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Judge lifts drilling ban for Mariner East 2 after Sunoco, groups make deal

Sunoco Pipeline LP can resume horizontal drilling along the path of its Mariner East 2 gas and liquids pipeline under a new regime of environmental oversight, according to a settlement reached between the company and three environmental groups, a Pennsylvania Environmental Hearing Board judge ruled Aug. 9.

Sunoco had already resumed drilling at 16 of 55 locations in the state to prevent the collapse of wellbores and recover equipment after Judge Bernard Labuskes lifted part of a ban he imposed in July. Labuskes signed off on a master settlement regarding all 55 sites Aug. 9 after Sunoco and the environmentalists agreed to a settlement hours before a scheduled hearing to lift the ban or extend it.

Under the settlement approved by Labuskes, horizontal drilling at 47 of the 55 sites along the pipeline's route from the Marcellus Shale's southwestern Pennsylvania fields to the Marcus Hook export complex outside Philadelphia will only be permitted after Sunoco presents new drilling plans to the state's Department of Environmental Protection. The new plans must take into account the specific geologic characteristics of each site and make accommodations to prevent the release of drilling mud or contamination of private water wells. The Department of Environmental Protection will have 21 days to decide whether the new plans are adequate for each site, and the public will have 14 days to register any objections, according to the order.

In addition, Sunoco must contact landowners within 450 feet of the pipeline's route at least 10 days before drilling and offer them water testing "before, during and after" any horizontal drilling.

"We are pleased to have reached an agreement that will allow us to proceed with horizontal directional drilling on the Mariner East 2 pipeline," Sunoco said in a statement issued after Labuskes signed off on the deal between the developer and the Clean Air Council, the Delaware Riverkeeper Network and Mountain Watershed Association. "We will continue to adhere to the strict conditions of our permits, including the enhanced standards for planning, outreach and reporting."

"The agreement will put hundreds of workers back on the job as we complete this transformational infrastructure project," Sunoco said.

Sunoco still plans to have the pipeline ready for service by the end of the year, executives at parent company Energy Transfer Partners LP told analysts on an Aug. 9 earnings call. "We do expect to have it in service sometime in the fourth quarter," Chief Commercial Officer Marshall McCrea said. "We have made significant progress on extending and restructuring the vast majority of the agreements that kind of allow us to finalize it in the fourth quarter."

"On the pipeline, approximately 80% of the pipe has been strung, more than 70% is welded and over half has been lowered in and backfilled," ETP CFO Thomas Long said. "We have made significant progress in resolving issues with the Pennsylvania Environmental Hearing Board to allow us to resume drilling various HDDs in Pennsylvania."

Most of the pipeline's route was constructed using the open trench method, which was not affected by the settlement. Sunoco had hoped to have the 275,000-barrel-per-day gas liquids pipeline open in the first half of 2017, with plans to later expand to 450,000 bbl/d.

While the judge rejected the environmental groups' February move to block Sunoco's permitting, he ordered a drilling halt at 55 locations statewide in July after repeated spills of drilling mud and the contamination of 14 private water wells in Chester County, Pa. Mariner East 2 is the latest pipeline developed by Energy Transfer or affiliated businesses that has run into construction difficulties.

Sunoco Pipeline's parent, Sunoco Logistics Partners LP, completed a merger with Energy Transfer in April, making Energy Transfer a subsidiary of Sunoco Logistics.