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Court pauses work on segment of Nexus gas pipeline

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Court pauses work on segment of Nexus gas pipeline

A federal appeals court has placed an emergency stay on the construction of a short section of the 1.5 Bcf/d Nexus Gas Transmission project, finding the city of Green, Ohio, made a strong showing that it is likely to succeed in a suit challenging the water certification granted by the Ohio Environmental Protection Agency.

The action presents a snag for the 257-mile project, a joint venture of Enbridge Inc. and DTE Energy Co. which once completed would bring an incremental 1.5 Bcf/d of new takeaway capacity to the Northeast. After gaining Federal Energy Regulatory Commission approval in August, the project, running through northern Ohio and southeastern Michigan, began construction in mid-October, working toward a late third-quarter 2018 in-service target.

The U.S. Court of Appeals for the 6th Circuit, in a 2-1 decision on Nov. 22, ordered an emergency stay of an 8-mile stretch of the pipeline through Green, pending a decision on the merits of the city's petition. Green has long opposed the pipeline route and had pressed unsuccessfully during FERC consideration of the project for an alternative path that avoided the city.

The majority of the three-judge panel found Green to be persuasive in arguing Ohio EPA's Clean Water Act Section 401 certification was "improper" because various procedures were sidestepped. The majority highlighted Green's arguments that the state had not followed a preferred method for assessing wetlands, called the Ohio rapid assessment method. Moreover, the court pointed to arguments that Ohio had evaluated many wetlands outside the growing season and had not backed up assertions that it evaluated alternative routes that avoid Green.

"In addition, Ohio EPA's argument that overall environmental harms will be minimal is undermined by the fact that its wetland evaluations may have been unreliable," the order said.

While conceding the stay may harm the Nexus project because of a construction delay, the majority emphasized that the pause would apply only to an 8-mile stretch out of over 250 miles of pipeline route. The court added that the damage will be minimized because the order expedites the appeal.

Dissent doubts Green cleared legal hurdle

In a dissent, Judge David McKeague said the stay alters the status quo by imposing "massive economic costs on NEXUS, which will have to halt construction and remobilize if it wins on the merits." There are serious downstream effects, he added, because a prolonged delay would jeopardize contracts and negotiations for sale of gas. By shutting down a small stretch of the pipeline, he added, the court effectively shuts down the entire operation.

McKeague emphasized the court can only vacate the Ohio EPA's order if it is found to be arbitrary and capricious, adding that he could not see how Green had cleared that high hurdle.

"Victory on the merits under an arbitrary and capricious standard is exceedingly rare, as it is meant to be," McKeague said. The most Green can say about Ohio EPA's determination is that it "may have been unreliable," the judge said.

In response to the stay, Nexus spokesman Adam Parker said: "We are aware of the decision and are evaluating it."

Nexus had warned of 'cascading' delays

In an Oct. 17 filing seeking to convince the court not to stay the project, the pipeline emphasized that Nexus would be built in "carefully timed, sequential phases along a linear path" and had engaged two "highly specialized and sought-after pipeline construction contractors."

"Were NEXUS forced to 'skip' the portion in the city, it would significantly undermine the entire construction plan, triggering cascading delays, which could affect the overall in-service date, and cause NEXUS to incur additional expenses demobilizing and remobilizing crews and equipment," the company said at the time.

While the project would raise outflow capacity from the Marcellus and Utica region, its immediate market impacts are muted given that it is one of several production-takeaway projects targeting service dates at around the same time. Additionally, the project's relatively low subscribership would mean that even if all contracts flowed at 100% utilization, the pipeline would only flow about 60% full.

Around the same time as Nexus is scheduled to enter service, Columbia Gas Transmission's WB XPress and Mountaineer XPress are scheduled to add a combined 4 Bcf/d of new capacity, while Mountain Valley Pipeline would raise takeaway by another 2 Bcf/d.

Those projects and Nexus, plus an expected 1.7 Bcf/d of new takeaway from Atlantic Sunrise on Transcontinental Gas Pipe Line in July 2018, would see the region's total outflow capacity increase by more than 9 Bcf/d in the second half of next year. (U.S. Court of Appeals for the 6th Circuit docket 17-4016)

Maya Weber is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc. S&P Global Platts analyst Eric Brooks contributed to this article.