For some time, Sunoco has been suggesting that it would begin operation of the Dragonpipe (Mariner East 2 pipeline) on November 1. They confirmed that date in their last quarterly investors’ conference call, and they recently filed a tariff (schedule of fees) with the Federal Energy Regulatory Commission in which they confirmed it again. (“The purpose of this filing is to provide for the start-up of service (expected to occur on or about November 1, 2018) on Sunoco’s new Mariner East 2 pipeline.”)
There are two problems with the idea that Mariner East 2 will start operations November 1.
First, Sunoco’s definition of “Mariner East 2” has been shifting. Up until a few months ago, that phrase referred to a 20-inch pipeline being constructed from western Pennsylvania to Marcus Hook. Now, Sunoco is using it to refer to a patchwork of pipelines consisting of sections of 20-inch, 16-inch and 12-inch pipeline. The latter is an old pipeline for refined products being pressed into ill-advised “temporary” use to bypass uncompleted sections of the new pipelines.
Second, even with this patched-together “Frankenpipe”, no products will begin flowing November 1. That’s because PHMSA (the federal pipeline regulatory agency) and the Pennsylvania Public Utility Commission are both investigating irregularities in Sunoco’s pipeline construction process. We don’t know the details yet, but it’s clear these investigations will delay operations by a few weeks at the very least.
Investors and shippers can’t be pleased. Sunoco investors won’t be happy about yet another postponement. The pipeline is already years behind schedule. But even more important, from Sunoco’s point of view, is that the company reportedly must satisfy shipping contracts that kick in starting on November 1. Of course we don’t know the details of those contracts, but there are probably financial penalties if Sunoco can’t fulfill them.
While it remains to be seen when (or if) Sunoco will be able to start using its Frankenpipe, we do have some information about when the “real” Mariner East 2 will start operations. Sunoco is now saying that will be sometime in 2020.
No doubt Sunoco will have more to say about these topics on its next quarterly investors’ conference call, on November 7. We’ll keep you posted.