Rover Pipeline LLC and parent Energy Transfer Partners LP violated the Natural Gas Act (NGA) and FERC regulations by not disclosing plans to acquire and demolish an historic home in Ohio that was located near a planned compressor station, Commission staff has alleged.
The Federal Energy Regulatory Commission's Office of Enforcement issued a notice of alleged violations Thursday stating that it "has preliminarily determined" ETP/Rover failed to satisfy "a forthright obligation" that applicants for FERC certificates "set forth all information necessary to advise the Commission" in evaluating a project application.
"Staff has preliminarily determined that, between February 2015 and September 2016, Rover did not fully and forthrightly disclose all relevant information to the Commission in its Application for a Certificate of Public Convenience and Necessity and attendant filings" in the project docket [CP15-93], FERC wrote. "Specifically, in the Application and other docketed filings, Rover falsely promised it would avoid adverse effects to a historic resource that it was simultaneously working to purchase and destroy.
"Rover subsequently made several misstatements in its docketed response to the Commission's questions about why it had purchased and demolished the resource."
Thursday's notice appears to refer to the Stoneman House, an historic structure in Ohio that Rover acquired and subsequently demolished during the project review process without notifying the Commission. The Stoneman House sat near a proposed Rover compressor station and would have likely required additional mitigation, FERC filings indicate.
FERC viewed the incident as a potential violation of federal historic preservation laws and consulted with the Advisory Council on Historic Preservation. When it issued a certificate to Rover in February it denied blanket authorization for routine construction activities, writing that "Rover's intentional demolition of the Stoneman House raises the question of whether Rover would fully comply with our environmental regulations in future construction activities under a blanket certificate."
In its February certificate order, FERC acknowledged ETP/Rover had provided compensation to the Ohio State Historic Preservation Office (Ohio SHPO) for the Stoneman House's destruction. But the Commission warned that it would be referring the incident to its Office of Enforcement for investigation, noting that "Rover did not even notify the Commission of its purchase of the Stoneman House; in fact, subsequent to the purchase, Rover filed a landowner list which listed the Stoneman House's prior owners."
In May, Ohio SHPO and counsel for ETP/Rover both contacted FERC seeking help resolving a dispute over the terms of a February memorandum of agreement (MOA) over the Stoneman House, specifically a section that stipulates a $1.5 million annual payment by the company "for the life of" the agreement to help finance state historic preservation activities. In June, the MOA was amended to require a single $1.5 million payment due July 7, FERC filings show.
ETP/Rover spokeswoman Alexis Daniel told NGI via email Friday that "as previously disclosed, we have resolved all outstanding issues regarding the Stoneman House with the Ohio SHPO. The revised [agreement] between Rover and the Ohio SHPO is in effect, and we look forward to cooperatively working with them to implement" it. "At the same time, we will continue to work with FERC to address any remaining Stoneman House issues."
ETP/Rover has previously challenged FERC's reaction to the Stoneman House incident, specifically the Commission's denial of blanket authorization in its February certificate order. In March, ETP/Rover told FERC that the agency failed to prove the operator had demolished the home to intentionally avoid additional regulatory proceedings under the National Historic Preservation Act (NHPA). The Commission further failed to address "contrary evidence" showing Rover notified state preservation officials prior to demolishing the Stoneman House, ETP/Rover has said.
The Stoneman House wasn't part of the project or "within the Project's footprint," the operator said. "Nor was the structure listed on any historic register -- it was merely 'eligible' for such listing. As such, Rover understood that there was no law, rule or regulation -- and [FERC] has pointed to none -- that forbade the removal of the structure located on private property, under private ownership and meant for private use, no matter how old it may have been."
The removal of the Stoneman House "does not in any way demonstrate that Rover intended to violate, or intends to violate in the future, the Commission's regulations or any applicable environmental regulation,” the operator wrote at the time.
Thursday's notice of alleged violations does not pertain to the April Tuscarawas River horizontal directional drilling (HDD) fluids spill that prompted FERC to halt new HDD activities during Rover construction pending a third-party review. FERC has also referred the Tuscarawas HDD spill to the Office of Enforcement for investigation after test results indicated the presence of diesel in the drilling mud at the site.
The preliminary results from FERC's investigation into the Stoneman House incident come as ETP/Rover is hustling to get the project fully in-service by November. The company recently said it expects partial service to begin this month, though FERC's Office of Energy Projects (OEP) subsequently notified developers that it won't issue in-service authorization until further mitigation activities related to the Tuscarawas HDD spill have been completed.
As for the alleged Stoneman House violations, "It is still possible for Rover to settle this matter at the staff level, but we would note that the company had the opportunity to do so before today's notice was made public," ClearView Energy Partners LLC said in a note to clients late Thursday.
"If a settlement does not materialize, the next step would be an Order to Show Cause, which requires a quorum the FERC currently lacks. Depending on the company's response to a potential order to show cause, additional process could take place before a FERC Administrative Law Judge or the courts."
As for potential penalties, "FERC has broad civil penalty authority, and we expect that if the Commission agrees" with staff findings "it would seek them." FERC's OEP also has authority to halt construction on a project or withhold authorization to place projects into service, potentially affecting the project timeline, ClearView noted.
"It is possible that OEP could suspend additional construction activities, given the developing pattern of potential certificate violations accumulating on Rover that we are not observing on other projects under construction," ClearView said. "...While we have not found an example of the FERC revoking a certificate for a reason other than failing to construct the facility, the FERC explained in Trunkline LNG Company, et al...that it has the authority to revoke certificates when the terms of the certificate are violated."
But given the current case is still preliminary, ClearView said it's "not yet handicapping outcomes on the continuum between the company resolving these issues...and the potential revocation of the certificate."
Rover, a 710-mile, 3.25 Bcf/d producer-backed greenfield mega project, is designed to deliver Marcellus and Utica shale gas to markets in the Midwest, Gulf Coast and Canada.
The market has watched Rover's progress closely given the project's massive designed capacity and its potential to reshape the natural gas supply landscape by uncorking significant volumes of Marcellus and Utica shale production.
The project is scheduled to come online in phases this year, beginning with a section from Cadiz, OH, to the Midwest Hub in Defiance, OH beginning this month (though analysts are less optimistic). Once complete, the project would extend to an interconnect with the Vector Pipeline in Michigan, allowing deliveries to the Dawn Hub in Ontario.