FERC Staff Discloses Alleged Violations by Rover, Raising More Questions About Pipeline

FERC staff in a July 13 notice said it preliminarily determined that Rover Pipeline LLC and parent Energy Transfer Partners LP (ETP) violated Section 7 of the Natural Gas Act (NGA) and FERC regulations when Rover promised not to harm a historic resource in its certificate application while it worked to buy and subsequently destroy the resource.

The alleged violations appear to refer to the destruction of the Stoneman House in Ohio prior to Rover receiving its NGA Section 7 certificate on 2/2/17, but the activity covered in a nonpublic investigation was not explicitly stated by FERC staff.

FERC’s order approving the $4 billion Rover project (CP15-93) denied a requested blanket certificate to perform routine construction activities and operations because Rover demolished the historic Stoneman House, which has been the subject of dispute resolution and settlement activities among FERC staff, Rover, and the Ohio State Historic Preservation Office (SHPO).

The notice of alleged violations explained that while Rover’s application was pending – between February 2015 and September 2016 – it “did not fully and forthrightly disclose all relevant information to the Commission” regarding its plans, in violation of NGA Section 7 and Section 157.5 of FERC’s regulations, which impose an obligation that pipeline applicants be forthright about their plans. “Specifically, in the application and other docketed filings, Rover falsely promised it would avoid adverse effects to a historic resource that it was simultaneously working to purchase and destroy,” FERC staff said.

Following the issuance of the notice, a spokeswoman for ETP said Rover has resolved outstanding issues regarding the Stoneman House through a revised memorandum of understanding (MOU) with the Ohio SHPO and it looks forward to working with the state agency to implement the MOU.

“At the same time, we will continue to work with FERC to address any remaining Stoneman House issues,” the spokeswoman said.

She did not address whether or how any violation of Rover’s NGA Section 7 certificate, if the FERC staff investigation actually results in such a finding, would affect the remaining construction or subsequent operation of the pipeline to move Marcellus and Utica Shale supplies to market hubs in Ohio, Michigan and Dawn, Ontario.

In a research report to clients, ClearView Energy Partners LLC Managing Director Christine Tezak said it is still possible for Rover to reach a settlement with FERC staff, but that it could have done so before the notice of alleged violation was made public. “If a settlement does not materialize, the next step would be an Order to Show Cause, which requires a quorum the FERC currently lacks,” Tezak said.

Depending on Rover’s response should there eventually be an Order to Show Cause from FERC, additional proceedings could take place in court or before a FERC administrative law judge, she said.

FERC has broad civil penalty authority, and “we expect that if the Commission agrees with the findings in the Notice of Alleged Violations, it would seek them,” Tezak said, declining to estimate a financial amount for any penalties.

The FERC staff notice marked only the latest development for Rover and its parent ETP. In a July 12 letter from FERC staff and in a final order from the Ohio Environmental Protection Agency, Rover received new instructions and warnings of civil penalties following construction activities that raised the ire of both agencies.

The Ohio EPA on July 7 issued a final order listing various construction activities of Rover and the release of drilling mud at horizontal directional drilling (HDD) sites, one of which included the presence of oil-based substances. The order listed unauthorized discharge violations, Clean Water Act violations, open burning of land clearing waste and industrial waste violations, directing Rover to address several issues that were first mentioned in May. The state agency said any drilling mud with petroleum hydrocarbons present is classified as industrial waste and must be disposed of at a licensed municipal solid waste location authorized by the Ohio EPA.

The Ohio EPA also on July 7 sent a letter to Ohio Attorney General Michael DeWine asking him to initiate civil proceedings and pursue civil penalties against Rover for the violations listed in the final order. The letter did not list any amount of civil penalties being sought.

“We are working to comply with the directives in the final order from the Ohio EPA and continue to work with FERC,” the ETP spokeswoman told The Foster Report on July 13. She did not address an in-service date for the first phase of the roughly 700-mile project.

In late June, she said the section of Phase I from Cadiz, Ohio, to Defiance, Ohio, is expected to be in service in July, and “we do not anticipate any delays to the November 2017 in-service date on Phase II.”

The Rover project consists of two 42-inch diameter mainline segments, running east-to-northwest across Ohio and turning north into Michigan, along with a network of several lesser-diameter laterals reaching into gas production areas of Ohio, Pennsylvania, and West Virginia, with associated compressor stations and ancillary facilities along the route. It is designed to move 3.25 Bcf/d, relying on interconnecting pipelines to reach different markets.

Rover has been unwavering in earlier comments that the portion from Cadiz to Defiance will be ready to begin service in July. But a July 12 letter from Terry Turpin, director of the Office of Energy Projects (OEP) at FERC, provides Rover with quite a to-do list before FERC will authorize service to begin.

Among the items Rover will have to address are: development of a remediation and restoration plan – to be approved by OEP – for a wetland along the Tuscarawas River in Ohio that was affected by the release of drilling mud at HDD sites; removal and disposal of all drilling mud and drill cuttings at a solid waste disposal site approved by the Ohio EPA; and development of a water quality monitoring program for water wells at three different sites in Ohio.

The latter program will need to be approved by OEP, and it will include monitoring water supplies for a period of two years, with quarterly reports filed at FERC. Based on the results of that program, FERC may, in consultation with the Ohio EPA, require additional mitigation and remediation, Turpin told Rover.

Turpin in May halted new HDD activities on several segments of the Rover project following the release of drilling mud in wetland areas in Ohio, then FERC staff followed that action with the launching of an investigation by the Office of Enforcement after it was discovered that elements commonly found in diesel fuel were present near Rover’s HDD locations near the Tuscarawas River.[1]

FERC staff has continued its review of Rover’s HDD activities and is trying to assess the presence of petroleum hydrocarbons in the drilling fluid, but Rover and its construction contractors are not being very helpful, Turpin said in the July 12 letter to Joey Mahmoud, senior vice president at Rover, a subsidiary of Energy Transfer Partners (ETP).

“I am concerned that the lack of availability of Rover’s personnel and its contractors’ personnel is delaying our ability to determine the relevant facts. Your prompt assistance in determining the cause of the drilling mud contamination will allow Commission staff to develop the necessary protocols and consider resumption of HDD activities,” Turpin told Mahmoud.

One of the conditions of FERC’s certificate order approving the Rover project requires a determination that rehabilitation and restoration of areas affected by construction are proceeding satisfactorily before an in-service authorization can be granted by OEP, Turpin said.

Leading up to FERC’s 2/2/17 approval of the project and after that, Rover’s producer shippers have been clamoring for the project to be placed in service to support their investments related to the pipeline, while landowners and environmental groups have told FERC that the rushed construction work has been shoddy, with complaints about work near agricultural fields and construction crews showing almost no regard to easement agreements and the environmental impact statement. Those filings have continued recently, with requests for FERC to halt all construction on the project.

Prior to FERC staff halting construction of HDD activities, the Ohio EPA in early May issued orders seeking negotiation on civil penalties and restoration of several sites where drilling mud was released into wetland areas. The ETP spokeswoman in June said that there was no evidence that the source of the hydrocarbons found in the drilling mud was related to Rover’s drilling activity.

FERC Acting Chairman Cheryl LaFleur and Commissioner Colette Honorable in a June 1 joint statement said they were troubled by Rover’s spill of HDD fluid and expressed support for actions taken by FERC staff, including the Office of Enforcement investigation.

“If we learn that a developer is acting inconsistently with the terms of its certificate, it is incumbent upon the Commission and its staff to act to enforce those terms. Going forward, we expect that Rover will act consistently with its commitments in the certificate order and will undertake the future actions directed by Commission staff to mitigate the potential impacts caused by any introduction of diesel fuel into its drilling mud, however it might have occurred,” LaFleur and Honorable said.

By Tom Tiernan TTiernan@fosterreport.com

[1]   For past stories, see, Rover Delays In-Service Date; Sees FERC Launch Investigation of Drilling Fluid, FR No. 3151, pp. 17-20, Rover Sees More Opposition to Construction; Dispute Resolution Called For, FR No. 3149, pp. 12-15, and FERC Staff Halts Some Construction on Portions of Rover Pipeline, FR No. 3148, pp. 9-11.

 

This article appears as published in The Foster Report No. 3157, issued July 14, 2017

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