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Results of Rover Third-Party Review Released; FERC Says HDDs Still on Hold

FERC on Monday released the results of an independent review of the horizontal directional drilling (HDD) fluids spill that has put HDD work for Energy Transfer Partners LP's Rover Pipeline on hold since May. Commission staff said ETP/Rover would have to submit a plan to implement the third-party recommendations before HDD activities may resume on the project.

Meanwhile, ETP announced late Monday that it has agreed to sell a stake in the embattled Rover project to Blackstone Energy Partners and Blackstone Capital Partners for $1.57 billion. The deal, expected to close in the fourth quarter, would see Blackstone acquire a 49.9% interest in ETP subsidiary ET Rover Pipeline LLC, which owns a 65% interest in the Rover project.

Prior to ETP’s announcement, the Federal Energy Regulatory Commission published a report Monday completed by J.D. Hair & Associates Inc. along with a letter to Rover stating that the firm has recommended "a number of measures for Rover to implement before the suspended HDD activities my resume. Rover must file for our review and approval a proposed plan for incorporating these measures. Also...a set of staff-approved protocols will need to be developed to prevent future contamination of Rover's drilling fluid prior to the resumption of the remaining HDD activities."

In a May 10 order suspending HDD work on the project, FERC said it may forward the results from the independent review to its Office of Enforcement. FERC wrote Monday that "because J.D. Hair found that the documentation of the HDD operations is 'very limited' and, therefore, it could not 'accurately assess or verify conformance with many of the applicable project requirements,' FERC staff will continue to consider any new information that becomes available and has not yet determined whether to refer the matter to the Office of Enforcement."

The enforcement investigation is ongoing into the presence of diesel fuel in HDD fluid released during Rover's construction, FERC said.

J.D. Hair was brought in to review what went wrong during a Rover HDD crossing that resulted in a roughly 2 million gallon release of drilling fluids into a wetland near the Tuscarawas River in Stark County, OH. The regulatory response to the incident -- one of a numberof alleged environmental violations occurring during Rover's construction -- has caused the highly anticipated project's initial start-up date to slip from July to "late summer."

The report indicated it could not determine whether ETP/Rover and contractor Pretec Directional Drilling (PDD) had followed all project requirements due to limited records.

While PDD appeared to follow some established best practices after experiencing drilling fluid circulation loss during the Tuscarawas HDD, "PDD did not provide documentation in their daily reports as to any other drilling practices...Due to lack of operational details and commentary in PDD's reports, it is not possible...to provide a firm opinion with respect to whether or not PDD's operation measures to restore circulation or their drilling procedure to minimize the risk of inadvertent returns met HDD industry standards," the firm wrote.

J.D. Hair concluded that "if PDD performed no other measures than what is indicated in their reports, then...they did fall short of common HDD industry practices." The firm detailed several measures ETP/Rover should follow to prevent issues for a second planned HDD crossing of the Tuscarawas River and for the remaining project HDDs.

While ETP/Rover did not receive authorization to resume HDD activities Monday, the release of the report is likely a welcome development for a project that has been held in regulatory limbo while the review was underway.

The moratorium on HDDs has impacted Rover's ability to complete key supply laterals planned for its initial start-up this summer, analysts have said.

ETP/Rover told FERC earlier this year that the company had also brought in its engineering consultant in an effort to prevent future HDD incidents. The operator urged FERC on multiple occasions to allow HDD work to resume at specific locations but to no avail.

Meanwhile, FERC has detailed additional clean-up that would be required following the Tuscarawas spill before it would issue an in-service authorization for Rover's Mainline A segment.

ETP is looking to complete construction on the roughly $4.2 billion, 710-mile Rover and place the full project into service by November. The pipeline is designed to deliver 3.25 Bcf/d of Marcellus and Utica shale production to markets in the Midwest, Gulf Coast and Canada.

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