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Court does not ease stay for 1.5-Bcf/d Atlantic Coast gas pipeline

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Court does not ease stay for 1.5-Bcf/d Atlantic Coast gas pipeline

A federal appeals court said Jan. 11 that it will not scale back a stay on a permit for the Atlantic Coast Pipeline LLC project, increasing prospects for delay of the 600-mile, 1.5-Bcf/d pipeline designed to move Appalachian gas to mid-Atlantic markets.

Setbacks to the construction timeline for the Atlantic Coast pipeline would likely delay pressure on Transcontinental Gas Pipe Line Co. LLC Zone 5 prices.

Dominion Energy Inc., project leader of the Atlantic Coast pipeline, said it remained confident in the full completion of the pipeline given the "critical customer need and a route that has been exhaustively studied and permitted."

Atlantic Coast in early December 2018 suspended most construction after the U.S. Court of Appeals for the 4th Circuit stayed the U.S. Fish and Wildlife Service's biological opinion as well as the incidental take statement setting limits on harm to protected species. To soften the blow, the pipeline company sought emergency clarification on Dec. 7, 2018, that the stay's application was narrower than it appeared.

The court on Jan. 11 rejected that request. The decision added to the late-December 2018 rejection of another Atlantic Coast attempt to put the project back on pace — a request to expedite briefing and oral argument in the case.

Amid regulatory challenges, Dominion previously postponed its in-service target from mid-2019 to mid-2020 for portions of the project, while a late-2019 target remained for some segments.

In a Dec. 14, 2018, motion, Atlantic Coast said a delay of up to a year was "all but certain" under the current oral argument schedule and "would exponentially increase" project costs. If the developer cannot complete tree felling by mid-March, time-of-year environmental restrictions on tree felling could make the additional delay inevitable, the company told the court.

Oral argument is tentatively scheduled for the court's March 19-21 session, and the stay is in effect pending the litigation.

In its Dec. 7, 2018, motion for clarification, Atlantic Coast requested that the stay be limited to areas that hold four species. By staying the entire biological opinion and incidental take statement, "the court effectively stays work on the entire project, well beyond construction in areas with any potential to affect these species," Atlantic Coast argued in the motion.

In a statement Jan. 13, Dominion said it would vigorously defend the Fish and Wildlife Service decisions, and it noted the court action on Jan. 11 was an interim order and did not address overall the merits of the case. In the litigation, environmental groups have challenged the Fish and Wildlife Service's second attempt at endangered species act documents after the court vacated the first versions.

"We believe [the Fish and Wildlife Service] thoroughly addressed the issues in this case in the revised biological opinion and new incidental take statement in September [2018]," company spokesman Karl Neddenien said.

In investor materials published Jan. 10, Dominion said, based on construction restart in the second quarter of 2019, the near-term earnings contribution from Atlantic Coast was expected to be "modestly lower" than foreseen prior to the late-2018 work stoppage. It suggested the company would achieve at least the lower half of the 6%-8% compounded annual growth rate guidance range for 2017-2020.

The court case involving the Fish and Wildlife Service is one of several affecting Atlantic Coast pipeline construction. The 4th Circuit Dec. 13, 2018, also vacated U.S. Forest Service authorizations allowing the pipeline to cross national forests and the Appalachian National Scenic Trail, and has previously stayed a U.S. Army Corps of Engineers permit authorizing water crossings.

Once in service, Atlantic Coast and nearby Mountain Valley Pipeline LLC project are expected to add a combined 3.5 Bcf/d of gas transportation capacity in the mid-Atlantic, likely putting significant pressure on Transco Zone 5 basis, as capacity to move that gas further southeast on Transco's system is limited much of the year.

Maya Weber is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.