 mile, 1.5 billion cubic feet per day Atlantic Coast Pipeline (NGW Aug.10'20). However, MVP has the advantage of being 92% complete when the Federal Energy Regulatory Commission (FERC) shut down construction on the last 25 miles in October 2019 after vital federal permits were vacated by the 4th US Circuit Court of Appeals (NGW Sep.21'20). Also, the importance of the pipe can't be underestimated; by 2022 the Marcellus Shale could begin seeing serious egress capacity constraints emerging. East Daley Capital Market analyst Alex Gafford said in a report published a day before the Equitrans call that an early 2021 start for the pipeline was "optimistic." "While most work appears complete, MVP's last leg faces large obstacles, including permitting and regulatory issues, stark pushback from environmental groups, difficult terrain to navigate, the coming winter and Covid-19 complications," he said. East Daley analysts now expect MVP to begin service in the 2021 third quarter, Gafford said, which is important as Equitrans is "highly leveraged to MVP's success, with many additional projects and contracts tied to the project's in-service date." MVP is also essential to "the entirety of Northeast infrastructure," he continued, as there is a clear need for MVP's 2 Bcf/d of takeaway capacity and 500 million cubic feet per day of additional compression capacity. On Nov. 3, Equitrans officials echoed many of Gafford's points, attributing the price hike to the more costly task of building the line during the winter, which MVP plans to do in order to make up time lost to legal challenges. The MVP project has had a number of regulatory wins since September that bolstered hopes that the project would come on line early next year (NGW Oct.5'20). In September, the US Fish & Wildlife Service issued a favorable Biological Opinion, essentially saying MVP construction would not unduly impact endangered species, and the US Army Corps of Engineers reissued the project's Nationwide Permit 12 (NWP12). That prompted FERC to allow MVP to restart construction along most of the route, except for roughly 8 miles that includes right of way through the Jefferson National Forest. Considering the last 25 miles is only a fraction of its 303 mile span from West Virginia to southwest Virginia, completion might seem an easy task. But that last stretch is a regulatory and logistical nightmare. "While only 8% of total mileage, the remaining stretch will be the toughest 8%," Gafford said. "The remaining portions cover water crossings, steep upland work and construction through the national forest." In addition, the regulatory quagmire remains. While the MVP project received FERC approval in early October to resume forward construction along the majority of the route, a week later the 4th Circuit Court of Appeals issued a temporary administrative stay of the project’s newly restored NWP12, which prevented construction of water body crossings until the court rules on the full motion to stay. The court has scheduled oral arguments for Nov. 9. Additionally in late October, a challenge was filed against the new Biological Opinion. The Covid-19 pandemic could also present risks, Gafford said, as mobilizing the 4,000 workers needed to complete construction "will be difficult to navigate through the pandemic, especially as some local communities push against it." Gafford notes that 22 Virginia lawmakers have asked the governor to suspend construction until the pandemic is over, "which we view as another proxy issue for NIMBY and environmental opposition. Project opponents have lurked in treetops to catch workers without masks, hoping to stop construction." Tom Haywood, Houston

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