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Sunoco Logistics Partners LP's Mariner East (ME) 2 pipeline project remains on track for a late 2017 start-up after the Pennsylvania Supreme Court late last month said it wouldn't hear an appeal challenging a subsidiary's power of eminent domain.
Landowners in Cumberland County filed the appeal after the Commonwealth Court ruled in July that ME 2 could be granted eminent domain powers under state law because it would provide both intrastate and interstate service.
"The [Supreme Court's] denial reaffirms the Commonwealth Court's decision that Sunoco Pipeline is a public utility with the power of eminent domain authority under Pennsylvania law for the Mariner East project," Sunoco said in a statement Friday. "Notwithstanding its success in all of the cases brought before various courts on the issue, Sunoco Pipeline respects landowner rights, and we are proud to have reached easement agreements with the vast majority of landowners without the need for legal proceedings. In addition, of the eminent domain proceedings that were filed, we were able to settle most of them."
The company launched a binding open season for the project in 2013. Sunoco has entered several condemnation proceedings across the state since then. In most cases, landowners have argued that the company shouldn't be allowed to use eminent domain to build the pipeline because it's been designed as an interstate system to primarily serve overseas and out-of-state markets that wouldn't benefit the state.
The company has claimed otherwise, producing at trial a number of orders and certificates of public convenience from the state relating to ME and noting that the Pennsylvania Public Utility Commission (PUC) should have the final say and not state courts. Many judges have agreed, dismissing landowner complaints, citing certificates and deciding the company has eminent domain as a regulated public utility under state law.
The project would transport ethane, butane and propane from processing and fractionation facilities in Ohio, Pennsylvania and West Virginia to the Marcus Hook Industrial Complex near Philadelphia for distribution to domestic and international markets. It's been billed as a much needed pipeline to get more liquids to market. Combined with the existing ME 1, a third proposed pipeline and Mariner West, the entire system would have a combined capacity of up to 800,000 b/d.
While court challenges and the commodities downturn have created uncertainty about the project, it's only waiting for permits from the Pennsylvania Department of Environmental Protection (DEP) so it can start construction. Initially, ME 2 was slated for in-service at the end of last year, but the company then said start-up would be pushed back to the first half of 2017 in order to obtain all necessary permits. In July, however, DEP said that due to the complexity of the project, it would enhance and extend public participation for earth moving and water crossing permits, again pushing start-up back to 3Q2017.
"The detail involved in the Pennsylvania DEP permit application has necessitated a longer-than-anticipated regulatory review process, but we are convinced that this project will be environmentally responsible and will be creating significant economic development in the commonwealth," Sunoco Logistics CEO Michael Hennigan said during the company's third quarter earnings call.
Despite the company's success in court, legal challenges still remain. Early last year, the Philadelphia County Common Pleas Court certified two landowners and the Clean Air Council (CAC) to proceed with their lawsuit against Sunoco Pipeline LP. In a key case, the judge ruled state courts have jurisdiction in the matter because, among other things, landowner rights under the state constitution are at issue with the threat of property condemnation for ME 2.
"I wouldn't say the judges have deferred to the PUC's decisions, I would say the judges have interpreted the PUC's statements in a way that Sunoco interprets them," the CAC’s senior litigation attorney, Alex Bomstein, said of the other lawsuits against Sunoco that have failed.
"I do think it's one of the more important cases out there," he added of the CAC's lawsuit. "One of the important distinctions between our case and some of the other cases is that we're raising constitutional claims that have not yet been ruled on."
While it didn't rule on the validity of Sunoco's certificates, the Philadelphia County court recognized that the courts should decide if Sunoco can condemn private property for its project. Plaintiffs in the CAC case are seeking "relief from uncertainty and insecurity with respect to rights," under Article I, Section 27 of the state's constitution, a rare environmental rights amendment. That case, Bomstein said, is currently in discovery.