An extension of the Mountain Valley Pipeline, threatened by the denial of a key permit from North Carolina, gained new life Thursday.
The 4th U.S. Circuit Court of Appeals threw out a decision by the state’s Department of Environmental Quality, ruling that it did not properly explain the reasons why it had denied a water quality certification for a portion of the natural gas pipeline
Called MVP Southgate, the extension would start at the main pipeline’s terminus in Pittsylvania County and run for 75 miles into North Carolina.
In sending the case back to North Carolina regulators, the 4th Circuit ordered them to address two things: inconsistent statements from a hearing officer who at one point found that the project had lessened its impact on water bodies “to the greatest extent possible,” and why it chose to deny the certification outright rather than give it conditional approval.
“On appeal, we hold that the Department’s denial is consistent with the state’s regulations and the Clean Water Act,” Chief Judge Roger Gregory wrote in a decision from a three-judge panel.
“Nevertheless, the Department did not adequately explain its decision in light of the administrative record.”
The denial was based, in large part, on uncertainty over whether the main portion of the pipeline — a 303-stretch in West Virginia and Southwest Virginia that is currently under construction — would ever be completed.
At the time of the decision last August, Mountain Valley was lacking three sets of federal permits, which had been struck down by legal challenges from environmental groups.
“Given the uncertain future of the MVP Mainline, North Carolinians should not be exposed to the risk of another incomplete pipeline” and the environmental problems it would bring, said Michael Regan, then-secretary of the North Carolina DEQ. This week, Regan was appointed to head the U.S. Environmental Protection Agency.
Should the mainline not be completed, a hearing officer wrote, its extension would be “a pipeline from nowhere to nowhere, incapable of carrying any natural gas.”
Mountain Valley has since regained two of the three permits for its main pipeline, and is attempting to bypass legal problems with the third by seeking approval for alternative methods of crossing streams and wetlands in the two Virginias.
With the project now back on track, Mountain Valley said Thursday it was proceeding with plans for the extension. The company had filed a challenge of North Carolina’s denial with the 4th Circuit last year.
“We look forward to working with NCDEQ to satisfy any concerns that it may have, and we remain committed to building this important infrastructure project to meet North Carolinians’ demand for cleaner and more reliable, affordable natural gas,” spokesman Shawn Day said.
Efforts to reach the North Carolina DEQ were unsuccessful Thursday.
Although interstate pipelines are governed largely by the Federal Energy Regulatory Commission, Mountain Valley was required to obtain a water quality certification from North Carolina following approval from the federal government.
Last June, FERC found there was a public need for the natural gas that Southgate would transport. The decision was based primarily on a contract between Mountain Valley and Dominion Energy, which will receive about 80% of the pipeline’s supply for distribution to homes and businesses in central North Carolina.
In the state water permitting process that followed, the North Carolina DEQ and several conservation groups argued that Mountain Valley had overstated the demand for the pipeline extension.
While that was not a factor in the 4th Circuit’s decision, opponents continue to argue that there is insufficient need for the 2 billion cubic feet per day of natural gas that Mountain Valley will transport from the Appalachian Basin to markets along the East Coast. A smaller load will be carried by the Southgate extension.
On Monday, the Institute for Energy Economics and Financial Analysis released a study that found Mountain Valley is in financial jeopardy, based on a lower natural gas demand now than when the project was first proposed in 2016. The nonprofit institute says its mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.
The project’s rising cost, caused by delays as it fights challenges from environmental groups, means that it will now have to compete with cheaper sources of natural gas, the study found.
“The pipeline faces a significant risk that its capacity is no longer needed,” Cathy Kunkel, an analyst with the institute and co-author of the report, said in a statement.
Mountain Valley spokeswoman Natalie Cox disputed the study, saying it came from a group that is opposed to natural gas. The pipeline remains fully subscribed, she wrote in an email.
“Furthermore, MVP retains strong support from shippers whose need has grown since cancellation of the Atlantic Coast Pipeline last summer,” she wrote.
Both FERC and an appellate court in Washington, D.C., have ruled repeatedly that there is a public need for the project, basing their decisions on so-called precedent agreements between the pipeline’s owners and shippers.
That thinking comes from a 21-year-old FERC policy that bases decisions on the existence of commercial contracts to purchase gas, rather than the actual need of new sources.
Commissioner Richard Glick, who was appointed chair of the panel by President Joe Biden, has said he would like to revisit that policy. But by the time Democrats are expected to gain control of FERC this summer, it’s unclear what the impact will be on Mountain Valley.