Rover's Over Budget, Sabal Trail's Under - Detailed Pipeline Contractor Cost Data

Natural gas pipelines are required to file financial and operating data on a quarterly and annual basis, and these filings can be mined to model cash flows and for other purposes. Once assembled, structured and analyzed, this data is a trove of information that can help project developers, contractors and investors answer previously unanswerable questions, such as:

• Will a new pipeline company's first project be over or under budget?
• Which mainline contractors is a company using?
• How much are mainline contractors earning?
• What's the market share for a pipeline contractor, environmental service company, etc.?

Early Insight into Rover and Sabal Trail's Final Costs

Our data platform provides the estimated cost for each project and the actual final cost reported by the pipeline. FERC does not require a pipeline to file its final cost report until six months after the pipeline is fully placed into service. Before that time, it is often difficult to determine whether a project is under or over budget. However, if the pipeline has commenced at least partial service, it is required to file annual and quarterly reports with the FERC -- which can often offer early insight into this question.

Rover

Rover began partial service in 2017 and so has filed its initial annual report. Rover had originally estimated that it would spend $4.216 billion on the project, with $1.762 billion of that being for labor. In its initial annual report, however, Rover reported that its total plant, including work in progress, is worth $5.130 billion. It also reported that, in 2017 alone, it paid mainline contractors Precision Pipeline $1.546 billion and US Pipeline another $317 million. Based on these numbers, it would appear that, by the end of 2017, Rover had exceeded its labor budget and the project was more than 21% over budget.

Sabal Trail

Similarly, Sabal Trail began partial service in 2017, so it has filed its first annual report, as well as a quarterly report for 2018. In those reports, Sabal Trail details paying Price Gregory $384 million in 2017. Because Sabal Trail began construction in 2016, we may never know the total amount it paid to Price Gregory for its work on the project, since we only have detailed information for the first year of operation. However, the 2017 annual report and Sabal Trail's first quarterly report for 2018 do provide insight into how it is doing compared to its original budgeted cost of $3.220 billion. As of March 31, 2018, total plant including work in progress is reported to be $2.958 billion. This amount only increased by approximately $20 million during the first quarter of 2018, so it appears Sabal Trail is under budget by about 8%.

Which Contractors Does a Developer Use? Dominion versus Precision Pipeline

In a recent filing, opponents to the Mountain Valley project pointed out that Dominion has been embroiled for three years in a lawsuit with Precision Pipeline concerning Dominion's Appalachian Gateway Project, which went into service in August of 2012. Litigation following a major project is not surprising; however, Dominion recently publicly asserted that Precision did not take adequate precautions to prevent landslides when building that project. These public allegations caused the Mountain Valley opponents to urge the State of Virginia to reject the Mountain Valley project's water quality certificate because of Precision's involvement.

So what can a review of the financial filings for Dominion tell us? As seen in the table below, since the litigation began, Dominion has apparently not hired Precision for any major projects, thus benefiting Precision's competitors, Michels and Price Gregory.

Dominion Payments to Three Mainline Contractors By Year (Thousands)

Who Else Uses These Contractors, and What Are They Paid?

While the litigation with Dominion has clearly impacted the relationship between Precision and Dominion, the litigation may not have impacted Precision's overall business from 2013 through 2017. The next chart shows these companies have earned substantial revenues from pipeline operators. Interestingly, while Michels has worked for the most companies, Precision has earned the most revenue while working for a fewer number of pipelines, but the majority of its revenue was earned in 2017 from Rover, as discussed above.

Other Possible Uses of Cost Data

This type of contractor-specific information is available for all other types of outside professionals, such as engineering firms, environmental consultants and law firms. If you want to learn who is using a particular consultant or how much market share a company has, please let us know your questions, and we will work with you to determine how best to present that information from our data.

Example of Outside Professional Spend Across Years

In the charts below, the total number of outside professionals reported on by each of the pipelines is shown on the horizontal axis with the amount paid to each contractor on the vertical axis. The individual contractor who received the highest amount in each year is listed on that year's chart.

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