May 11 U.S. regulators on Wednesday prohibited
Energy Transfer Partners (ETP) LP from new drilling to
install pipe along the route of its Rover natural gas pipeline
from Pennsylvania to Ontario following drilling fluid spills in
a wetland area in Ohio.
Concern that the ban was coming helped lift natural gas
futures prices on Wednesday, traders said.
The drilling ban will remain in place until the U.S. Federal
Energy Regulatory Commission (FERC) staff authorizes the company
to start again. It does not prevent the company from finishing
drilling activities already started or other non-drilling
Gas traders said futures prices settled up about 2 percent
on Wednesday. The pipe is expected to enable Marcellus and Utica
shale producers to boost output when it enters service in phases
later this year.
ETP has said the $4.2 billion Rover pipeline, which will
have the capacity to transport 3.25 billion cubic feet of gas,
would enter service in two phases in July and November.
Officials at ETP were not immediately available for comment
on the FERC action or its possible impact on the project's
Some major gas drillers that plan to boost output once Rover
enters service include Antero Resources Corp and Ascent
In a letter, FERC said ETP cannot conduct any new horizontal
directional drilling activities until it complies with certain
measures to help prevent spills.
Analysts at FBR, an investment bank, said in a note that
FERC's additional requirements should be manageable but tend to
lead to higher costs and more frequent delays.
FERC's letter said that on April 13, Rover alerted the Ohio
Environmental Protection Agency and FERC’s Compliance Monitor of
a spill of about 2 million gallons of bentonite-based drilling
fluid covering about 6.5 acres in a wetland area. The spill
occurred during drilling under the Tuscarawas River in Stark
FERC said it has serious concerns regarding the magnitude of
the incident, its environmental impacts, the lack of clarity
regarding the underlying reasons for its occurrence, and the
possibility of future problems.
FERC said it was requiring Rover to immediately obtain
independent third-party contractor proposals to further analyze
all drilling activity at the Tuscarawas River drilling site.
FERC also ordered ETP to preserve all documents since Jan. 1
regarding the drilling around the Tuscarwas River.
(Reporting by Scott DiSavino; Editing by David Gregorio)