Originally published for customers June 7, 2023
What’s the issue?
Our first article on the Mountain Valley Pipeline project was on July 6, 2017. Now it is almost six years later and the project is still not in service.
Why does it matter?
However, in late May, President Biden and Speaker McCarthy reached a settlement regarding the nation’s debt limit and included in that bill was a very special section that specifically directed the administrative agencies to issue all permits for the project. Even more important was the provision in the statute that declared no court will be allowed to review those permits.
What’s our view?
This statute which President Biden signed into law on June 3 means that concerns about the project switch dramatically from if it will ever go into service to a question of when. As we discuss today, we view the first quarter of 2024 as the most likely timeline for that event, but it could come sooner. One thing that is certain is that the opposition will not give up.
Our first article on the Mountain Valley Pipeline (MVP) project was on July 6, 2017. Now it is almost six years later and the project is still not in service. However, in late May, President Biden and Speaker McCarthy reached a settlement regarding the nation’s debt limit and included in that bill was a very special section that specifically directed the administrative agencies to issue all permits for the project. Even more important was the provision in the statute that declared no court will be allowed to review those permits.
This statute which President Biden signed into law on June 3 means that concerns about the project switch dramatically from if it will ever go into service to a question of when. As we discuss today, we view the first quarter of 2024 as the most likely timeline for that event, but it could come sooner. One thing that is certain is that the opposition will not give up.
The Tortured History of the Project
In this limited space, we cannot recount all of the legal problems the project has encountered since it received its certificate from FERC on October 13, 2017. Even before FERC issued that decision, our first headline about the project on July 6, 2017 noted Emerging Risk Factors for Mountain Valley and Atlantic Coast Projects. In March 2019, when both projects began encountering similar legal difficulties as a result of every required permit being challenged before the Fourth Circuit, we noted in Similar Problems, Different Risks - MVP and ACP that a key difference between the two projects was that MVP was pushing ahead with construction and getting its pipe in the ground, whereas the Atlantic Coast Pipeline project was taking a more wait and see approach. Eventually, the Atlantic Coast Pipeline project was canceled but Mountain Valley has famously been described for years now as 94% complete. But 94% complete equates to zero revenue. The key concern we have noted many times is that the Fourth Circuit has appeared to act as a super-regulator replacing the considered views of the experts in the various agencies with its own judgment based on one-hour oral arguments. Thus, last November we noted that the Future of MVP May Be in Senator Manchin’s Hands. As it turns out, those were good hands to be in.
The Statute
Senator Manchin’s vote was instrumental in passing the Inflation Reduction Act, which provided the most incentives for clean energy in the nation’s history. But in exchange for his support, Senator Schumer and President Biden agreed to include in a future “must pass” type of legislation a provision ensuring that MVP would be built. The original draft of that bill that was proposed for inclusion in the Inflation Reduction Act would not have solved all of MVP’s issues. Even the draft that was proposed at the end of last year was not as complete as the one that finally made it into the debt limit bill. In that regard, MVP may have benefitted from the delay in the bill’s passage.
The key provision in the law simply provides that “no court shall have jurisdiction to review any action taken by the Secretary of the Army, the Federal Energy Regulatory Commission, the Secretary of Agriculture, the Secretary of the Interior, or a State administrative agency acting pursuant to Federal law that grants an authorization, permit, verification, biological opinion, incidental take statement, or any other approval necessary for the construction and initial operation at full capacity of the Mountain Valley Pipeline.” That essentially means it is now up to the agencies to approve the project’s construction.
But the law also directs the U.S. Army Corps of Engineers to “issue all permits or verifications necessary — (1) to complete the construction of the Mountain Valley Pipeline across the waters of the United States; and (2) to allow for the operation and maintenance of the Mountain Valley Pipeline.” The law even requires the permit to be issued within twenty-one days after the bill becomes a law. Because President Biden signed the bill on June 3, that means the U.S. Army Corps is on the clock and has only until June 24 to issue the required permit. It further directs all the other federal agencies, including FERC, to continue “to maintain all other approvals or orders issued pursuant to Federal law necessary for the construction and initial operation at full capacity of the Mountain Valley Pipeline.” We fully expect FERC to comply with the law and authorize full construction following the issuance of the water permit.
The Construction Process
While we fully expect further legal efforts to attempt to block the project and for civil disobedience actions to be taken to slow the construction, the project is now on the firmest footing possible for completion of construction. Therefore, rather than providing information on the various legal challenges which called into question the project’s viability, we now turn to assessing the timing of its in-service date. The largest owner of the project has insisted it intends to have the project in service by the end of 2023. That intent is important because commitment to complete the project by a certain date is critical. But, is that even possible? For that we turn to the data we have on how the project progressed in mid-2018 before it was beset with delays.
The project was designed to be built by nine construction crews each working what is referred to in the industry as a spread.
As seen above, each of these spreads has different lengths and were likely determined by the difficulty of the terrain, so that each contractor could finish the particular spread in one construction season. While MVP has famously said that the project is 94% complete, that is based on the total project, including the compressor stations, which are essentially done. The total mileage that is complete for the pipeline itself is not nearly that high.
When it was actively under construction, MVP reported on the progress for each spread divided into ten key activities necessary to complete each spread, starting with “Tree Felling” and ending with “Final Restoration.” We will look at just two key activities for each spread and use them to project a potential in-service date for the project once it resumes construction, assuming full construction begins on July 15.
Trenching and Backfilling
The fourth step in the construction process reported by MVP was trenching. Because the pipeline is to be buried, it is necessary to dig a trench along the entire right of way. So trenching represents a key indicator of how far each spread has progressed in getting the ground ready for the pipeline. Following that step, the project reported on the following three steps in the construction process, stringing (which is positioning the pipe along the right of way), welding (joining the pipe segments together), and coating and wrapping (which is preparing the pipe to be buried for the next 50 years).
The next step that we will be monitoring and using to predict an in-service date is “backfilling and tying in.” Although not mentioned in the MVP reports, this step follows lowering the fully welded and coated pipeline into the trench and, as indicated by the activity title, filling in the trench around the pipe with the dirt that was originally excavated.
As seen above, the progress in each spread on these two key activities varies widely, with trenching being 100% complete on all but three spreads, spreads F, G and H, which are the ones on each side of the Jefferson National Forest and the spread that includes that critical crossing.
How Fast Can This Get Done?
Assuming only one crew can work on each spread, the spreads on the critical path would appear to be spreads G and H, each of which have over 12 miles that have yet to be trenched. By looking back at the progress reported in 2018 before the project encountered numerous legal delays, we can gain some understanding of how fast this trenching process may go.
As seen above, the average daily progress on this key activity varied widely in 2018, from almost half a mile per day to less than a tenth of a mile in the key spreads G and H. We can use the median and average speeds to bracket the likely time it will take for spreads G and H to complete the required twelve miles of trenching. The median for all spreads in 2018 was 0.08 miles per day, about double the progress reported in spreads G and H, and the average for all spreads in 2018 was almost 0.15 miles per day, or triple that reported in spreads G and H. Using those as our proxies for anticipated timing to complete the trenching process, we end up with between 81 days and 147 days for each of the two critical spreads. Assuming a start of July 15, that would mean we could expect trenching to be complete sometime between October 4 and December 9.
The pipeline construction process is often described as a moving assembly line. So once the trench is dug, the other crews move in to string, weld, coat, lower in and backfill the trench. The forward movement of the entire process will be dictated by the trenching crew, but the time for each of the other crews to complete the processes required before backfilling can occur will dictate when that critical step can be completed. By looking at the 2018 reports from MVP, we see the median and average number of days between when the same percentage of completion for trenching and backfilling was 23 and 20 days, respectively. That means if we add that time to the projected timelines for trenching we can estimate that backfilling for the two critical spreads will be completed sometime between October 24, 2023 and January 1, 2024.
Following the trench being backfilled, the pipeline still needs to be pressure tested and then cleaned and the right of way needs to be substantially restored. Given the time of year when this project is likely to conclude, final restoration is unlikely to be achievable because vegetation likely won’t grow that late in the season.
The final step in the process is for the project to request authority from FERC to go into service. FERC will not approve that request unless FERC staff determines “that rehabilitation and restoration of areas affected by the projects are proceeding satisfactorily.” As that language indicates, this is a fairly subjective determination. However, in the past FERC staff has allowed projects to go into service during the winter months even when final restoration is not possible, provided that they are comfortable with interim measures and have faith in the applicant to complete final restoration after commencing service. Such faith in the applicant is essential because FERC understands the authorization to go into service is its last and best point of leverage to ensure compliance with all aspects of its certificate order.
Assuming it takes a month following the backfilling operations for the other steps to complete, that puts the potential date for a request to go into service between November 24, 2023 and February 1, 2024.
As seen above, in the past the time for FERC staff to respond to a request to place a project into service can be very quick, as short as the next day, but typically it takes a couple of weeks. Given the likely opposition that will be filed in this case, we would expect FERC to look carefully through the compliance history of the project before granting its approval, so the two-week average seems appropriate. Thus our current bottom line is that the project will likely go into service sometime between December 8, 2023 and February 15, 2024.
We will be following the progress reports filed by MVP and will update this prediction if any material change occurs.