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PIPELINES

MVP's 2023 Start-Up Looks More Solid, But Opponents Steadfast

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Mountain Valley Pipeline (MVP), which appeared to be teetering just six months ago, is poised to cross the finish line next year after picking up support from key members of Congress and the White House. But sponsor Equitrans Midstream still must persuade the Federal Energy Regulatory Commission (FERC) to extend its deadline for completion by October, or it's game over.

In a second-quarter earnings call this week, Equitrans CEO Tom Karam said he is now confident that the 303-mile, 2 billion cubic feet per day pipeline from Bradford, West Virginia, to southern Virginia will secure key federal permits vacated by the Fourth US Circuit Court of Appeals, allowing the final 6% of construction to proceed. Those permits largely would allow the pipe to cross sensitive streams and wetlands.

“MVP’s joint venture partners and customers have made a compelling case for the necessity of the pipeline,” East Daley Capital analyst Alex Gafford told Energy Intelligence this week. “Producers will be unable to grow without additional egress opportunities, and given MVP’s journey, it’s highly unlikely another comparable greenfield pipeline will ever be proposed.”

Those arguments have been buttressed this summer by the surge in demand for US gas abroad amid the Russia/Ukraine conflict, and by growing constraints on additional output from the Marcellus Shale needed to slake demand in the US Southeast.

Perhaps even more notable, US Sen. Joe Manchin (D-West Virginia) secured commitments from President Joe Biden, Senate Majority Leader Chuck Schumer (D-New York) and House Speaker Nancy Pelosi (D-California) to have the vacated permits reissued as soon as possible. The pledges were part of a side deal to ensure that Manchin backed a broader energy, climate and tax bill he had earlier quashed.

Opponents, Backers Make Their Case

That is quite a turnaround for the long-delayed project, which just emerged from a bruising public comment period on its request for FERC to extend its approval by four years. Equitrans already secured a four-year reprieve in 2018.

Opponents included a bevy of environmental lobbies that say damage already caused by construction would worsen if MVP is allowed to restart work. They also argued in filings that MVP itself is responsible for not meeting its original deadlines, as its own actions caused vital permits to be vacated.

But individuals also flooded FERC with hundreds of letters opposing the extension. Many were landowners along the route who reported what they claimed were devastating impacts of the construction on their properties.

One of them, Karolyn Givens of Blacksburg, Virginia, detailed how MVP construction destroyed a cave near her property and caused ongoing flooding and erosion on her historic farm. Many landowners said they have endured such problems for years and begged FERC not to extend their ordeal.

While lawmakers have weighed in on both sides of the issue, West Virginia Gov. Jim Justice urged FERC to “act without delay” to approve the extension and work with other federal and state agencies to ensure the vacated permits “are reissued expeditiously.” He estimates that the state has lost more than $100 million in ad valorem taxes from construction delays.

The North Carolina Manufactures Alliance (NCMA) noted that many of its members rely on natural gas that is growing more scarce in the region as power generators switch from coal to gas.

Also, the cost of that gas is exploding due to “severely limited capacity” on a fully subscribed Transcontinental Gas Pipe Line (Transco) mainline system — the chief supply source for the state. This one-two punch of scarcity and expense curbs expansion of gas-dependent operations and the creation of new ones, the NCMA said.

The cost of gas in Transco Zone 5 that encompasses Virginia and the Carolinas has blown out recently as constraints on the mainline in Louisiana shave already limited supply. The day-ahead price average in July ran a $4.60 per million Btu premium to the Henry Hub. But an unusually high premium predated the constraints, averaging more than $2/MMBtu so far in 2022, Energy Intelligence data show.

Duke Energy Carolinas reinforced NCMA’s position by arguing that MVP will “address existing and growing demand for incremental natural gas supply in the Transco Zone 5 market.”

Duke said its ability to generate power for its 4.2 million customers in the two states not only demands that gas generation be expanded as coal plants are retired, but the additional gas-fired power will enable the nation’s most ambitious deployment of renewable resources.

Extension Considered Likely

Analysts tell Energy Intelligence that despite the robust opposition, a FERC extension is effectively in the bag. Not only is there clear precedent for approval, the case for not extending the deadline to October 2026 is weak, ClearView Energy Director Christi Tezak told Energy Intelligence.

“The opponents to the extension generally argue that FERC should reconsider its original decision,” she said. “The commission has made clear it will not consider arguments that relitigate such an order, including whether the commission properly found the project to be in the public convenience and necessity.”

However, an extension does less to improve MVP's chances of coming on line in the second half of 2023 than Manchin's proposed legislation, according to Tezak.

"We think that this materially improves their odds of hitting their in-service target as it would give the agencies plenty of political cover to move forward with an expeditious but still robust review,” she said. “Since the permits were vacated earlier in the year, our view has been that they may be fixable. What has changed is the improved outlook for receiving new permits late this year or early next year because the agencies will prioritize versus back-burner the reviews.”

While Gafford agreed, he and Tezak both noted that reissued permits — allowing those last environmentally sensitive water crossings and for crossing the Jefferson National Forest — must still pass muster with the appellate court in Richmond, Virginia.

“Those still pose a difficult last leg of permitting,” Gafford said. “As we close on the end of the year we should have more visibility into how those court proceedings and permits are playing out and if [Equitrans’] timeline remains realistic.”

MVP officials are certain the end is in sight, said Karam, who reiterated that pooling service is targeted to start “during the second half of 2023 at a total project cost of $6.6 billion.” The project was already 94% complete when the key federal permits were pulled.

Putting MVP on a 2026 timetable does not signal that its opening is expected to be pushed back, Karam explained. Instead, it is meant to coincide with a FERC-approved deadline extension for the 75 mile Southgate Expansion Project, which would carry 300 million cubic feet per day of gas from MVP’s terminus in southern Virginia into North Carolina.

2023 Opening For MVP?

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Topics:
Gas Pipelines, Gas Demand, Policy and Regulation, Midstream Companies
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