Here's (Drilling) Mud in Your Eye: Regulatory Troubles Not Over for Rover

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Researched by Industrial Info Resources (Sugar Land, Texas)--Now that the Federal Energy Regulatory Commission (FERC) has temporarily halted the start of construction drilling along the Rover natural gas pipeline in the wake of a drilling fluids spill in Ohio, questions have arisen over whether Energy Transfer Partners (NYSE:ETP) (Houston, Texas) can meet its goal to have the first phase of the pipeline up and running in July.

Energy Transfer's $4.2 billion pipeline project was one of the last to receive FERC approval in February before the lack of a commission quorum, due to the resignation of its chairman, meant no more approvals for the time being. President Donald Trump has since made nominations to fill two of the three FERC leadership vacancies, but those nominations still require the confirmation of the Senate. For related information, see February 7, 2017, article - Natural Gas Pipeline Projects Gain Last-Minute Approvals by FERC.

The Rover Pipeline is designed to transfer up to 3.25 billion cubic feet per day about 710 miles from the Marcellus and Utica areas to markets in the Midwest, Northeast, East Coast, Gulf Coast and Canada, with direct deliveries to Ohio, West Virginia, Michigan, and into the Dawn Hub in Ontario, Canada, which has a broader network of distribution points back into the U.S. Construction began shortly after FERC gave its conditional approval, with targeted in-service goals of July 2017 for Phase I and November 2017 for Phase II. For more information, see Industrial Info's project reports on the Ohio, Michigan and West Virginia portions of the pipeline.

But problems arose in mid-April, when the project developers notified the Ohio Environmental Protection Agency and FERC of a 2 million-gallon spill of bentonite-based drilling fluid over 6.5 acres of wetland. The spill occurred while Energy Transfer's Rover Pipeline LLC was performing horizontal directional drilling under the Tuscawaras River.

Last week, the Ohio Environmental Protection Agency ordered Energy Transfer to pay $431,000 for water and air pollution violations related to the pipeline project.

According to the Rover Pipeline website, the bentonite-based drilling mud used for horizontal directional drilling for the project is "a non-toxic, naturally occurring material that is safe for the environment..."

On Wednesday, FERC ordered a halt to drilling at Rover project sites where drilling has not already commenced. At locations where drilling is already under way, "stopping drilling activities may result in the loss of the bore hole and could cause more prolonged environmental impacts," FERC said in a letter to Energy Transfer. "As a result, Rover is authorized to complete drilling activities for these HDDs [horizontal direction drillings]."

FERC went on to say its staff "has serious concerns regarding the magnitude of the incident (which was several orders of magnitude greater than other documented HDD inadvertent returns for this project), its environmental impacts, the lack of clarity regarding the underlying reasons for its occurrence, and the possibility of future problems. Given that the site of the release occurred near, and extended over Rover's approved centerline, a stoppage of additional drilling is warranted to facilitate a review of Rover's efforts to search for and locate any potential releases."

FERC ordered a third-party review "to encompass all actions taken from the beginning of the Tuscarawas River drill, throughout the drill effort, and ending with the development and initiation of the plan for restoring the wetland."

A spokesman for the Rover project said there was no change at this time to its construction schedule, according to The Canton Repository.

At any rate, Energy Transfer, the developer of the Dakota Access Pipeline project, is no stranger to controversy.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.