Sunoco Logistics Partners LP will proceed with the construction of a third Mariner East (ME) pipeline known as ME 2X now that it's received the necessarypermits from the Pennsylvania Department of Environmental Protection (DEP).
About a week after it received the water obstruction/encroachment and erosion/sediment control permits that it needed to begin construction on ME 2, management told analysts Wednesday during the company's year-end earnings call that the project is permitted for two pipes. Sunoco launched an open season for ME 2X in September 2015 in response to shipper demand. The open season remains in effect to secure last minute contracts for the third pipeline, but CEO Michael Hennigan said it's taken so long to close because the company was waiting for the DEP permits.
"We're excited to announce that we are moving forward with two pipes...We've received enough commitments to move forward," he said. "...ME 2 as a project has always been about two pipes. We wanted to to do that from the beginning. We permitted for two pipes, so that has always been the project's goal."
The company launched an open season in 2013 for ME 2. It has battled in state courts to defend the project in the face of staunch opposition from environmental groups, concerned citizens and municipalities. Sunoco was forced to delay the in-service date last year after DEP said it would need more time to issue the permits. The 350-mile ME 2 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.
The third pipeline would run parallel to ME 2, which would be installed first. ME 2X would be installed shortly after, Hennigan said. The company is targeting a third quarter in-service date for ME 2, while it now expects ME 2X to enter service sometime next year. The new pipelines, along with the existing ME 1 and Mariner West, would have a combined capacity of up to 800,000 b/d.
While legal challenges for the pipelines remain, the shadow of uncertainty that has hung over the ME project appears to have vanished at this point now that Sunoco has its permits in hand. Construction has started in Pennsylvania on ME 2, and DEP's approvals have jump-started other discussions about potential at Marcus Hook -- a former oil refinery on the Delaware River that's being repurposed for natural gas liquids (NGL) storage, processing and distribution.
As the ME system is built-out, Hennigan said that additional cryogenic propane and butane tanks at Marcus Hook should be completed by the summer, which would enable more NGLs to reach the facility by rail. He added that stalled conversations with other companies about developing more manufacturing at Marcus Hook have resumed now that the ME pipes are moving forward.
"We were kind of in a stalled mode for a while -- in a waiting period while the regulatory process played out," Hennigan said. "Now that we've gotten to go ahead, the excitement and the discussions are happening pretty rapidly."
Sunoco also announced Wednesday that it would expand its Permian Basin pipeline network in West Texas, "as shipper interest is becoming very robust." The company has a joint venture with ExxonMobil Corp. in the play to move the producer's volumes. Hennigan said Sunoco would launch an open season for the Permian Express 3 pipeline project in "the next couple months." That project would provide another 100,000 b/d of crude oil takeaway in the Permian.