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May 11 (Reuters) - 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 construction work.
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 timeline.
Some major gas drillers that plan to boost output once Rover enters service include Antero Resources Corp and Ascent Resources LLC.
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 County, Ohio.
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)