Equitrans Midstream Corp.’s (EQM) long-delayed Mountain Valley Pipeline (MVP) may gain some necessary permits within the next few months, “which will allow us then to bring MVP into service in 2023,” said CEO Thomas Karam.
EQM is expecting the biological opinion from the U.S. Fish and Wildlife Service by next Tuesday, “and based on the permitting timeline announced by other agencies, we expect to receive all of the required permits and approvals over the next few months. This timing will allow for mobilization of construction crews in the summer of 2023, which will position us to bring MVP into service in 2023,” Karam said during the company’s fourth-quarter and full-year earnings conference call.
MVP, a joint venture of EQM subsidiary EQM Midstream Partners LP, NextEra Capital Holdings Inc., Con Edison Transmission Inc., WGL Midstream and RGC Midstream LLC, stands alone in potentially bringing an incremental 2 Bcf/d of takeaway capacity to Appalachia. Total work on the project is nearly 94% complete, but the pipeline has faced staunch opposition that has resulted in multiple delays.
As its estimate stands now, however, EQM is expecting the U.S. Army Corps of Engineers to issue permits to cross water bodies in the Jefferson National Forest “in mid-April, and subsequent to that, we expect for it to lift the stop-work order and allow work in the forest…,” Karam said.
“However, as we all know, we expect project opponents to yet again challenge these duly issued permits,” Karam added.
“Projects like the MVP that comply with every process and receive every approval should prevail, which is why we remain committed to the regular permitting path. That said, we also believe that our country desperately needs federal permitting reform,” the CEO noted.
“Companies need to have some assurance that permits are issued and construction is authorized, [and] that their investment won’t be endlessly held hostage by legal challenges,” Karam said.
In 2022, EQM’s capital expenditures (capex) on MVP alone totaled $199 million, accounting for more than 35% of the company’s total spend during the year. EQM’s capex in 2022 reached $549 million, including its gathering, transmission and water operations. In the final quarter of the year, capex stood at $138 million.
Spending on MVP is expected to further increase this year.
EQM reported it expects capex on MVP to total $610-$660 million in 2023 – assuming the pipeline comes in-service this year. If the pipeline is not completed this year, the midstreamer estimates 2023 capex for MVP would range from $125-$200 million.
If MVP comes online, total capex for 2023, including spending on MVP, gathering, transmission and the company’s water segment, is estimated between $970 million-$1.1 billion. Should more delays incur, capex across all segments is reduced to between $510-630 million.
Speaking to the possibility of further delays, Karam also noted EQM was “disappointed that Congress couldn’t pass a permitting reform bill in December during the lame duck congressional session.
“Although there are differences between and within the parties as to potential reform, we believe there remains support from both sides of the aisle to work on a bipartisan solution, and we think there continues to be prospects for legislation in the new Congress.”
Most recently, former Sen. Pat Toomey (R-PA) in December introduced legislation that would have limited regulatory and litigation delays as a result of laws including the Federal Water Pollution Control Act, the National Environmental Policy Act of 1973 and the Endangered Species Act of 1973.
Earlier last year, Sen. Joe Manchin (D-WV) attempted to include language in a continuing resolution that would have overhauled the permitting system while avoiding a potential government shutdown. Opposition to Manchin’s bill from Republicans and progressive Democrats meant the bill died after failing to receive the filibuster-proof 60 votes needed.
Manchin has pushed for permitting reform multiple times, as his home state of West Virginia is where MVP is held up on the 3.5-mile crossing of the Jefferson National Forest.
Rager Mountain Storage Incident
EQM also noted it is continuing its investigation into the cause of natural gas escaping from its Rager Mountain Storage field in Cambria County, PA. The leak allowed more than 1 Bcf to enter the atmosphere in early November.
The company discovered the leak on Nov. 6 from a single well, which was flooded on Nov. 19 to stop the flow of natural gas and placed one of two planned plugs. A second plug was set on Nov. 20.
“We currently do not have permission to inject gas into the Rager Mountain field, but we are having active, productive discussions with” the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA), “and are hopeful that they’ll authorize us to inject gas during the coming season,” said COO Diana Charletta, who joined Karam on the call.
EQM has completed inventory tests on the field, and found that storage was reduced by about 1.29 Bcf.
“We continue to evaluate whether and to what extent all of the inventory loss was due to venting or whether some’s due to potential migration,” Charletta said. “The root cause investigation phase is now underway. We have engaged the leading firm with expertise in storage field incidents to conduct an independent investigation…” while working with the Pennsylvania Department of Environmental Protection.
In the fourth quarter, EQM incurred $8.1 million in expenses related to the Rager Mountain incident, including a regulatory reserve for potential penalties. The midstreamer said that full-year 2023 guidance assumes an estimate of an additional $5 million in spending for the natural gas storage field based on current information.
That said, “Operating expenses for the year were lower by $62 million compared to last year, primarily from a $56 million impairment of long-lived assets in 2021…” as well as lower selling, general and administrative (SG&A) expenses, said CFO Kirk Oliver.
Expenses in the fourth quarter, however, “increased by $18 million compared to last year, primarily from the $8.1 million of expenses related to the Rager mountain storage incident and higher” operations and management, SG&A and appreciation.
EQM, with its 940 miles of FERC-regulated interstate pipelines, has 4.4 Bcf/d of capacity in operation. In 2022, the company’s gathering segment processed almost 7.7 trillion Btu/d, and 7.4 trillion Btu/d in the final quarter of the year.
Total pipeline throughput reached 3.3 trillion Btu/d in 4Q2022, compared with nearly 3.1 trillion Btu/d the same period the prior year. Total pipeline throughput was also up year/year in 2022 at 3.1 trillion Btu/d, compared with more than 2.9 trillion Btu/d in 2021.
EQM reported net income of $82.16 million (15 cents/share) in the final quarter of 2022, compared with a net loss of $1.6 billion (minus $3.74) during the year-ago period.
In 2022, EQM reported a net loss of $257.14 million (minus 76 cents/share), compared with a net loss of $1.397 billion (minus $3.40) in 2021.
