Exclusive: Equitrans CEO – MVP’s Approval Can Be ‘Canary in the Coal Mine’

It’s clichéd to joke that challenging obstacles take “an act of Congress,” but sometimes reality really does require such action.

Equitrans Midstream Chairman and CEO Tom Karam has reason to celebrate after President Joe Biden on June 3 signed the bipartisan debt ceiling compromise into law, which specifically includes the authorization and expediting of the 303-mile, 2 Bcf/d Mountain Valley Pipeline (MVP) from northern West Virginia to southern Virginia.

As the developer, operator and 48% owner of the joint venture project, Equitrans has a lot on the line with the MVP natural gas system intended to relieve much of the takeaway bottleneck from the Appalachian Basin.

With MVP stalled from legal challenges after being roughly 94% constructed, Karam is confident the pipeline will be completed and fully online by the end of this year, or at least early 2024. Only about 20 miles of pipe–mostly through waterways and the state line–are left to be built.

The law also amends the National Environmental Policy Act (NEPA) to streamline the permitting process for infrastructure, potentially including pipelines, electric transmission and renewable energy projects.

Hart Energy Editorial Director Jordan Blum conducted an exclusive interview with Karam on June 5 after U.S. Sen. Joe Manchin, D-W.V., and others successfully fought to include MVP in the congressional compromise.

Jordan Blum: I'll start off broad. Just how big a deal is this legislation now that we have a compromise and the president’s signature?

Tom Karam: I think that the importance and significance of MVP being included in the debt ceiling legislation goes far beyond MVP. I think that it’s symptomatic and shines a light on the fact that we should not have to rely on an act of Congress to construct–in a timely manner–infrastructure that is critical to continue our economic and energy growth and security.

So, my takeaway is both narrow and broad. The narrow takeaway is, we're thrilled and grateful as a company and as a partnership that MVP was deliberately and definitively determined by Congress and the White House to be a piece of infrastructure that is critical to our national security and our national energy. So that then will result in an efficient completion of the project sometime around the end of the year or early 2024.

On a more broad scope, I hope and expect that there will be some wind at the backs of our elected officials to see the need for comprehensive permitting reform, which is agnostic as to whether it's fossil fuel–meaning natural gas infrastructure–or whether it's renewable wind, solar, hydrogen or other. You have to be able to attract the capital on a risk-adjusted basis that can then be deployed to construct this infrastructure that we need in a timely manner, but also consistent with the appropriate and necessary environmental review and protection. So I hope that MVP turns out to be the canary in the coal mine of what needs to be done to fix our permitting regulation in this country.

JB: In the debt ceiling legislation, there's broader language about bigger permitting form, but I'm assuming you think that's not nearly enough of what needs to be done?

TK: I think it's a good start. I've heard it referred to as ‘permitting light.’ I would call it more directional than definitive. I think what was included in the debt ceiling legislation directionally is a good step in the right direction. But you need definitive rules of engagement with the state and federal agencies with very well-defined time limits and thresholds. And then you need rules of engagement with the court system so that there are timelines, and you can't continue to be in a loop where there's never-ending litigation. I think those things have to be included and contemplated in what I would define as the more broad and comprehensive permitting reform that we so desperately need.

JB: Is there optimism that that might end up being a part of another broader congressional compromise package? I know it's hard to do it as standalone legislation.

TK:  I don't know that I can handicap that. I think everything I've heard from Sen. Manchin, from Sen. [Shelley Moore] Capito (R-W.V.), from [House] Speaker [Kevin] McCarthy is that there is an appetite and desire to roll up their sleeves and see if they can't put together a comprehensive piece of permitting legislation.

Right now we’re the hot spot in terms of natural gas infrastructure, but if you step back and think about it over the long term, the transmission grid needs permitting reform every bit as much, if not more than we in the natural gas infrastructure business need it. The transmission grid has to be, first of all, upgraded and, secondly, enlarged significantly if there's any hope to deploy and get the penetration of renewable power sources that the transition is talking about.

JB: When it comes to MVP, was it surprising that enough Democrats got on board with it, including the president?

TK: No. I think it’s a watershed event for our dual-path strategy. What I mean is we, as a company and as a partnership, have consistently maintained that we were going to travel two paths at once. The first path is the regular way permitted in order to have durable permits issued by state and federal agencies, and to finally get through the [U.S. Court of Appeals for the] Fourth Circuit panel that has so consistently been antagonistic toward us. And then the other path was to continue to educate and to communicate with both parties to include the White House, to discuss and explain why MVP is so important to our energy security. The watershed event for me was when–through the administration–[U.S. Energy]  Secretary [Jennifer] Granholm issued that public letter of support stating that the administration deemed MVP to be a critical piece of infrastructure for national security. I think that confirmed for a lot of Democrats, as well as Republicans, that they were actually all on the same page specifically with MVP. I think that opened the door for continued conversations to allow us to get the result we did in the legislation.

JB: Obviously, this legislation is a huge deal, but can you talk about just kind of what MVP roadblocks and next steps remain in terms of any issues with lawsuits or permitting?

TK:  We feel very good that the legislation as written will both withstand challenges to its constitutionality as well as very clearly lays out a plan … that the remaining permits shall be issued and deemed ratified immediately upon issuance by Congress. So we see a path for us to be fully mobilized by early to mid-July to complete construction.

JB: But there will still be some litigation hurdles, even though you're confident they'll be overcome?

TK: Look, our opponents are very well financed and sophisticated, and they are not simply going to give up. They will continue to challenge us in the courts, and I would think specifically in the [U.S. Court of Appeals for the] D.C. Circuit as it relates to the constitutionality of the act. And we expect to prevail there.

JB: How onerous this whole process has been? Construction started more than five years ago, the planning was years before then. And now there's only 20 or so miles left of pipeline with water crossings mostly.

TK: Yeah, that's correct. It’s been a very painful process. Both the federal and state agencies have had to issue multiple permits … and been forced to jump through hoops that they've never had to jump through before. Each time the Fourth Circuit would either vacate or stay a federal permit, they would at the same time confirm the fact that we did successfully show the need for the project, that we were successful in showing the appropriate scope of the project and that they never challenged the route of the project. So the three main pillars of any regulatory oversight were confirmed, even while at the same time they would remand or vacate the permit either on ancillary issues or issues of not enough explanation. That was the most frustrating for us. But I don't want to go down the rabbit hole of trying to argue the case. I’d much prefer to look forward. We're fortunate that we had an act of Congress mandate that MVP be completed. Now, we have to take that win and we have to expand it to the broader permitting reform.

JB: I think we're still calling this a $6.6 billion project (MVP started at less than $4 billion), but is that going to be revised up in total capex at some point?

TK: I don't think you're going to see any major revisions. I think we're going to try to come in close to the $6.6 billion that is our guidance. I will tell you that we may change our work schedule and flow a little bit in the four or five months of construction we have re remaining. One area that I'm very concerned about is the safety of our right of way and the safety of our contractors as we mobilize to begin construction again. We've had many, many instances in prior construction periods where the opposition and activists would intrude upon the right of way, putting themselves at risk and in danger, and putting our contractors and our employees at risk and in danger. We're concerned that given the fact that the opposition has now lost, that they will raise their activism even further. So we are going to take significant extra steps through the Virginia State Police and local law enforcement and West Virginia State Police and law enforcement, as well as our own initiatives with security to do everything we can to protect the right of way, our contractors, as well as our opponents. They have every right to free speech; they just don't have a right to create safety or risk hazards for our right of way or our employees.

JB: If this is completed by year end or early 2024, about how long will it take to really ramp up to full capacity?

TK: We will start operating at full capacity immediately. What will happen is we'll mechanically complete the pipeline, then we'll do all of the hydrostatic testing to ensure that it's fit for service. And then we will start to receive nominations for the 2 Bcf/d.

JB: Big picture again, can you talk about just how big a deal this is for overall Appalachian Basin production with all the bottlenecks that have existed?

TK: That's an excellent point. There is no shortage of producers in the Appalachian Basin that will tell you that they are capacity constrained with takeaway capacity coming out of the basin. That has two impacts. It has the impacts on how much they can produce and grow their production over time, but it also has a significant pricing impact. What we're hoping MVP can do, in the short term, is have a beneficial impact on pricing almost immediately. Over time, we fully expect to have a positive impact on the ability for producers–within their own financial forecast–to grow their production. From there, that may lead to additional projects out of the basin, which could further enhance the energy security and affordability. We haven't talked about affordability yet, but MVP clearly is a tool and a pipeline that will help to keep natural gas from Virginia and south on a much more affordable footing.

JB: This applies more to future projects, but how will this impact the ongoing issues with getting pipelines up into those highly populated East Coast areas?

TK: It's amazing to me that you cannot build a pipeline into the Northeast and into New England to ease their supply concerns and their cost impact. Instead, they will import LNG and import natural gas from Canada and use heating oil. It's just incongruous to me that we should not be able to construct natural gas pipelines when you have the proximity of the largest natural gas reserve on the planet–the Marcellus Shale and Utica Shale–just a couple hundred miles from where it could be delivered and provide pricing relief and reliability and security to a very significant number of consumers.