FERC Issues Stop Work Order to Rover
Today, the Federal Energy Regulatory Commission (FERC) staff issued an order prohibiting Energy Transfer's Rover Pipeline Project from conducting any drilling activities where horizontal directional drilling (HDD) has not commenced. And in an unprecedented move, the FERC staff has also required Rover to retain an independent third-party contractor to work at the direction of FERC to further analyze all drilling activity at the site of the HDD that suffered an inadvertent return. According to FERC's order, this decision appears to be based on the fact that Rover continued this drilling for almost three weeks, during which time Rover apparently knew or should have known that the drilling mud was not returning to the drill rig.
As we previously reported, on April 13, Rover Pipeline experienced an incident during which an HDD suffered an inadvertent return, which deposited nearly two million gallons of bentonite-based drilling fluid into a state-designated wetland. The FERC staff's order today is reminiscent of FERC's decision to deny Rover a blanket certificate when it approved the Certificate for this project, and does not bode well for Energy Transfer in its request for rehearing on this issue.
The impact of this order on Rover's schedule is difficult to assess, but primarily depends on two issues. First, it does not apply to the 22 HDDs that have already commenced or have been completed, including, apparently, all of the HDDs needed to complete Mainline A. From a footnote in the FERC's order, however, it appears that the order prevents Rover from commencing any of the HDDs needed to complete Mainline B. Second, because the focus of FERC's inquiry is on Rover's HDD activities, FERC allowed all other construction activities to continue. FERC did require Rover to double the number of environmental inspectors per spread to ensure compliance along the entire construction right-of-way. While adding inspectors may cause a slight increase in the inspection budget, there is no clear impact on the construction schedule itself.
The most serious constraint arising from this order that may lead to a delay is simply the time it takes for Rover to solicit bids from companies to serve as FERC's contractor to prepare the mitigation plan described in the order, and for FERC to evaluate and select a contractor. The FERC process referenced in the order is presumed to take approximately 54 days to complete, although it may proceed more quickly and the process may have already begun. Assuming the contractor selection process takes 54 days, and assuming FERC does not allow any Mainline B HDDs to commence until the report is prepared, a July 1 in-service date for Mainline B would be at risk.
The final impact on Rover's overall schedule will depend on how quickly Rover can retain the required FERC contractor, and provide the information necessary for the contractor to complete the analysis and provide its recommendations. It is certainly in Rover's interest to meet these requirements as expeditiously as possible. An additional constraint may be the ability of Rover to find an independent consultant with HDD expertise, given the short supply of this specialized skill set and the number of such consultants that have been used to date by Rover.