Mounting Hurdles for Mountain Valley Pipeline and Atlantic Coast Pipeline
In prior Insights , we’ve worked to untangle the mounting litigation complexities tied to EQT’s and NextEra’s Mountain Valley Pipeline (MVP) and Dominion’s Atlantic Coast Pipeline (ACP). Recent events that have threatened the viability of a permit required for both projects in Virginia, the Water Quality Certificate (WQC), brought many of these issues to a head. Today, we examine the following three fundamental questions: (1) what is the geographic scope for each of the issues facing the projects; (2) who needs to approve any resolution of each issue facing the projects; and (3) how will resolving these issues impact each project’s timeline.
As explained below, we believe the critical path issue for MVP is the decision of the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) to vacate the use of Nationwide Permit 12 (NWP 12). For ACP, the critical path is negotiating its way through a series of challenges to restore three essential federal authorizations.
If you are a producer waiting for these new outlets for your production, a shipper waiting for a new source of supply, or an investor in one of the companies involved, the timing of the in-service dates for these projects will certainly impact your decision-making. As set forth below, there are real risks to both companies being able to meet their projected in-service dates.
MVP’s Path is Straightforward (Sort of)
Of the two projects, MVP’s challenges are easier to understand. Until last week, there were really only three remaining obstacles to MVP’s path forward:
- The Fourth Circuit voided the right of way for the project through 3.5 miles of the Jefferson National Forest, which primarily impacts work in that portion of the project.
- The Fourth Circuit vacated the use of NWP 12 in a portion of West Virginia, finding that the project could not meet certain special conditions of West Virginia’s programmatic WQC, including a prohibition on the use of NWP 12 for pipelines greater than 36 inches and a requirement to complete the construction of river crossings within 72 hours. The lack of a valid NWP 12 impacts only wetland and waterbodies in the U.S. Army Corps of Engineers’ (USACE) district covered by the challenged NWP 12 (Huntington District). However, after the court vacated the use of the NWP in the one district, two other USACE districts (Pittsburgh and Norfolk), which cover the remainder of the project, suspended their verifications until the issue is resolved in West Virginia. Therefore, at least for now, MVP may not work in wetlands or waterbodies across the entire project.
- A challenge to the project’s FERC certificate is pending before the U.S. Court of Appeals for the D.C. Circuit, but the court has not issued a stay. So, at least for now, the project is not impacted by this action.
- Last week, a fourth issue arose, when the Virginia State Water Control Board voted to reconsider its WQC for MVP, and the Virginia State Attorney General filed suit claiming that MVP had violated the WQC conditions and sought to impose penalties on MVP for those violations. To date, neither of these actions has limited the ability of MVP to continue construction.
Of these four issues, we believe that the critical path is the court’s decision to vacate the use of NWP 12 in West Virginia. The court strongly hinted in its opinion that the “best” and perhaps “only” way to cure the problems would be for West Virginia to issue a project-specific WQC after providing the public with an opportunity to comment on any proposed conditions.
However, it appears that MVP prefers a different path. MVP is waiting for West Virginia to finalize a revised programmatic WQC that would either modify or allow the West Virginia Department of Environmental Protection (WVDEP) to waive the two conditions that the court found problematic in the current WQC. Then, MVP intends to re-apply for coverage under NWP 12 and the new programmatic WQC. Based on MVP’s asserted preference, we see the path forward to be fairly clear, but meeting the in-service date of December 31, 2019 is far from certain if MVP’s opponents successfully challenge MVP’s revised NWP 12.
Below is a simplified path of the way forward for MVP on the NWP 12 issue highlighting the risks this path presents. In sum, we believe the greatest risk to the revised WQC will be a renewed stay request filed with the Fourth Circuit by the project’s environmental opponents. There are two concerns related to this issue. First, in contrast to the back-and-forth exchanges project developers often have with state regulators, MVP will have no opportunity to ask the court what it might take to meet the court’s requirements. Second, the court appears to have a fairly low threshold for issuing a stay -- so unless the court is satisfied with the WVDEP’s process, it may very well grant a stay to force the agency to follow a process more acceptable to the court.
We believe the other three issues facing MVP will likely be resolved before the NWP 12 issue is resolved. With respect to the crossing of the Jefferson National Forest, the United States Forest Service provided a revised decision on August 29. We believe the revised decision should satisfy the court.
With respect to the challenge to the FERC certificate, the DC Circuit appears unlikely to issue a stay. But even if the DC Circuit were to issue an adverse decision, the court will likely allow FERC to reconsider its decision before formally vacating that decision, as it did in the Sabal Trail case.
As for the Virginia Water Control Board’s decision to reconsider its WQC, MVP could raise a direct challenge to the authority of the board to take such an action. Such a challenge would be based on the assertion that a WQC is not really a permit, but is merely a certification that a project will not violate the state’s water quality if the conditions in the certificate are followed. However, most pipeline companies, other than perhaps Rover, usually take a more cooperative approach with the state environmental agencies. We expect that MVP will follow the more cooperative path that allows the state to exercise its authority, but in a fashion that does not impact the project schedule.
ACP’s Multiple Issues are Analogous to MVP’s Primary Issue
There are a number of key differences between MVP and ACP that could impact ACP’s ability to meet its current proposed full in-service date of mid-2020. First, ACP has always intended to build the project over two construction seasons, which almost doubles the construction time required when compared to a project like MVP that is intended to be built in a single construction season. However, this also means that ACP has a greater opportunity to make adjustments to that schedule that can compress the originally planned two-season construction window and allow it to keep the project on schedule.
The biggest factor in the ACP risk profile, however, is the greater number of hurdles it must overcome to gain full construction authority. ACP currently faces the following challenges:
The path forward for ACP on the three high risk issues is very similar to the path described above for MVP. ACP will need to work with the regulatory agency to revise the challenged decisions. We expect that all of the revised decisions will be brought back before the Fourth Circuit and the court will need to be convinced that its concerns with the prior decision have been adequately addressed. This process is more problematic for ACP because ACP has three of these types of problems, while MVP has only one such issue to resolve -- and any one of ACP’s issues could cause a delay in the project’s timeline.
Insights Coming Soon
- Value of Alerting on Nonconforming Agreements
- Year in review and a look ahead