Dive Brief:
- Mountain Valley Pipeline officials announced Monday that the cost of the 300-mile natural gas pipeline from West Virginia to Virginia had risen to $4.6 billion from a previous estimate of $3.7 billion. This is an increase of more than $1 billion since the first cost projections of up to $3.5 billion in 2015.
- Approximately half of the increase is due to August work stoppages ordered by the Federal Energy Regulatory Commission as a result of environmental lawsuits. These legal actions, pipeline officials said, led to increased material costs and expenses related to "ongoing contractual charges and schedule changes." In addition to the delays imposed by FERC, the project also lost time and incurred extra costs after crews had to prepare some sites for Hurricane Florence. Developers reported that they also had to pay for and perform erosion repair and install sediment control devices due to significant rainfall during the past several months.
- FERC gave permission to Mountain Valley to continue work on Aug. 29, with the exception of 25 miles of the route. Construction should be 50% complete by the end of this year, and Mountain Valley expects to enter the pipeline into service in the fourth quarter of 2019.
Dive Insight:
Pipeline workers employed by Mountain Valley also took a hit during the FERC-ordered stoppage, as 50% were reportedly laid off in August.
FERC also brought construction on the Atlantic Coast Pipeline to a temporary halt on Aug. 13 due to permitting issues, but workers are returning to work after the commission gave the green light to a new right-of-way through national park lands in Virginia.
MetroNews reported that Atlantic kept their pipeline employees working elsewhere during construction downtime instead of implementing layoffs. A pipeline spokesman told the outlet that competition for welders and other trades is so stiff that they kept workers on payroll rather than risk losing them to competitors.
Construction companies continue to fight over the limited pool of qualified workers. And despite pay increases and better benefits packages, according to the Associated General Contractors of America, 80% of contractors are having difficulty filling hourly positions. This fight to stay adequately staffed is costing construction companies more than just a bigger payroll. These manpower shortages are causing project delays and exposing contractors to contractual penalties.
Stephen Sandherr, the AGC's CEO, said much of the growing costs of labor, as well as rising material prices, must be absorbed by contractors because they can’t pass all of the expense on to customers.
