Energy Transfer's Mariner East 2 - Haunted by a Familiar Ghost?
Development and operation of crude oil and refined products (liquids) pipelines is relatively opaque, thanks to a regulatory scheme that allows for obscured reporting and segmented, rather than centralized, approvals. Presumably, this is to the benefit of the pipeline and, some argue, to the detriment of shippers. Are large liquids pipeline projects such as Energy Transfer Partners' (formerly Sunoco Logistics') Mariner East 2 (ME2) insulated from the project delays that have embroiled its natural gas counterparts? Nope. In fact, just yesterday, two new events occurred that will likely haunt ME2: the Pennsylvania Public Utility Commission (PUC) voted to affirm a ruling to halt construction and the Department of Environmental Protection issued new data requests. And is it possible to leverage - as with gas pipes - operational data (flows and shippers)? Well, sort of.
Liquids (and ME2): Different...
Unlike natural gas shippers, liquids pipelines, by law, cannot disclose their shippers. Instead, shippers bid and contract for capacity in a shielded process inaccessible to the public, even during operations. However, a glimpse of what's to come for liquids pipeline development can be caught during the Federal Energy Regulatory Commission's (FERC) review of the rate treatment that the developer proposes to use in operating its new assets. The process, initiated by a "petition for a declaratory order," offers insight into project scope, rates charged, and, in some circumstances, the shippers that may be impacted by the project. In 2017, there have been 10 petitions (i.e., new projects) filed, which are captured through our daily alerting feature. Are these projects on your radar? Our platform includes all publicly disclosed liquids pipeline shippers and, especially, those with an "economic interest."
Several years ago, Sunoco Pipeline LP filed a petition seeking approval of its proposed rate treatment for ME2. The project, which has become hampered by construction issues and protestor involvement, will extend Sunoco's existing Mariner East pipeline system by approximately 350 miles of pipe in Pennsylvania, West Virginia and Ohio. When constructed, the project will transport natural gas liquids from Ohio and the Pittsburgh area to the Marcus Hook refining facility on the Delaware River for both domestic distribution and export. ME2 will have an initial capacity of approximately 272,750 barrels per day of natural gas liquids, and was initially estimated to be in service by the end of 2016, but is now (optimistically) scheduled to be in service by year end.
...but the Same
But even without federal review of the ME2 project's environmental impact, need, and siting, Sunoco has faced pushback from local landowners and state agencies, much like comparable natural gas pipeline projects. And with a committed in-service date looming and increased industry-wide scrutiny, ME2 is embroiled in multiple issues complicating its completion. Yesterday, the PA PUC unanimously voted to certify a judge's decision to stop Sunoco from beginning work on a Chester County valve station until a trial is held, which may not be until early 2018.
And, to make matters worse, on the same day, the PA Department of Environmental Protection issued another round of data requests for two of eight HDDs at issue. This summer, HDD spills and incidents of contaminated groundwater led to increased reporting and continued oversight by the state regulator. And while the PADEP has yet to sign off on Sunoco's responses to the HDD information requests, legal challenges to the validity of ME2's original environmental permits from interest groups on other issues have ramped up. These issues are unlikely to stop the project, but they reflect the uncertainty and schedule risk inherent in the energy infrastructure regulatory process.
Reporting Changes? Unlikely
The Mariner East Pipeline system, including some other liquids pipelines, are considered collectively as a single set of operating assets, owned by one entity, Sunoco Pipeline LP. As a result, all Sunoco operations and financial results are combined and collectively reviewed by FERC in a single quarterly filing. Oddly, this is not the case for all pipelines; in fact, many pipelines must report at the asset level, which provides a far more useful lens into pipeline fundamentals. A group of liquids pipeline shippers filed a Petition for Rulemaking that requested changes to the filing structure that would, if implemented as filed, make the reporting structure much more reminiscent of gas pipelines. But don't hold your breath for a decision anytime soon.
But that's not to say that detailed fundamental pipeline data can not be garnered from such filings. Interested in crude or liquids activity? For example, Sunoco Pipeline is obligated to provide quarterly reports of the specific types of liquids and the states in which they are received and delivered. LawIQ's data acquisition system collects these quarterly reports for asset level financial data and trunkline traffic, as well as any available intelligence on shippers and other stakeholders with interest in specific systems.
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