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Hope Springs Eternal as Mountain Valley Nears Start

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Mountain Valley Pipeline (MVP) has sprung a leak, just weeks away from a planned start of the new pipeline. Despite the goal-line setback, we have high hopes for MVP and its long-term impact on Northeast gas flows, with new owner EQT already looking ahead to an expansion.

The rupture occurred May 1 on a pipeline section near Roanoke, VA during hydrostatic testing, according to an incident report filed with Virginia regulators. Hydrostatic testing involves injecting water at a high pressure into newly constructed pipeline to test the integrity of the steel and welds.

MVP had intended to start operations later in May, according to an April 22 filing with the Federal Energy Regulatory Commission (FERC). The pipeline requested approval from FERC to place the new facilities in service no later than May 23, 2024, and to start minimum volume commitments (MVCs) with shippers on June 1. It is not clear if the rupture will postpone the start.

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In the FERC filing, MVP said it had completed construction on the first 77 miles in West Virginia up to the Harris compressor station, and had packed that section with natural gas. MVP runs 303 miles from West Virginia to an interconnect with Williams’ (WMB) Transcontinental Pipe Line (Transco) in southern Virginia.

Start-up of MVP would close a long chapter for developer Equitrans Midstream (ETRN). ETRN started construction on MVP in 1Q18, over six years ago, before the project became mired in legal challenges to permits and weather-related delays.  

MVP also filed a tariff schedule with an effective date of May 23, 2024. MVP has filed for a firm transportation rate of $1.76/Dth per day. Unfortunately for MVP, the pipeline is already fully contracted under negotiated rates that are unaffected by the recourse tariff. However, the elevated rates could provide upside to some interruptible shipping.

While Mountain Valley will be able to transport up to 2 Bcf/d, EDA forecasts that MVP will only move ~750 MMcf/d on average in 2024 due to downstream constraints at Transco Zone 5. These constraints will be alleviated in 2027 when Transco debottlenecks downstream through its Southeast Supply Enhancement expansion.

Despite the outlook for limited near-term upside, new owner EQT plans to expand MVP by 500 MMcf/d once it completes the acquisition of ETRN later this year. EQT announced the project in its 1Q24 earnings. The proposal isn’t a new idea; ETRN originally designed MVP to ship up to 2.5 Bcf/d by adding more compression, but the project was tabled when MVP stalled in legal proceedings.

EQT is the primary capacity holder on MVP with nearly 1.3 Bcf/d under contract. Several utilities and industrials hold the remaining capacity, including AltaGas (200 MMcf/d), Consolidated Edison (250 MMcf/d), USG (250 MMcf/d) and Roanoke Gas (10 MMcf/d). The capacity provides these shippers with more options to source gas and connects them directly to cheaper supply. For EQT, MVP allows the leading Appalachian producer to ship gas from the discounted Dominion South hub to realize premium prices at Transco Zone 5. – Alex Gafford Tickers: EQT, ETRN, WMB.


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