Delay puts $3.7 billion Marcellus pipeline at risk of overhaul

HOUSTON (Bloomberg) -- A $3.7 billion pipeline in America’s biggest shale gas play could be rerouted after a federal agency ordered all work on the project to stop.

In a rare move, regulators on Friday ordered EQT Midstream Partners LP to halt construction on its 303-mi Mountain Valley conduit, which would carry natural gas from the Marcellus basin to southern markets. The decision follows a U.S. appeals court’s order a few weeks ago vacating two key permits for the project.

The ruling, which requires agencies including the U.S. Forest Service to take a closer look at the project’s environmental impact, could lead to a “material re-route” for the pipeline, Height Securities LLC analysts Katie Bays and Josh Price said Monday in a note to clients.

EQT Midstream is confident that the permits in question will be restored, and that the Bureau of Land Management will stand by its decision that the route favored by the company is better than alternatives, spokeswoman Natalie Cox said in an email.

The company’s parent, EQT Corp., last month pushed the expected in-service date for the project to the first quarter of 2019 from late 2018. But late 2019 or early 2020 is more likely, Charles Robertson, an analyst at Cowen & Co., said in a note to clients.

And while the setbacks probably won’t cost EQT the $600 million it estimated earlier this year, “those construction stops do start to pile on material costs when the delays are reaching months instead of weeks,” Bloomberg Intelligence analyst Brandon Barnes said in an email.

Mountain Valley is a joint venture of EQT Midstream, NextEra Energy Inc., Consolidated Edison Inc., WGL Holdings and RGC Resources.