Litigation around the permitting of long-haul US oil and gas projects has made timing of returns for large capital investments uncertain, leading some midstream companies to avoid such projects, industry officials said Tuesday.
Their comments came during a Sept. 29 panel discussion on legal challenges affecting major oil and gas pipeline projects at the Shale Insight conference, organized by the Marcellus Shale Coalition.
“I can tell you from our perspective in a lot of instances, we try to stay out of the regulatory arena,” said Christopher Rimkus, assistant general counsel of MPLX, while noting the company does have an equity interest in the Dakota Access Pipeline. “It’s just something that from a capital perspective it’s hard to consider putting a billion dollars up when you don’t have a sense of when your project will actually be done, when you can start getting a return on that investment.”
Ashley O’Neil, senior counsel at Williams, said she agreed about challenges facing the sector.
“The uncertainty just makes the planning and the capital process of these types of projects much, much more difficult,” she said.
Overall, Rimkus said, litigation from nongovernmental organizations has less of a day-to-day impact on the gathering-and-processing end of the business. But litigation targeting distribution lines or transmission pipelines affects the ability for producers to market from large fields liked the Marcellus and Utica shales to end-use customers, he said.
“And it’s incredibly disruptive. In our case, we’ve deployed over $10 billion of capital up here,” he said. If the ability to move product up and down the eastern seaboard is degraded, then “that initial investment is degraded, and you’ll see an economic slowdown, and a slowdown in construction and drilling,” he added.
Appeals court rulings
Recent appeals court rulings have resulted in some significant setbacks for major oil and gas projects in the eastern US.
In one case with potential impacts for other interstate projects, the 3rd US Circuit Court of Appeals found PennEast Pipeline could not condemn lands in which New Jersey held an interest in federal court.
Separately, a US Army Corps of Engineers’ general permit for stream crossings often used by oil and gas pipelines also was thrown into question earlier this year by a Montana federal district court and remains the subject of appeals court litigation.
The Atlantic Coast Pipeline saw multiple permits sent back to agencies by the 4th US Circuit Court of Appeals before Dominion Energy canceled the project. Williams tangled with New York state in various venues before shelving the Constitution Pipeline project amid altered market conditions.
Regulatory efforts
Lawyers on the panel acknowledged several Trump administration initiatives aimed at ensuring greater regulatory consistency, such as the June US Environmental Protection Agency regulation aimed at setting limits on the timing and scope of state water quality certifications under the Clean Water Act.
Still, Lisa Bruderly, shareholder at Babst Calland, pointed out that litigation has since been brought by the attorneys general of 21 states, including New York, who argued the CWA regulation unlawfully curtailed the state’s authority to fully review the projects. (State of California, et al., v. Andrew Wheeler, 3:20-cv-04869).
“We’ll see where that challenge goes. At this point, the certainty that was intended to be brought by having a rule is now sort of shadowed by the uncertainty of where we’re going to be going with this litigation,” she said.
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