Logistics accounts for 7.4% of US GDP. Pipeline transport represents only half a percentage point of this total of 7.4%. Proponents of pipelines argue that when pipelines are properly built and maintained they have fewer carbon emissions associated with transporting natural gas and oil than trucks or railcars. But pipelines are facing headwinds from advocacy groups; these non-governmental organizations (NGOs) claim that too often pipelines are do not properly constructed or maintained. They argue that pipelines, far from being an environmental solution, are too often a danger that society should not be willing to accept.
Larger investment funds are beginning to see increasing risks associated with investing in companies and sectors that lack strong environmental, social and governance (ESG) records. NGOs willing to sue are certainly one of the nodes of these increased risks. These lawsuits pit small, often poorly funded advocacy groups against large corporations and high-paying law firms. And in these battles, the Davids beat the Goliaths more and more.
A concrete example: the Mountain Valley pipeline
The Mountain Valley pipeline is in trouble. The Mountain Valley Pipeline (MVP) is a natural gas pipeline being constructed between southern Virginia and northwest West Virginia. The project will consist of over 300 miles of pipeline. If completed, the pipeline would have the capacity to ship 2 billion cubic feet of natural gas per day from the Marcellus and Utica shale formations to markets in the Mid and South Atlantic regions of the United States. -United. The main owner of the pipeline is Equitrans Midstream. Groups fighting to stop the pipeline include the Sierra Club and very small partner organizations like Wild Virginia, Protect Our Water, Heritage, Rights (POWHR), Virginia Scientist and Appalachian Mountain Advocates.
Mountain Valley Pipeline has had a mountain of challenges to overcome since filing a formal application with the Federal Energy Regulatory Commission (FERC) to build and operate the pipeline. In a punch, January 25and, the Fourth Circuit Court of Appeals again denied permits issued by the U.S. Forest Service and the Bureau of Land Management allowing the Mountain Valley Pipeline to cross three and a half miles and four streams in Virginia’s Jefferson National Forest and in West Virginia. Richmond court ruled federal agencies ‘did not sufficiently consider actual sedimentation and erosion impacts’ of pipeline, ‘prematurely authorized’ use of course crossing method of water and “did not follow” a Forest Service rule governing forest management. .
February 3rd, the other punch landed. The same three-judge panel rejected the U.S. Fish and Wildlife Services’ assessment of the impact of the Mountain Valley Pipeline (MVP) on two endangered fish species: the Roanoke log and the darter candy.
“If a species is already headed for the cliff of extinction, an agency cannot press the gas. We urge the Fish and Wildlife Service to carefully consider this directive while reassessing the impacts on the two endangered fish in issue, particularly the seemingly not long -for-for-this-world candy dart,” Judge James Wynn wrote in the court notice.
“We recognize that this decision will further delay the completion of an already largely completed pipeline,” Wynn added, “but the Endangered Species Act directive to federal agencies couldn’t be clearer: “stopping and reversing the trend of species extinction, whatever the cost”. .’”
Wild Virginia (David) vs. Equitrans Midstream (Goliath)
As of December 31, 2021, Equitrans Midstream was the largest owner of the Mountain Valley Pipeline with a 47% interest in the project. Equitrans Midstream (ETRN) defines itself as a natural gas collector with a significant transportation footprint in the Appalachian Basin. The company has 766 employees.
ETRN has invested $2.5 billion in this project, including $284 million in the last fiscal year. In 2020, the company made a net profit of $364.4 million. One of the attorneys working for ETRN is Donald Verrilli, Jr. Mr. Verrilli is a former United States Solicitor General and an associate at a partner in Munger, Tolles & Olson.
Although not the largest of NGOs, Wild Virginia has played a vital role in this fight. In the latest annual report, Equitrans Midstream complained that “the majority of environmental justice litigation appears to focus on whether state or federal agencies with permitting or other decision-making responsibilities have properly addressed consider environmental justice issues during the decision-making process”. Advocacy organizations, like Wild Virginia, are raising environmental justice issues in connection with legal challenges.
In Wild Virginia, an attorney named David Sligh, the director of conservation, reviewed each permit, went through thousands of pages of documents line by line and identified where he thought the language was either misleading or outright simply misrepresentation. It then transmits its conclusions to the partner organizations that deal with legal litigation.
Mr Sligh said ETRN’s problems are entirely self-inflicted. “They have these difficulties because they didn’t do the job well from the start. The company and the agencies that were supposed to look into these things and do a thorough analysis just haven’t done their job. In Wild Virginia’s annual report last year, the advocacy group said it had submitted a letter to Virginia’s State Water Control Board showing that MVP violated requirements on a much larger scale than it did. had not previously admitted. Wild Virginia exposed over 1,500 violations.
Where ETRN has 764 employees and the money to pay for several high-priced law firms, Wild Virginia has 4 employees and, according to a Form 990, received $246,000 in contributions and grants. These contributions don’t just fund salaries, Mr. Sligh and the organization’s director aren’t particularly well paid. Contributions also finance voluntary activities; helps pay for water quality monitoring at over 100 sites; and keeps abreast of rules, regulations and proposed projects – and submits comments and recommendations on these rules and regulations. In the fight against the system, community outreach and support is a particularly important activity that needs to be funded.
How did David do it?
Goliath suffers. In 2021, net loss attributable to common shareholders of Equitrans Midstream was $1,439.0 million. If you invested $100 in ETRN in 2018, it was worth $66 according to their annual report. A $100 investment in the S&P 500 would have generated a return of $186.
Investment firms, such as Seeking Alpha, argued quite bluntly that “the unfavorable court ruling has greatly increased the risk of investing in these securities.” But they also pointed out that “Anytime you have a major project behind schedule… fickle banks can cut off additional financing and (it can) increase capital costs dramatically. As soon as a court issues an adverse opinion, such as this, then… the stock (is) no longer an investment-grade vehicle…”
MPV’s principal owner, Equitrans Midstream, admitted in the risk section of this year’s annual report, which was released shortly after the decisions, that “there is no guarantee that the MVP joint venture will ultimately receive all necessary permissions…” to complete this project.