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US appeals court will not ease stay for 1.5 Bcf/d ACP natural gas pipeline

Highlights

Action boosts prospects for delay

Company reaffirms confidence in project

Houston — A federal appeals court said Friday it will not scale back a stay on a permit for the Atlantic Coast Pipeline, increasing prospects for delay of the 600-mile, 1.5 Bcf/d project, designed to move Appalachian gas to Mid-Atlantic markets.

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Setbacks to ACP's construction timeline would likely delay pressure on Transcontinental Pipe Line Zone 5 prices.

Company officials did not comment on the schedule Sunday, but Dominion Energy 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."

ACP in early December suspended most construction after the 4th US Circuit Court of Appeals stayed the US 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 December 7 that the stay's application was narrower than it appeared.

The court on Friday rejected that request. The decision added to the late-December rejection of another ACP 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 December 14 motion, the company said delay of up to a year was "all but certain" under the current oral argument schedule and "would exponentially increase" project costs.

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

If it was unable to complete tree felling by mid-March, ACP had told the court that time-of-year environmental restrictions on tree felling could make the additional delay inevitable.

In its December 7 motion for clarification, ACP requested that the stay be limited to four species in contention.

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," ACP argued in the motion.

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

"We believe [FWS] thoroughly addressed the issues in this case in the revised Biological Opinion and new Incidental Take Statement in September," company spokesman Karl Neddenien said.

In investor materials published January 10, Dominion said, based on construction restart in the second quarter of 2019, the near-term earnings contribution from ACP 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% 2017-2020 compounded annual growth rate guidance range.

The FWS court case is one of several affecting construction. The 4th Circuit December 13 also vacated US Forest Service authorizations allowing ACP to cross national forests and the Appalachian National Scenic Trail, and has previously stayed a US Army Corps of Engineers permit authorizing water crossings.

Once in service, ACP and Mountain Valley Pipeline are expected to add a combined 3.5 Bcf/d 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, maya.weber@spglobal.com

--Edited by Jonathan Fox, newsdesk@spglobal.com