Equitrans to seek renewed federal permits for MVP, eyes H2 2023 service start

Equitrans Midstream said May 3 it will pursue new federal permits for the 304-mile, 2 Bcf/d Mountain Valley Pipeline, after several were struck by the US Court of Appeals for 4th Circuit, and set a new target for placing the natural gas facility in service in the second half of 2023.

Top company officials during Equitrans' first-quarter earnings call May 3 said they remained "committed to the path forward" for the 304-mile, 2 Bcf/d project, with support from joint venture partners.

"After extended review of the recent court decisions and discussions with federal agencies, external counsel and our partners, we believe the path forward is to pursue new permits from the relevant federal agencies," Equitrans Chairman and CEO Thomas Karam said.

Legal challenges from environmental groups and subsequent adverse decisions by the 4th Circuit have proven a major hurdle for the project in West Virginia and Virginia connecting Appalachian gas to downstream markets.

The 4th Circuit in early-2022 invalidated federal authorizations allowing the MVP project to cross the Jefferson National Forest, as well as striking the US Fish and Wildlife Service's Endangered Species Act authorizations for the facility. The company's pitch for rehearing in those cases was then rejected by the full court in March, leaving MVP with a choice of requesting US Supreme Court review or seeking new federal permits, if it continued pursuing the projects. Another important permit is pending from the US Army Corps of Engineers.

Legal rationale

The company said it anticipated federal agencies would be able to supply clearer legal rationale for their technical decisions, in order to survive future challenges.

"We have confidence that the agencies can produce not only technically sound permits, as they have in the past, but also permits that connect the dots between the technical decisions and the respective federal law, effectively mitigating potential perceived ambiguity," Karam said.

The revamped schedule, which aligned with several analysts' expectations after the court setbacks, is based on federal agencies issuing new permits in 2022, and assumes four to five months of remaining construction, company officials said.

"From a timeline perspective, what we have assumed there now is with the interaction that we're having with the agencies, which has been positive, we think we'll be back to construction second quarter [2023]," said Diana Charletta, Equitrans president and chief operating officer.

Federal agencies face a "narrower scope of issues," following the court action, she said.

In one advance for the MVP project, the Federal Energy Regulatory Commission April 8 unanimously approved an amendment allowing changes to the construction method for certain water bodies and wetland crossings. Environmentalists have pursued a number of other challenges, however, including those attacking state water quality authorizations.

Evaluating Southgate

Uncertainties remained around the related 75-mile, 375,000 Dt/d MVP Southgate project, extending into North Carolina.

A company press release said continued evaluation of Southgate involves "engaging with the shipper regarding options for the project, which includes potential changes to the project design and timing in lieu of pursuing the project as originally contemplated."

Charletta said there was no question about demand for that project, but that given the environment and some of the recent rulings, Equitrans was having discussions about whether there were ways to "optimize the design and timing with customers."

The company also bumped up its cost estimates for the MVP project to $6.6 billion, above the $6.2 billion estimated in 2021, and well above the initial $3.25 billion estimate put forward.

Gary Kruse of ArboIQ said his group has been using the end of 2023 for an MVP in-service as its "base case for a while now."

"The only way we see that timing improving is if Senator [Joe] Manchin, Democrat-West Virginia, is able to include expediting the project as part of a larger deal with the Biden administration relating to energy security and the energy transition," he said in an email.

"Otherwise, the end of 2023 is likely a best-case scenario."

Manchin, a key swing vote in the Senate, has on several occasions discussed his desire for legislative action to advance MVP.

Karam welcomed Manchin's support for MVP in Washington on the grounds of energy security and reliability, and said he was pleased that gas has entered the national dialogue in a positive way.

"We have remained in frequent contact with Senator Manchin, Senator [Shelly Moore] Capito, Republican-West Virginia, and others, discussing the possible paths to bring MVP into service," Karam said.

Equitrans Midstream reported net income of $105 million, and adjusted EBITA of $277 million. It's net income was impacted by a $6.4 million unrealized gain on derivative instruments related to a contractual agreement entitling the company to receive cash payments from EQT, conditioned on specific NYMEX gas prices exceeding thresholds post MVPs in-service and through 2024.