Sunoco parent Energy Transfer (whose stock symbol is now “ET”) had a good quarter financially, but they are now willing to admit that they really screwed up in Pennsylvania—at least that’s what they said on the February 21 briefing call for financial analysts.
The Dragonpipe (Mariner East pipeline system) is a tiny part of ET’s overall business, but it got a significant amount of attention in the latest quarterly briefing. The schedule for ME2 and ME2X was discussed, as was the “problem” with the DEP resulting from the explosion of the brand-new Revolution pipeline in September, and the subsequent remediation effort. And the company claimed it had learned its lesson about the right way to deal with regulators in a state like Pennsylvania.
There was no discussion of ME1; apparently they consider the current shut-down to be a mere blip in the schedule.
The schedule for Mariner East: all pipelines to be completed in 2019. Very early in the call, Tom Long, ET’s CFO, expressed his pleasure with the company’s progress on Mariner East. “I am pleased to say that we placed the initial capacity of ME2 into service on December 29 of 2018,” he said. “Volumes are ramping up on the pipe, and we expect to be running at capacity [apparently suggesting that the 20-inch pipeline will be completed] in the near future. And on ME2X, 99% of the mainline construction is complete, and at this time, we continue to target having the pipeline in service by late 2019.”
Later, in response to a question, he said, “99% of the pipeline itself is installed. It’s a matter now of completing the HDDs and some open cut. There are roughly 20 permit modifications required to convert from HDDs to open cut. We’re [submitting the permit modifications] with PA DEP. And I think that we have adequate time in our schedule for the return of those [permits] to be able to execute this. And as I say, we’re still committed to completing 2X by the end of 2019.”
Fixing the problem with Revolution. Also early in the call, Long spoke about “working together with the Pennsylvania DEP” to resolve the compliance issues that led the DEP (along with the governor) to halt all work on DEP permits on all ET/Sunoco pipelines statewide, after the company racked up numerous violations in the process of attempting to restore the ill-fated Revolution pipeline to service. He said, “…we are committed to bringing this project into full compliance with all environmental permits and applicable regulations,” and emphasized that “the operations of our in-service pipelines are not impacted by PA DEP’s recent permit hold, nor any areas of construction where permits have already been issued.”
Kevin Smith, ET’s Executive VP, described the situation this way: “We have four documents that are due to PA DEP on Monday [February] 25, which is the date mutually agreed. We expect that they’ll review and approve those documents within 30 days, which would allow us to commence the restoration effort. And yes, that is the only thing that’s prohibiting us [from getting our other permits].” (It’s not clear to me what the “four documents” are or the extent to which they will convince the DEP that it is fine to start releasing permits again.)
“Mistakes in Pennsylvania; every place is not Texas”. In response to a question about whether there had been any “changes in practices” that would help ET “execute better”, CEO Kelcy Warren said, “We’ve learned all kinds of lessons. And we’ve made mistakes and we are correcting those mistakes and we’ll not make those mistakes again. So yes, we’ve learned a lot. Every place is not Texas…. We made some mistakes, and specifically now we’d like to talk about Pennsylvania, and we’re going to take our medicine and fix those mistakes and complete good projects from this point forward. I’m not insinuating that everything we’ve done has been bad. It’s just we’ve made some mistakes we’re not proud of. So you’ll see that improve and when we don’t make those mistakes again, that our costs are going to improve and the predictability of those costs are likewise going to improve.”
Whether ET will really “take our medicine and fix those mistakes” remains to be seen. Surely, some of the most fundamental mistakes (such as the failure to consider emergency evacuation issues or the failure to perform adequate pipeline maintenance on old pipelines) are just about impossible to fix. 2019 will probably be the year we find out whether the company can make fixes that will satisfy the regulatory agencies, the courts, and the public.
I will add, 2019 will probably be the year we find out whether the company, the courts and regulatory agencies can make fixes that will satisfy the public. If the past indicates the future, public trust in the regulatory agencies will continue to deteriorate.
What do they mean, “Every place is not Texas”?
Add Comment- I suggest that’s a dame good thing!
I think they mean that in Texas, they can do whatever they please with their pipelines and they get no pushback from regulators. They have discovered that Pennsylvania (however poor our regulations may be) is not like that.