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Update: FERC 'to closely monitor' Rover Pipeline after diesel found in spill

In another complication for a troubled natural gas pipeline project, the Federal Energy Regulatory Commission will further investigate Rover Pipeline LLC's 3.25-Bcf/d project over a spill at the Tuscarawas River drill site in Ohio after diesel fuel was found in drilling fluids that leaked into wetlands.

Acting FERC Chairman Cheryl LaFleur and Commissioner Colette Honorable issued a joint statement on June 1.

"We are troubled by the Tuscarawas River [horizontal directional drilling] spill and the indications that diesel fuel is present in the drilling mud utilized," they said. "We recognize that Rover [Pipeline] will need a number of additional authorizations as the Rover pipeline project moves forward ... We will continue to closely monitor its progress to ensure that Rover follows the terms of its certificate."

In a June 1 letter, FERC Director of the Office of Energy Projects Terry Turpin informed the Energy Transfer Partners LP subsidiary that the investigation would look at how diesel fuel ended up in the spill. Samples of the spilled fluids from several sites near the Tuscarawas River drill area included petroleum hydrocarbon constituents, commonly found in diesel fuel, which the Ohio Environmental Protection Agency concluded could present long-term environmental impacts.

"The confirmed presence of petroleum hydrocarbons in the samples taken by Ohio EPA also suggests a violation of Environmental Condition No. 1 of the commission's Feb. 2, 2017, order issuing certificate," Turpin said. He observed that Rover, in its project application, committed to only using drilling fluid that contained nontoxic bentonite clay and water.

Turpin said staff has the "delegated authority to take additional actions as necessary ... including additional measures to mitigate adverse environmental impacts resulting from project construction and operation."

FERC had temporarily halted stream-crossing work, and the Ohio EPA had assessed a $431,000 fine after the Tuscarawas River spill and others were discovered in April. Rover Pipeline pushed its in-service date for the first phase of the $4.1 billion project to late July after FERC staff denied requests to resume drilling at certain water crossings. The agency has asked FERC to enforce the initial citation.

Commission staff and Rover Pipeline have agreed to use an outside contractor to investigate horizontal directional drilling practices at water crossings and recommend a plan for further drilling activities.

Energy Transfer spokeswoman Alexis Daniel said project sponsors are fully cooperating with the commission and Ohio EPA. "At this time, however, there is no evidence that the source of the hydrocarbons is related to our drilling activity," Daniel said in a June 2 email to S&P Global Market Intelligence.

In a June 2 Height Securities LLC note, analyst Katie Bays speculated the hydrocarbons were likely introduced as the fluid leaked into the wetlands and not from an intentional violation.

"While we think that all problems are ultimately fixable, Rover's biggest risk continues to be self-inflicted wounds," Bays said. She said the project is expected to eventually enter service although the investigation could present some delays. "We continue to believe that Rover can bring their first phase into service in 2017."

Bays expected the investigation to last about five weeks, basing the estimate on a similar investigation into the Constitution pipeline project. Should the investigation find evidence of intentional wrongdoing, it could risk the status of the FERC certificate, Bays said.

ClearView Energy Partners LLC's analysts said they could not rule out a full halt on construction, but they did not expect that to occur. ClearView said Ohio could also add additional requirements on Energy Transfer.

The Sierra Club said all project operations should cease until FERC staff concludes the investigation. "Energy Transfer has repeatedly proven itself ... an immediate threat to Ohioans and our wetlands and waterways," the group's Ohio director, Ken Miller, said in a June 1 press release.

The investigation is the second into the project, as FERC initiated a dispute resolution consultation considering the financial consequences of Rover's demolition of the Stoneman House in Ohio. (FERC docket CP15-93)