By John Downey
Two recent federal court rulings could delay construction of the Atlantic Coast Pipeline for up to a year and add as much as $1 billion more to costs already estimated at up to $7 billion.
That could push completion of the 600-mile project — designed to transport natural gas from shale fields in the North and Midwest from West Virginia, through coastal Virginia and to eastern North Carolina — back to mid-2021. And that is only if the pipeline ultimately wins current court challenges.
At immediate issue is a stay the 4th Circuit Court of Appeals imposed Dec. 7 on findings by the U.S. Fish and Wildlife Service on treatment of endangered species’ habitats needed for construction of the project. The stay caused Atlantic Coast Pipeline LLC — a joint venture of Dominion Energy Inc. (NYSE: D), Duke Energy Corp. (NYSE: DUK) and The Southern Co. (NYSE: SO) — to voluntarily halt construction along the entire route.
The court has declined to either narrow that December stay or to expedite the hearing on the case. Agreeing to either could have made it possible for construction to resume on the project after a brief pause.
Dominion, which is in charge of construction, has warned that on the current court schedule, construction could be pushed back by as much as a year. And it says the construction halt is costing up to $20 million a week.
Because of requirements in its Federal Energy Regulatory Commission license, the pipeline could be prevented from clearing timber for construction of the pipeline until November, even if the court rules in its favor after the hearing that starts March 19. If that were to happen, the delays could add up to a $1 billion cost increase.
The delays appear to be causing problems for the project’s principal owners. On Jan. 10, Dominion (which owns 48% of the pipeline) warned investors the “near-term earnings contribution from ACP will be modestly lower than had been expected,” even if the project were to resume construction by spring. And the day before, Bank of America Merrill Lynch downgraded 47% owner Duke Energy’s shares to “neutral” from “buy,” at least in part because of delays and escalating costs on the pipeline.
Pipeline spokesman Karl Neddenien says the ruling has already cost 4,500 jobs along the pipeline as Dominion, which is building it, laid off about 3,000 workers and scotched plans to hire about 1,500 more until construction can resume.
D.J. Gerken, one of the Southern Environmental Law Center lawyers involved in the case, says the pipeline partners have themselves caused the problems they are experiencing. He contends ACP pushed to start construction based on various federal agency approvals before those approvals had been fully litigated.
In the current case, a finding by the Fish and Wildlife Service — which sets limits on how much damage can be done to endangered species along the pipeline route — has been stayed as the appeals court determines whether the agency followed the law in issuing the findings. Gerken and the SELC represent the environmental groups that challenged the Fish and Wildlife decision. Construction on the pipeline, which was allowed briefly last year following the initial finding, has been stopped in its tracks as that case proceeds to court, Gerken says.
Neddenien says ACP is confident that it will ultimately win the court case and continue construction. “The need is there, the need is real for this project,” he says.
“At oral arguments in March, we will make a compelling argument that the FWS order covers all of the affected species so we can resume work and complete the Atlantic Coast Pipeline,” he says.
Gerken contends that new information about endangered species’ habitats along the route raises new questions about the FWS order. Neddenien disputes that, saying that opponents are simply extending their delaying tactics in an effort to frustrate construction of the pipeline.
The pipeline does face other challenges. In December, the 4th Circuit vacated the U.S. Forest Service permit to run the project through two national forests , which could require major changes to the planned route and more expenses. The pipeline has also won some approvals recently, including a permit issued by Virginia regulators last week for a key compressor station and a ruling Monday by the 4th Circuit upholding a water-quality permit in that state.
But the challenge over the Fish and Wildlife decision is the most immediate and creates the largest potential headaches for the project.
Neddenien says the case could be decided quickly and options could remain to minimize any delay that might be caused. But he concedes that even if the ACP ultimately prevails in the case, the costs and delays could be substantial.