The legal trouble surrounding Mountain Valley Pipeline LLC (MVP) continues to grow, with the project’s lead sponsor acknowledging in a regulatory filing that it now faces a federal criminal investigation in addition to a litany of other court challenges that threaten even longer service delays. 

In its annual report filed with the U.S. Securities and Exchange Commission, Equitrans Midstream Corp. said the MVP joint venture (JV) received a letter last month from the U.S. Attorney’s Office for the Western District of Virginia that it is investigating potential criminal and civil violations of the Clean Water Act. The Environmental Protection Agency is assisting, it said.

According to the filing, MVP received a grand jury subpoena from the attorney’s office requesting certain documents dating to Aug. 1, 2018. “The MVP joint venture is complying with the letter and subpoena, but cannot predict whether any action will ultimately be brought by the U.S. Attorney’s Office or what the outcome of such an action would be,” Equitrans said in the filing.

MVP has been plagued by legal challenges, permit issues, work stoppages and bad weather since construction started early last year. The company has since increase its cost estimate to $4.6 billion from the initial forecast of $3.5 billion. It was also forced to push back the target in-service date twice, most recently from 1Q2019 to 4Q2019.

Despite the criminal investigation disclosure, COO Diana Charletta said during the year-end earnings call last week that management continues to target the 4Q2019 in-service date and its latest price tag. Similar to an update offered in December, she said MVP was 70% complete, including welding of 175 miles of pipeline and most of the construction on all compressor stations and interconnections. “We are currently running a scaled-back construction effort,” she said, “which is consistent with our plan for the winter.”

Compounding matters, however, is an unrelated proceeding before the U.S. Court of Appeals for the Fourth Circuit involving the Atlantic Coast Pipeline, a similarly routed project that received its FERC certificate in 2017 on the same day as MVP. The Fourth Circuit held that the U.S. Forest Service (USFS) lacked authority to grant rights-of-way for oil and gas pipelines to cross the Appalachian Trail.

While MVP obtained its grant to cross the trail from the U.S. Bureau of Land Management (BLM), Equitrans executives said they’re closely monitoring the case as the Fourth Circuit’s opinion could apply to the BLM as well. The court’s judgment is on hold while it considers granting ACP’s request for an en banc hearing, which ACP filed for in January arguing that the decision could have “widespread ramifications” for the industry.

“Our situation is not directly the same as ACP’s,” said Equitrans CEO Thomas Karam during last week’s call. “But clearly, when you’re talking about crossing the Appalachian Trail, we’re keeping our eye very closely attuned to that. As you may have seen, we filed an amicus brief” with the Fourth Circuit supporting the en banc hearing.

As the company monitors the ACP case, other legal challenges that it faces at the state and federal levels are percolating that could ultimately have additional impacts for the project’s timeline.

MVP still cannot conduct any water-crossing work along its entire 300-mile route after the Fourth Circuit vacated its Nationwide Permit (NWP) 12 last year. In its annual report, Equitrans said MVP is still waiting on West Virginia regulators to revise the water quality certification (WQC) and the U.S. Army Corps of Engineers to reverify its NWP 12. Those processes are ongoing and expected to be finished early this year, but the company cautioned that they could be delayed until the second half of 2019.

Work on a 3.6-mile segment of the pipeline in the Jefferson National Forest in Virginia and West Virginia also remains on hold after another decision from the Fourth Circuit last year to vacate federal approvals issued by the USFS and BLM authorizing a crossing of the federal land. Equitrans said in its regulatory filing that it is still waiting for those authorizations to be revised.

MVP also faces a lawsuit filed last year by Virginia Attorney General Mark Herring and the state Department of Environmental Quality for alleged environmental violations that occurred during construction in five counties. More than 300 violations, mainly related to improper erosion control and stormwater management, were raised in the complaint.

MVP said it filed an answer to that lawsuit, stating that it “does not admit and will contest the allegations,” according to its annual report. The company said it has initiated settlement negotiations with the state to resolve the matter. A resolution, Equitrans added, could result “in penalties and injunctive relief designed to assure compliance with relevant environmental laws and regulations.”

Shortly after the lawsuit was filed, the Virginia State Water Control Board (VSWCB) voted to schedule a hearing to revoke MVP’s WQC. A public hearing has been set for March 1. “MVP will vigorously oppose any action by the VSWCB which would result in revocation of its authorizations to continue project activities in Virginia.”

Work on a small stretch of the project in southern West Virginia is still on hold while a circuit court judge reviews an appeal filed by landowners and environmental organizations against the state’s Natural Streams Preservation Act permit. While a hearing was held last October on the matter, Equitrans said in its regulatory filing that the court has not yet issued a decision. “In the event of an adverse decision, the MVP joint venture would appeal or work with” state regulators “to attempt to resolve the issues identified by the court,” Equitrans said.

The project got a win this week when the U.S. Court of Appeals for the District of Columbia denied a series of petitions seeking to revisit the project’s Federal Energy Regulatory Commission certificate. Notably, the court upheld FERC’s approach to assessing the project’s potential climate impacts.

MVP also has fought off federal court challenges to its use of eminent domain to obtain access to property along the route. Another related case brought by a group of landowners challenging the constitutionality of eminent domain provisions in the Natural Gas Act that have been applied by MVP was also rejected by federal courts. The U.S. Supreme Court ultimately declined to hear that case.

MVP would move 2 Bcf/d of Appalachian gas from West Virginia to Virginia and connect with the Transcontinental Gas Pipe Line to deliver more volumes to Southeast markets. It is a JV of Equitrans, NextEra US Gas Assets LLC, Con Edison Transmission Inc., WGL Midstream and RGC Midstream LLC.

The company filed in November for a FERC certificate to extend the project into North Carolina by adding a 73-mile segment that would provide 300 MMcf/d of natural gas to utility PSNC Energy. Karam acknowledged last week that the Southgate Project could be delayed depending on the challenges facing MVP.

Equitrans recently separated from EQT Corp.’s upstream business to become the third largest natural gas gatherer in the country.