Sunoco Pipeline LP can win a quick reversal of a Pennsylvania judge's order shutting down construction and operations on the Mariner East family of NGL pipelines, a key outlet for Appalachian liquids production, a midstream stock analyst said.
Pennsylvania Public Utility Commission Administrative Law Judge Elizabeth Barnes ordered operations on the Mariner East 1 pipeline and construction on Mariner East 2 and 2X halted in West Whitehall Township in Chester County outside Philadelphia, saying Sunoco's actions put profits over safety.
The judge's decision can be appealed to the full PUC. "We will pursue all legal remedies to overturn this order, including our right to request PUC review of the order, which will be filed within the next seven days," Sunoco Pipeline, an Energy Transfer Partners LP affiliate, said May 24.
"We think there's a chance the PUC backs off and allows service on ME1 to resume," Height Capital Markets midstream analyst Katie Bays told her clients May 25. "We also believe the PUC could issue this decision outside of their regular open meetings. So, an order allowing ME1 to resume service could come at any time following ETP's interlocutory appeal."
Mariner East 1 had just resumed operations after a two-month suspension over concerns about sinkholes during construction on the nearby Mariner East 2 line. Mariner East 2's construction was halted in late April by the state's Department of Environmental Protection when work crews continued to release drilling mud into wetlands and streams after paying a $12.6 million fine and agreeing to changes in the pipeline's development plan and Sunoco's construction practices. Mariner East 2 and the 2X expansion share Mariner East 1's route.
Mariner East 1's shutdown capped NGL prices Appalachian shale drillers realized if they could find any transportation out of the shale, analysts at Tudor Pickering Holt & Co. said May 25. "Mariner East I suspension saw Mont Belvieu propane prices fall to lows of ~$0.74/gal as two month outage surpassed initially messaged 2-3 week downtime," the analysts said. The NGL storage complex in Mont Belvieu, Texas, sets the benchmark price for NGLs in the U.S. Ethane, propane and butane carried on Mariner East 1 flow into a marine terminal outside Philadelphia, where most is exported to Europe.
Given that there is limited room on Sunoco's Mariner West, Enterprise Products Partners LP's ATEX and Kinder Morgan Inc.'s Utopia pipelines out of Appalachia, Tudor Pickering Holt said, contracted shippers Range Resources Corp., Eclipse Resources Corp. and CNX Resources Corp. are re-injecting ethane into the natural gas stream and sending propane and butane to market using barges, trains or trucks.
"Sunoco has made deliberate managerial decisions to proceed in what appears to be a rushed manner in an apparent prioritization of profit over the best engineering practices available," Barnes wrote in her May 21 order. Barnes' order took effect immediately but will require the eventual endorsement of the five-member state PUC, which regulates energy transportation and safety.
Barnes was ruling on a complaint was filed by Democratic state Sen. Andrew Dinniman, who represents Chester County in the southeastern part of the state. He is asking regulators to more closely examine the engineering behind Mariner East 2 and the PUC's decision to allow hazardous NGLs to be transported on the decades-old Mariner East 1 after sinkholes were discovered along the pipeline's path in the county.
Sunoco said the judge's ruling did not comport with the facts or the law. "We strongly disagree with Judge Barnes' order and believe there is no evidence or legal basis to support Senator Dinniman's claims in his Petition and the Order that followed," Sunoco said in a statement, noting that Mariner East 1 only reopened after an inspection by the PUC's own experts. "The safe operation of ME1 was verified through exhaustive geophysical testing and analysis that was verified by the PUC's Investigation & Enforcement division and their experts, which was the basis for the PUC's 5-0 decision to return the line to service."
Barnes laid out a laundry list of items that Sunoco and its contractors need to complete before resuming construction on Mariner East 2 and 2X and operations on Mariner East 1. The administrative law judge wants an extensive re-examination of the pipes and welds on Mariner East 1. The 70,000-barrel-per-day line originally carried refined products west out of a refinery at Marcus Hook outside Philadelphia and now moves NGLs east from the Marcellus and Utica shales to a Marcus Hook terminal for export.

