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Energy Transfer pipeline explosion put customer out of business, driller claims

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Energy Transfer pipeline explosion put customer out of business, driller claims

Energy Transfer LP has been accused of ruining streams and soiling wetlands while building natural gas and liquids pipelines in Pennsylvania, and now a customer has claimed the pipeline giant put it out of business.

That customer, Goldman Sachs-backed gas driller EdgeMarc Energy Holdings LLC, claimed in a May 14 Chapter 11 filing in bankruptcy court in Pittsburgh that the producer has lost the ability to flow up to 50,000 Mcf/d from its Butler County, Pa., wells because Energy Transfer unit ETC Northeast Pipeline LLC could not get its Revolution Pipeline in operation by the first of the year, as promised. That volume is about a third of EdgeMarc's existing production capacity.

Worse, EdgeMarc claimed, ETC Northeast is billing the driller for not flowing gas on lines that have never worked and are still being repaired from a Sept. 10 landslide . State regulators have cited Energy Transfer and ETC Northeast for poor work that led to the landslides that washed pipe away, and they continue to be dissatisfied with Energy Transfer's repair work, deciding in February to hold up all permitting on Revolution and Energy Transfer's Mariner East family of NGL pipelines.

EdgeMarc said it canceled its contract with ETC Northeast in January when Revolution was not in service as promised but was then sued by ETC Northeast in state court for breaching the companies' previous agreement. ETC Northeast claims the Revolution break was a force majeure event, or an act of God — a standard provision in oil and gas contracts that allows ETC Northeast to hold EdgeMarc to its firm transportation agreement without providing any gas transportation.

Energy Transfer said it will not comment on litigation and a spokeswomen for EdgeMarc said that company's court filings speak for themselves. Those filings paint a picture of Energy Transfer notifying shippers hours after the explosion that the line went into service the day before the explosion and that the blast was an act of God.

"ETC has taken every opportunity to use the Revolution explosion to its benefit," EdgeMarc told the Allegheny County Common Pleas court in February. EdgeMarc accused ETC of "contriving a post-explosion notice to EdgeMarc that ETC had finally placed the Revolution System 'in commercial service' mere hours before the explosion, concocting a second post-explosion notice" of a force majeure, and then demanding $7.3 million in collateral for gas that never shipped.

According to EdgeMarc's state suit, ETC Northeast started building its paper trail with "such haste" that its original in-service and force majeure notices to EdgeMarc were addressed to the wrong company and had to be corrected.

EdgeMarc argued that ETC's decision to label the Revolution explosion and fire as an act of God ignores inspections by the state's Department of Environmental Protection that found Revolution was built across the steep hills of western Pennsylvania without adequate landfill support. "DEP issued the October order after inspections discovered violations including unreported landslides, impacts to aquatic resources, construction activities occurring in unpermitted areas, and several sections of the pipeline that required the installation of additional measures to prevent accelerated erosion," DEP said in its February order suspending permitting for all of Energy Transfer's projects after finding fault with repairs to Revolution.

The state court case with ETC is on hold while EdgeMarc goes through Chapter 11. The driller is seeking court approval to auction off its leases and wells in Butler County and a second set of leases and wells in Ohio's Utica Shale to pay its debts. According to the bankruptcy filing, EdgeMarc owes ETC Northeast $615,995 and another Energy Transfer company, Rover Pipeline LLC, $3.8 million. EdgeMarc's owes the most to oil and gas marketer BP Energy Co. Inc. — $41.4 million — all for commitments the driller could not fulfill with the Revolution gathering system out of action, EdgeMarc said.

EdgeMarc said in its bankruptcy announcement that its Monroe County, Ohio, wells would remain in operation during the bankruptcy process while its Butler County wells remain shut in. EdgeMarc ships its Ohio gas using Eureka Midstream LLC for gathering and processing, then on Texas Gas Transmission LLC and Rockies Express Pipeline LLC for shipment further west. According to the filing in the U.S. Bankruptcy Court for the Western District of Pennsylvania, EdgeMarc uses Rover pipeline for shipments to Canada.

(U.S. Bankruptcy Court for the Western District of Pennsylvania, 19-11104-BLS, ETC Northeast Pipeline LLC vs. EM Energy Pennsylvania LLC, Allegheny County Court of Common Pleas, GD-19-002052)