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MVP’s 2018 Startup in Doubt as Appeals Court Stays Crucial Water Permit in West Virginia

A federal appeals court on Thursday stayed a crucial U.S. Army Corps of Engineers water crossing permit for Mountain Valley Pipeline (MVP) in West Virginia, potentially a major setback for a project under construction that was aiming to begin service this year.

The U.S. Court of Appeals for the Fourth Circuit granted a motion to stay the Nationwide Permit (NWP) 12 issued by the Army Corps pending a ruling on a legal challenge brought by a coalition of environmental groups including the Sierra Club.

The NWP 12 is issued under Section 404 of the U.S. Clean Water Act (CWA) and allows contractors to trench through the bottom of streams and rivers. The Sierra Club earlier this year challenged the validity of MVP’s NWP 12 permit, arguing that the project could not meet a special condition in West Virginia requiring all stream crossings be constructed within 72 hours.

In response to the groups’ challenge, the Army Corps voluntarily issued a limited suspension of the NWP 12 for four river crossings in the state. But the Sierra Club and others successfully argued to the court that under Army Corps regulations, all portions of the NWP 12 permit must be stayed, putting nearly 600 MVP waterbody crossings in regulatory limbo.

As part of its rationale for waiving a state-issued CWA Section 401 water quality certification, the West Virginia Department of Environmental Protection (WVDEP) had cited special state-specific conditions that had been added to the NWP 12 permit. WVDEP had earlier withdrawn the CWA 401 it issued to MVP after facing a court challenge.

MVP spokeswoman Natalie Cox told NGI Friday that both the developers and WVDEP interpreted the 72-hour requirement included in the West Virginia-specific conditions of the NWP 12 permit as only applying to “wet-cut” crossings.

“The Sierra Club argues that MVP cannot comply with the permit condition to complete four waterbody crossings (Elk, Gauley, Greenbrier, and Meadow Rivers) within 72 hours; however, this provision is intended to apply to water crossings that are constructed in an open trench while the river is flowing (wet-cut),” Cox said. “MVP plans to utilize a ‘dry-ditch’ coffer dam method to cross these four rivers as this technique is more protective of the environment because construction activity is not performed in a flowing river.

“This crossing technique has been approved by both the FERC and the WVDEP,” Cox said. “While significantly more environmentally protective, the ‘dry-ditch’ technique also requires a longer completion time as compared to traditional ‘wet’ crossing methods to which the time limitation provision applies,” she said. “In response to the Sierra Club’s motion, the Corps suspended the permit for these four crossings and is evaluating the environmental benefits of the ‘dry-ditch’ method and whether the time limitation should apply.”

MVP plans to file a request for rehearing of the court’s decision, Cox said. MVP is continuing to target a late 2018 in-service date while it evaluates its options.

“While disappointed with this temporary setback that affects stream and wetland crossings along approximately 160 miles of the route in West Virginia, the MVP team is evaluating options to understand its ability to continue with construction activities that do not include stream and wetland crossings along this portion of the route.”

MVP, which secured a FERC certificate in a rare split decision in October, began construction earlier this year. The 303-mile, 2 Bcf/d greenfield expansion is routed from West Virginia to Virginia, where it would connect with Transcontinental Gas Pipe Line to move Marcellus and Utica shale volumes to the Southeast. The project also recently launched an open season to extend the system into North Carolina.

MVP is a joint venture between EQT Midstream Partners LP, NextEra US Gas Assets LLC, Con Edison Transmission Inc., WGL Midstream and RGC Midstream LLC.

EQT Corp., which formed EQT Midstream to operate its midstream assets, has emerged as the nation’s largest natural gas producer after acquiring Rice Energy Inc. to grow its Appalachian Basin stronghold.

EQT Corp. (EQT) and EQT Midstream (EQM) share prices took a hit Friday following news of the court’s decision. Shares of EQT were trading about 2% lower at around $54.72 Friday afternoon, while EQM’s share price was down about 4% to around $53.87.

MVP, represented by Hunton Andrews Kurth LLP and Jackson Kelly PLLC, argued in a court filing that a stay would cause “substantial harm” to the project.

“Assuming FERC does not suspend its construction on the entire project...MVP would be required to suspend construction entirely on 80.6 miles of pipeline in West Virginia, which is roughly 41% of the total pipeline mileage in West Virginia,” MVP’s counsel wrote. “And the completion of construction would be delayed at least eight months.

“Under the most optimistic scenario, MVP would incur more than $600 million in incremental expense due to the suspension of construction in these areas until Dec. 1.”

Washington, DC-based ClearView Energy Partners LLC told clients Friday the court’s decision to grant a stay could delay MVP by up to a year. ClearView analysts expect the Sierra Club to ask the Federal Energy Regulatory Commission to revoke any notices to proceed with construction in areas that include the 594 waterbody crossings covered by the NWP 12.

“If FERC declines to halt construction, Sierra Club could seek another injunction from the Fourth Circuit -- this time against FERC and not the Corps -- to stop work, and we would expect such a motion to prevail even if incremental process took another few weeks,” ClearView said. The Fourth Circuit has scheduled oral argument for Sierra Club’s full complaint for the week of Sept. 25, “and the stay appears to ensure that the project’s schedule will reflect a delay,” even if the Corps and WVDEP were to succeed in defending the permit.

“A decision issued six months from oral argument (a relatively quick timeline for an appellate ruling, although timing can vary substantially) would arrive at the end of March 2019, coincident with the conclusion of key work windows limited by the Endangered Species Act and other statutes,” analysts said.

If WVDEP and the Army Corps were to succeed in defending the NWP 12, construction could resume by next summer, but if they were to lose, MVP may need a CWA Section 404 permit from the Army Corps instead, “which we estimate could require six months to a year to complete, adding to the delay,” according to ClearView.

The project, planned to cross sensitive and rural terrain along the West Virginia/Virginia border, has proved controversial, even among sitting FERC commissioners, with Cheryl LaFleur and Richard Glick publicly dissenting on how FERC has handled the review process, citing issues like climate change and cumulative impacts.

West Virginia Gov. Jim Justice on Friday expressed support for the embattled project and defended how the state has handled environmental oversight.

“While the WVDEP is not a party to this lawsuit, we can say that this project is extremely important to West Virginia,” Justice said. “This project represents thousands of jobs and millions of dollars being spent to benefit this state, not to mention the long term stability and boost the energy economy of this country will see as a result of this project’s completion.

“...While there have been violations that have resulted from the WVDEP’s inspection of this pipeline, these violations have been corrected quickly,” the governor said. “We will continue to monitor these proceedings closely to determine what role the state may play in expediting the construction of this pipeline. This project is vital to the energy future of the United States and we will do everything we can to ensure it is constructed in an environmentally sound manner.”

Meanwhile, the Sierra Club and its allies celebrated the court’s decision.

The court’s “decision is a validation of what we’ve been saying for years: a one-size-fits-all permit is completely wrong for the Mountain Valley Pipeline,” Chesapeake Climate Action Network General Counsel Anne Havemann said late Thursday. “The companies behind the harmful and unneeded MVP have pushed regulators to approve key permits such as this one without considering the full scope of its destruction…”

The “court-mandated pause is a welcome opportunity for regulators to take a real look at the impacts of this massive project, which we’re confident will lead them to conclude that there simply is no safe way to build the Mountain Valley Pipeline.”

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