Rash Of Violations Plague Rover, Mariner East 2 Projects

MEDIA, Pa.—Energy Transfer LP (NYSE: ET) and its Sunoco pipeline subsidiary have racked up more than 800 state and federal permit violations while racing to build two of the nation’s largest natural gas pipelines, according to a Reuters analysis of government data and regulatory records.

The pipelines, known as Energy Transfer Rover and Sunoco Mariner East 2, will carry natural gas and gas liquids from Pennsylvania, Ohio and West Virginia, an area that now accounts for more than a third of U.S. gas production.

Reuters analyzed four comparable pipeline projects and found they averaged 19 violations each during construction.

The Rover and Mariner violations included spills of drilling fluid, a clay-and-water mixture that lubricates equipment for drilling under rivers and highways; sinkholes in backyards; and improper disposal of hazardous waste and other trash. Fines topped $15 million.

Energy Transfer also raised the ire of federal regulators by tearing down a historic house along Rover’s route.

The Appalachia region has become a hub for natural gas as it increasingly replaces coal for U.S. power generation, creating an urgent need for new pipelines. But the recent experience of residents and regulators with the two Energy Transfer pipelines has state officials vowing to tighten laws and scrutinize future projects.

“Ohio’s negative experience with Rover has fundamentally changed how we will permit pipeline projects,” said James Lee, a spokesman for the Ohio Environmental Protection Agency.

Problems with Mariner prompted Pennsylvania legislators to craft bills tightening construction regulations, which have drawn bipartisan support.

“Any pipeline going through this area is going to face resistance which it would not have faced before,” said Pennsylvania State Sen. Andy Dinniman, a Democrat.

Energy Transfer spokeswoman Alexis Daniel said the firm remained committed to safe construction and operation and at times went “above and beyond” regulations for the two projects.

Construction of the 713-mile, $4.2 billion Rover started in March 2017 and was planned to proceed at about 89 miles a month, while work on the 350-mile, $2.5 billion Mariner East 2 started in February 2017 and was planned at 50 miles a month, according to company statements on construction schedules. Both were targeted for completion late last year.

Regulators and industry experts said the pace of both projects far exceeded industry norms.

The four other projects examined by Reuters were mostly completed at a pace averaging 17 miles per month. Reuters selected the projects for comparison because, like Rover and Mariner, they cost more than $1.5 billion, stretched at least 150 miles and were under construction at the same time.

Construction on both Energy Transfer pipelines was ultimately slowed when state and federal regulators ordered numerous work stoppages after permit violations. Energy Transfer completed the last two sections of Rover in November and said it expects to put Mariner East 2 in service soon.

In February, Pennsylvania fined the company $12.6 million for environmental damage, including the discharge of drilling fluids into state waters without a permit. After further problems, including the sinkholes, a state judge in May ordered work halted on Mariner East 2.

Administrative Law Judge Elizabeth Barnes wrote that Energy Transfer’s Sunoco unit “made deliberate managerial decisions to proceed in what appears to be a rushed manner in an apparent prioritization of profit over the best engineering.”

While pipeline construction schedules vary, the planned timelines for Rover and Mariner were ambitious, said Fred Jauss, partner at Dorsey & Whitney in Washington and a former attorney with the U.S. Federal Energy Regulatory Commission (FERC), which regulates interstate gas pipelines.

“They aren’t taking their time ... we’re all concerned about it,” said Pennsylvania State Sen. John Rafferty, a Republican, referring to other state politicians, constituents and first responders.

Energy Transfer spokeswoman Lisa Dillinger told Reuters the schedules were “appropriate for the size, scope and the number of contractors hired.”

Other companies that planned slower construction of comparable projects have finished mostly on schedule with almost no violations. Canadian energy company Enbridge Inc. (NYSE: ENB), for instance, recently finished a $2.6 billion, 255-mile pipeline—following a path similar to Rover through Ohio and Michigan—with just seven violations. Enbridge did not respond to a request for comment.