April 17 (Reuters) - Pennsylvania regulators said on Tuesday they will set up a grant program with the $12.6 million that Energy Transfer Partners LP paid as a penalty for permit violations during construction of the Sunoco Mariner East 2 natural gas liquids pipeline:
* The grants will be available for projects that reduce or minimize pollution and protect clean water in the 85 municipalities along the length of the pipeline corridor, the state Debarment of Environmental Protection (DEP) said in a release.
* ETP is building the $2.5 billion Mariner East 2 pipeline, which will boost total capacity of its Mariner East project to 345,000 barrels per day (bpd) and open the pipe to suppliers in Ohio and West Virginia.
* Since May 2017, Mariner East 2 has received 50 notices of violation from Pennsylvania regulators due in part to 110 inadvertent returns or spills, including six so far this year.
* Delays related to those spills, among other things, have pushed the expected Mariner East 2 startup from the third quarter of 2017 to the end of the second quarter of 2018.
* Separately, the DEP said on Monday it will hold a hearing on April 30 to receive comment on two permit modifications ETP is seeking for Mariner East 2.
* ETP is seeking to change from horizontal directional drilling (HDD) at two sites in Chester County to conventional bore drill at one site and a combination of conventional bore, open trench and HDD at the other site.
* The DEP said it extended the comment period from April 21 until May 11. Officials at ETP were not immediately available to say if that extension would affect the expected startup of the project.
* In related news, ETP is still waiting for Pennsylvania regulators to allow liquids to flow through the existing Mariner East 1 pipe. The company told shippers using the line that it will likely restart in late April.
* Pennsylvania utility regulators suspended operations on Mariner East 1 on March 7 after sinkholes were discovered near the project.
* The Mariner East 1 shutdown has forced shippers, including Range Resources Corp, to find another route for their liquids.
* Mariner East 1 can transport up to 70,000 bpd of propane and ethane from the Marcellus and Utica shale formations in western Pennsylvania to customers in the state and elsewhere, including ETP’s Marcus Hook industrial complex near Philadelphia. (Reporting by Scott DiSavino Editing by Paul Simao)