Rescue Me

Monday, 06/05/2023Published by: Rick Smead

The recent drama related to the U.S. debt ceiling may have illustrated the chaos that polarization has brought to Washington, but it showed one other thing as well: there's an appetite for federal permitting reform from Democrats and Republicans alike. The Fiscal Responsibility Act (FRA), signed into law Saturday by President Biden, addressed some immediate priorities — including changes to the review process under the National Environmental Policy Act (NEPA) — but its mandate to expedite completion of the long-delayed Mountain Valley Pipeline (MVP) caught many of the project's supporters and critics by surprise. In today's RBN blog, we look at the permitting issues that have kept MVP in regulatory limbo and how the FRA is designed to overcome them and bring the project back to life.

Concerns about energy infrastructure permitting have pervaded public policy for at least a decade, on both sides of the political aisle. On one side, concern over things like new power transmission for renewable energy sources has been dominant, while on the other side concern over new natural gas pipeline infrastructure like MVP has been center stage. (For more, see our Don't Pass Me By series.) The whole debate over permitting reached a fever pitch as both Congress and the Biden administration became deeply concerned over reliability and national security in our energy mix following events such as the Winter Storm Uri Texas blackout.

We have chronicled MVP's long, long journey in the years since it was proposed (most recently in Will It Go In Circles). It received its certificate from the Federal Energy Regulatory Commission (FERC) in 2017 and construction began in early 2018. But as the project wandered through the permitting jungle (even after a FERC certificate is issued, a project has to get permits at the state level, primarily water permits from the U.S. Army Corps of Engineers at the federal level, but with a state ability to obstruct them), we saw permit by permit issued, only to be yanked away by a U.S. Court of Appeals reversal after being challenged by environmental groups (which is somewhat ironic given the net emissions benefits of the pipeline, as we discussed in Ghosts of Pipelines Past and Future). But just as MVP was once again testing its sponsors’ resolve by having yet another permit reversed, along came the debt-limit crisis. As anyone with access to any news at all knows, we went through the periodic mud fight of trying to integrate U.S. budgetary policy with the basic act of preventing a default on debt we have already incurred. If we hadn't been through this process before, it would have been pretty scary — in fact, this time it was pretty scary, given the polarization in our government at the moment.

But just like the previous situations, negotiations between the adults in the room came through, and President Biden and House Speaker Kevin McCarthy reached agreement on the terms of the FRA, which will increase the debt limit, impose a wide variety of budget-control factors, and reform the way the National Environmental Policy Act (NEPA) interacts with agency actions to approve energy projects. The FRA passed in the House on Wednesday, raced through the Senate on Thursday (despite a late attempt to remove the MVP provision from the bill, that was voted down), and has been signed into law by President Biden. So where does MVP fit in? As a late addition to the package, the FRA included language that deems MVP to be in the national interest and basically tells everyone to approve it, period, and to issue all necessary permits within three weeks. This is reminiscent of ancient Greek dramas where everyone messes up everything they can possibly touch, then in the last act a Greek god comes down on a little pulley and makes it all right. ("Deus ex machina," or "god dropped in by machine" in Latin.)

Figure 1. Mountain Valley Pipeline and MVP Southgate Projects: Source: RBN

Before we get deeper into what the FRA's approval should mean for MVP, let's get a quick refresher about what the project is all about. MVP is designed to connect Appalachian gas supply to growing power generation markets in the Mid-Atlantic and Southeast, including southern Virginia and, via the MVP Southgate extension, North Carolina. The MVP mainline (dashed pink line in Figure 1) is a ~300-mile, 42-inch-diameter system with an initial capacity of 2 Bcf/d, though the operator said it has the potential to expand the capacity by an incremental 500 MMcf/d through additional compression. MVP Southgate (dashed purple line in Figure 1) was initially proposed as a 75-mile extension from the tailgate of the MVP mainline near Chatham, VA, to an end point in Alamance County, NC, about 50 miles south of the Virginia-North Carolina border. But given the permitting issues, the lead sponsor, Equitrans Midstream Partners LP (EQM), has said it is reevaluating the extension. (See our weekly NATGAS Appalachia report for the latest on MVP and other pipelines in the area.)

[RBN's NATGAS Appalachia provides the data and insights to monitor the northeast natural gas market's twists and turns and identify the risks and opportunities along the way, including tracking supply-demand trends, outbound capacity and their impact on takeaway pipeline utilization, and regional prices. Click here for more information and a sample report.]

MVP's progress has been continually stymied by a host of issues related to permits and approvals:

FERC Certificate: The DC Circuit U.S. Court of Appeals (DC Circuit) ruled May 26 that in issuing its work orders for MVP, FERC failed to provide an adequate explanation for why it did not conduct a supplemental analysis for erosion and sedimentation. While the court didn't fully vacate FERC's orders, it remanded them, requiring FERC to either complete the analysis or better explain why it's not warranted.

U.S. Forest Service: In mid-May, the U.S. Forest Service (USFS) restored MVP's permit to install a 42-inch-diameter pipeline along a 3.5-mile corridor through Jefferson National Forest. The agency issued a favorable Final Environmental Impact Statement (FEIS) for the project in April, which kicked off a 30-day comment period that ended May 15. The latest decision aims to address and alleviate concerns raised by the Fourth Circuit U.S. Court of Appeals (Fourth Circuit) when it remanded the previous approval back in January 2022. Like with most of the other approvals, this is the third go-round for the USFS since the project was first approved in 2017.

BLM: Quickly following the USFS decision, the Bureau of Land Management (BLM) issued a Record of Decision on May 19 granting MVP's right-of-way permit to complete a 3.5-mile stretch of construction through Jefferson National Forest.

U.S. Fish and Wildlife Service: In late February, MVP received a revised and favorable Biological Opinion (BioOp) from the U.S. Fish and Wildlife Service for the third time, affirming the two previous decisions that federally protected species of bats, fish and one plant were not likely to be adversely impacted by MVP. Both previous opinions were remanded by a three-judge panel sitting on the Fourth Circuit, most recently in January 2022. The latest decision worked to address the court's concerns with additional data and analysis. However, as predicted, environmental groups have already filed a petition for review challenging the latest BioOp, effectively perpetuating the legal loop that MVP has been stuck in since it received its first federal permits in 2017.

West Virginia DEP: Not long after upholding MVP's water quality certificate from the Virginia Department of Environmental Quality (VDEQ) in early April, the Fourth Circuit revoked the West Virginia Department of Environmental Protection's (WVDEP) water quality certification for the project, a setback that would likely prevent MVP from being able to resume construction this year.

The FRA clears MVP's path, ordering regulatory agencies to issue the necessary permits and telling the courts they cannot second-guess those actions. Specifically, it approves all authorizations and permits needed to complete construction and start operations and makes the ordered agency actions just rubber stamps this time. It does recognize that there will probably be challenges to the MVP provision, but restricts jurisdiction over those challenges to the D.C. Circuit alone — taking it out of the hands of the Fourth Circuit (that's local to the project), which has been responsible for most of the decisions that have stalled MVP to date. Overriding the individual state and federal agencies in this way is unprecedented.

Putting challenges to the MVP provision solely in the hands of the D.C. Circuit is not necessarily a guarantee of a favorable decision. As noted above, on May 26 the same court remanded FERC orders allowing work to continue on MVP, and the D.C. Circuit has not been all that friendly to pipeline projects overall. But it's also important to note that challenging legislation is a far-different battle than opposing an agency action (like the issuance of a permit under that legislation). In effect, our amateur view is that any counterparty would have to prove the legislation is unconstitutional, making it a much higher bar to clear than simply challenging an agency's permitting decision. And, despite being fairly tough on gas pipelines, the D.C. Circuit tends to take a national perspective in its decisions.

The bottom line is that the MVP provision in the FRA certainly improves the project's prospects for completion in general. But there's always the risk that legal action against the provision itself could leave MVP in the uncomfortable position of having the project authorized and put into service, then being told by a court that the whole thing was illegal (although, as noted, that's less likely here than in the other big case, Spire STL, where that happened — see I Need You). But despite that potential uncertainty, the market has been emboldened by the news, with Equitrans stock up nearly 50% since May 26.

Does the MVP provision offer any guidance as to how other pipeline projects might fare on this wave of concern about infrastructure permitting? Not directly, since none of them are named "Mountain Valley Pipeline." But all the other streamlining provisions in the FRA, including deadlines for permit processing and multiple procedures to coordinate agency action, coupled with commitments that have been made by regulators such as Willie Phillips, acting Chairman of the FERC, certainly suggest it will be a more positive world out there for pipeline sponsors.

"Rescue Me" was written by Ray Miner, Carl Smith and Fontella Bass. The song was recorded in three takes at Chess Studio in Chicago, with Billy Davis producing. Released as a single in September 1965, the song went to #1 on the Billboard Rhythm and Blues chart, and #4 on the Billboard Hot 100. It would become Fontella Bass's biggest hit and one of the best-selling singles for Chess Records. Personnel on the record were: Fontella Bass (lead vocals), Minnie Ripperton (backing vocals), Louis Satterfield (bass), Maurice White (drums — later of Earth Wind and Fire), Pete Cosey (guitar), Gerald Sims (guitar), Leonard Caston (piano), Sonny Thompson (organ) and Charles Stepney (percussion). "Rescue Me" would be included on Bass's first studio album, The New Look, and would go on to be covered by many artists, including Linda Ronstadt, Diane Ross, Cher, Bryan Ferry, Roy Buchanan and Gayle McCormick.

The New Look LP was released in early 1966 and went to #93 on the Billboard Top 200 Albums chart. It was produced by Billy Miller and recorded at Chess/Ter-Mar Studios in Chicago in November 1965.

Fontella Bass was a soul singer from St. Louis. Her mother, Martha Bass, was a member of the Clara Ward Singers, so Fontella was around music from an early age. She started her professional career as a pianist and singer with bluesman Little Milton's band. Her recording career started in the early 1960s with her singing on singles produced by Ike Turner for his Bobbin, Prann, and Sonja labels. She signed with Chess Records in 1965. Bass released eight studio albums and 10 singles in her career. She passed away in St. Louis in 2012 at the age of 72.