Ohio and West Virginia and Pennsylvania, Oh My!    

Oil Projects
August 3, 2017

 The Rover Pipeline Project continues to be a source of concern and confusion for the industry as environmental violations led this week to a Stop Work Order for the entire state of West Virginia. More than ever before, state agencies are wielding more authority during the permitting process, which now includes an increasingly active role during construction. As a result, project developers and, increasingly, contractors and environmental consultants, are now under the microscope for any missteps. But are interstate natural gas pipelines the only pipes (and not liquids) caught in the crosshairs of states exercising their authority? Sunoco’s recent experience in Pennsylvania with its Mariner East 2 Pipeline Project suggests otherwise.

Gas Pipeline State Snags

Following Rover Pipeline Project’s herculean tree felling success, many believed the project was out of the woods. But with an extremely compressed construction schedule to meet customer commitments, Rover was, based on our historical construction data, left with little margin to meet its planned in-service dates. In response to Rover’s horizontal directional drilling (HDD) frac-out, the FERC staff issued an order prohibiting it from conducting any drilling activities where HDD had not commenced. 

Tensions rose as Rover asserted that it was not subject to the authority of the Ohio Environmental Protection Agency, which may have encouraged FERC to tighten enforcement. In response, the Ohio EPA announced that it was issuing a “unilateral” order requiring Rover to take a number of remediation actions. The FERC essentially adopted the measures proposed by the Ohio EPA, and notified Rover that it would need to complete those measures before Rover would be allowed to place any facilities into service. And so, Energy Transfer officially delayed its in-service date for Phase 1 facilities. 

With those issues as a backdrop, on July 17, 2017, the West VirginiaDepartment of Environmental Protection (WVDEP) ordered Rover Pipeline to “cease and desist” from any further construction. West Virginia determined, as had Ohio, that Rover had failed to meet water quality standards, although under different circumstances. The four laterals and one compressor station involved are all part of Rover’s Phase 2, which, although the company continues to project will be in-service by November 1, now suggests that not only Phase 1, but also Phase 2, may be delayed. The FERC has yet to take any action, suggesting that it is in support of the state’s decisions. What will the impact be for Rover? Its response to the WVDEP may be telling. 

Mariner East 2’s NGL Pipe is Halted

Construction of liquids pipelines — including crude oil, gasoline, diesel and natural gas liquids (NGL) like propane — does not seem to be any less subject to the efforts of the federal and state governments than their natural gas counterparts. Liquids pipelines are permitted and constructed under a different regulatory regime than natural gas pipelines, which primarily provides states with the authority within its jurisdiction. However, federal environmental statutes can’t be escaped, especially the Clean Water Act’s delegation of maintaining water quality standards to the states. This has recently been felt by another Energy Transfer Partners affiliate, Sunoco Logistics, which, during its construction efforts in Pennsylvania, spilled thousands of gallons of drilling fluid (not millions, as experienced by Rover) while conducting HDD operations. 

Sunoco’s Mariner East 2 is a $2.5 billion expansion of the existing Sunoco Mariner East pipeline system. The new pipeline capacity is intended to deliver an initial capacity of 275,000 barrels per day from Ohio through West Virginia, Pennsylvania and Delaware to transport NGL. Following the Pennsylvania Department of Environmental Protection’s issuance of several notices of violation for drilling fluid spills , the agency issued Orders seeking agreement on the remediation of the spills. In response to these agreements, national environmental organizations sought, unsuccessfully, to have the project halted. But earlier this week those attempts proved successful when the Pennsylvania Environmental Hearing Board halted construction activity until August 7, 2017. The Hearing Board’s decision may be appealed to the Commonwealth Court of Pennsylvania. As a result, an initially low risk project being built largely in an existing right of way may be dramatically delayed beyond its Q3 2017 start date. 

Perhaps West Virginia and Ohio have taken their cues from New York by attempting to meddle with pipeline developers (although in these projects, during construction, rather than during initial permitting). On the other hand, the states believe they have identified and rightly enforced environmental requirements, thus shining a spotlight on project developers as well as the contractors and consultants involved. 

Net Receipts of NGLs
PADD 1 and PADD 2 Net Receipts by Pipeline, Tanker, Barge and Rail from Other PADDs of Liquified Petroleum Gases (Thousand Barrels)