West Virginia Issues Key Permit for MVP and ACP - When Will Construction Resume?
Dominion Energy’s Atlantic Coast Pipeline project (ACP) and EQM’s Mountain Valley Pipeline project (MVP) received some good news late last week when the state of West Virginia issued a revised water quality certificate (WQC) that applies to the use of the U.S. Army Corps of Engineers’ (USACE) Nationwide Permit 12 (NWP12). While the issuance of this revised permit is a positive development, as we detail below, the issuance of the WQC does not mean that full construction can resume in wetlands and streams regulated by the USACE. There are still a number of steps that need to be taken by the USACE, the U.S. Environmental Protection Agency and the projects themselves before construction in those areas can resume.
We expect that these processes may take at least a couple of months to complete and it is clear that the environmental groups opposing the project will challenge the revised WQC once it is applied to the projects. We believe that the current projected in-service date for both projects, which are the end of this year for MVP and early 2021 for ACP, will be under pressure, particularly if the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) issues a stay in any challenge filed concerning the revised WQC, which we see as a possible if not probable outcome.
The Tortured History of the Projects in West Virginia
Each of the projects met the conditions for use of the USACE’s Nationwide Permit 12 (NWP12) to conduct construction in the waters of the United States (generally wetlands and streams). However, the projects also needed to either satisfy the conditions of the WQC in each state that applies to the NWP12 or receive a project-specific WQC from each state.
In West Virginia, each of the projects applied for and received a project-specific WQC. However, when those WQCs were challenged in court, the state of West Virginia asked that each of those project-specific WQCs be vacated and remanded to the state. The state then “waived” the right to issue a project-specific WQC and relied on the conditions in the programmatic WQC applicable to NWP12 in West Virginia. This, however, did not satisfy the Fourth Circuit, which determined that neither of the projects met all of the conditions in the programmatic WQC. In particular, neither project met the condition that the pipelines be smaller than 36 inches, and MVP could not complete all of its stream crossings within 72 hours, as the programmatic WQC required.
When the Fourth Circuit ruled that neither project could satisfy the conditions of the existing programmatic WQC, the West Virginia Department of Environmental Protection (WVDEP) decided to amend the programmatic WQC to either remove, or allow the Department to waive, the conditions that the projects could not satisfy. Both projects originally thought the revisions to the programmatic WQC would be completed by the end of 2018, but they were not finalized and issued until April 24, 2019.
The Saga Continues
West Virginia’s issuance of the revised WQC does not mean that the projects can immediately resume construction in the regulated areas. In fact, the USACE’s Huntington District filed a comment in the proceeding to amend the WQC and noted that any modification must be submitted to the Huntington District office. Once submitted, the “district engineer will submit [the] request to the division engineer, which will determine whether the proposed water quality certification modifications are acceptable.”
If the revised WQC is found acceptable, the new conditions “would proceed through the process of being recognized as regional conditions of the nationwide permits. If certain conditions are clearly found to be unacceptable, the water quality certification would be considered administratively denied.” In addition, in its response to the USACE comment, the WVDEP stated its understanding that the “USACE as well as USEPA will need to agree upon the modification of WV’s 401 Water Quality Certification of the NWPs.” Therefore, the issuance of the revised WQC would not be complete until both of these agencies act to approve the modifications.
The original programmatic WQC was submitted by West Virginia on April 13, 2017 and not incorporated by the USACE into the nationwide permits for West Virginia until May 17, 2017. Given that the process for adopting these changes will undoubtedly be challenged in court, we expect the process to take even longer this time, and may not be completed for a couple of months.
How Long Will This Take?
We expect that the final revised NWP12 will be issued by the USACE in late June. Following that, each of the projects would be required to resubmit their applications to be covered by the revised NWP12. That process will also likely take some time, meaning that the projects will probably not have a final permit until late summer. This leaves very little time for MVP to meet its targeted in-service date by the end of this year. In fact, in its earnings release earlier this week, EQM stated that “completing the project during 2019 is unlikely” but that the “MVP JV continues to target a full in-service date for the fourth quarter 2019.”
The following charts project MVP’s progress toward completing each segment (or spread) of the pipeline by using its prior progress reports to project out the date by which they could complete a key task, the tying-in and back-filling of the pipe. The first chart shows how quickly they could complete all spreads if each spread progressed at the fastest rate that spread achieved between selected progress reports while it was actively under construction. The second chart shows the same projected progress using the average rate of progress each spread achieved when it was actively under construction. As can be seen, even using the fastest rate of progress, all spreads would not be done by the end of this year. Using the average progress though, the last spread would not be done until late in 2021. However, both of these graphics assume that MVP commences construction in upland areas beginning on May 1. If they do that, the number of skips and tie-ins will increase and so production potentially could be slower than under either of the scenarios depicted.
Projected Spread Progress Using Each Spread’s Fastest Rate
Projected Spread Progress Using Each Spread’s Average Rate
Similarly, Dominion announced that it currently expects that “construction could recommence on the full route during the third quarter of 2019 with partial in-service in late 2020 and full in-service in early 2021.” This schedule also seems in peril, particularly if, as we discuss below, the Fourth Circuit issues a stay in response to an expected challenge to the revised WQC once it is approved.
Final Say Rests with the Fourth Circuit
Many of the comments filed with the WVDEP regarding the proposed modification to the WQC concerned the process used by the WVDEP to adopt the change and whether the state even has the legal authority to amend the existing WQC. The WVDEP provided a defense of its process and authority in its response to the comments filed and appears to have a legally defensible position for most of those challenges. The WVDEP’s weakest response is to the argument that a state may not modify a WQC once it has been incorporated into a federal permit. The WVDEP’s response focuses on the ability of an agency to modify a “permit” once it is issued, but that argument fails to take into account the key difference between a “permit” and a “certification.” The WQC is not a permit; it is merely a “certification” to the federal agency that, if the conditions contained in the certificate are met, the actions authorized by the federal permit will not violate a state’s water quality rules. Once the federal agency issues a permit, i.e., the NWP12, in reliance on the “certification” from the state, the state cannot generally amend that “certification” because the state has no right to force an amendment of the “permit” that incorporated the terms of the certification.
As we expect the environmental groups opposing both MVP and ACP to challenge the use of this revised WQC, the final arbiter of whether the proposed amendments are valid will likely be the Fourth Circuit. Given the Fourth Circuit’s apparent willingness to reverse administrative decisions and issue stays in challenges to these projects, as we have discussed previously in Similar Problems, Different Risks - MVP and ACP, we believe there is a distinct possibility, and maybe even a probability, that the Fourth Circuit will issue a stay in any challenge to the revised WQC. The issuance of a stay by the Fourth Circuit would almost certainly mean that neither project would be able to meet its projected in-service date. We would expect this entire process to be played out between now and November of this year.
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