RE:RE:RE:Mountain Valley PipelineWhen politicians and regulators get involved , projects can go south very quickly. What was a great 3.7B project to be completed in 2 year (2018) is now costing 6.2B and is scheduled to be completed in late 2021.... and frankly I would not wait around for that date either. What should be a one paragraph description of the project is now a whole page due to constant changing landscape of reverse decisions by the FERC and other regulatory bodies.
Let me begin by providing a general background, then regulatory info and then conclude with some economic numbers. I do apologize for the novel but the regulatory bodies are .......... frankly should be fired.
Background: *Altagas owns a 10 percent equity interest in Mountain Valley
*AltaGas' exposure is contractually capped to the original estimated contributions of approximately US$352 million
*As of December 31, 2020, approximately 92 percent of the project is complete, which includes construction of all original interconnects and compressor stations.
*commitments to buy approximately 0.5 Bcf/d of natural gas, at index-based prices, for a 20-year term
Regulatory and Delays: Sounds good doesn’t it? Let’s dig into regulatory issues and delays
*October 13, 2017, the FERC issued the Certificate of Public Convenience and Necessity for the pipeline.
*early 2018, the FERC granted several notices to proceed with certain construction activities on the pipeline.
*August 2019, certain construction activities were voluntarily suspended, thereby shifting more mainline work into 2020.
*October 15, 2019, FERC issued a project-wide order halting forward-construction progress, much of which was already deferred following the August 2019 voluntary suspension or was winding down for the winter season
*August 25, 2020, Mountain Valley Pipeline, LLC requested a two-year extension to complete the pipeline to October 30, 2022
*November 9, 2020, the 4th U.S. Circuit of Appeals granted a request from certain environmental groups and issued a stay pending litigation over the U.S. Army Corps of Engineers' verification of water crossings for the project, under a general permit known as Nationwide Permit .
*November 19,2020, courts allow Equitrans to continue construction in areas other than the 25-mile exclusion zone surrounding the Jefferson National Forest while the court considers the merits of appeals against the Biological Opinion. The exclusion zone is then further reduced to 7.7miles.
*January 5.2021 The Virginia Department of Environmental Quality said it plans to bar gas pipes with a diameter of 36 in. or more from using the U.S. Army Corps' proposed 2020 Nationwide Permits to cross streams, while MVP has planned to use pipe 42 in. in diameter to transport 2B cf/day of gas from the Marcellus/Utica shale formation in West Virginia, Pennsylvania and Ohio to Virginia. Instead of using the Nationwide Permit program, which would cover all stream crossings with one permit, the Virginia regulator wants to seek individual stream-crossing permits for big pipes,
*January 19, 2021 FERC deadlocked 2-2 - with the fifth commissioner abstaining from voting - on Mountain Valley’s request to bore under streams and wetlands along the pipeline's first 77 miles in West Virginia, and none of the three draft orders for the pipeline advanced. Environmental groups had objected to MVP's request to bore under 69 water bodies that lie between the pipeline's origin in northern West Virginia and the point where it will connect with another pipeline..
*May4 – 2021 MVP now plans to seek individual permits to trench through some of water body crossings in Virginia and West Virginia, and ask the Federal Energy Regulatory Commission to allow drilling tunnels under others. Equitrans says the latest delay and price increase is due to a change in the permitting process for ~420 remaining stream and wetland crossings.
So, my take is that there are
2 remaining issues. Equitrans believes completion will occur late 2021.
- Water crossing permits for individuals streams and wetlands …approx. 400 crossings
- Biological Opinion and permit to cross Jeffersion National Forest.
After a 3 year delay and a 2.5B additional cost….. do you believe the new completion date?
Economics of MVP: *Despite demand from downstream customers in the mid-Atlantic and Southeast, new pipelines that would connect those markets with abundant supplies of Appalachian Basin gas have struggled to get built due largely to permitting challenges, pressure from environmental groups and shifting economics.
*In 2014, when Mountain Valley was initially offered at open season, spreads between Dominion( Appalachian Basin) and Zone 5 (Southeast) for calendar year 2022 were trading at nearly $1.50/MMBtu, well above the roughly $1 it would cost to ship on Mountain Valley
*In 2021 with costs of MVP changing from 3.7B to 6.2B , the estimated cost to ship is now estimated to be $1.60/MMBtu. The current spread has also changed . The spread is now currently near $1.00 / MMBtu.
The current economics is a bit
“iffy” to say the least.
GLTA
RFguy.
: