EX-99.1 22 etrn12312021ex991-mountain.htm EX-99.1 Document







Financial Statements
Mountain Valley Pipeline, LLC – Series A
Years Ended December 31, 2021, 2020 and 2019
With Report of Independent Auditors





Mountain Valley Pipeline, LLC – Series A
Index To Financial Statements
Years Ended December 31, 2021, 2020 and 2019


Report of Independent Auditors        2
Balance Sheets         3
Statements of Operations         4
Statements of Members’ Equity        5
Statements of Cash Flows         6
Notes to Financial Statements        7






Report of Independent Auditors

The Management Committee of Mountain Valley Pipeline, LLC - Series A

We have audited the financial statements of Mountain Valley Pipeline, LLC - Series A (the Company), which comprise the balance sheet as of December 31, 2020 and the related statements of operations, members’ equity and cash flows for the years ended December 31, 2020 and 2019, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management of the operator of the Company, EQM Gathering Opco, LLC, is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mountain Valley Pipeline, LLC - Series A at December 31, 2020, and the results of its operations and its cash flows for the years ended December 31, 2020 and 2019 in conformity with U.S. generally accepted accounting principles.

Other Matter

The accompanying balance sheet of Mountain Valley Pipeline, LLC - Series A as of December 31, 2021 and December 31, 2020, and the related statements of operations, members’ equity and cash flows for each of the three years in the period ended December 31, 2021 are presented for purposes of complying with Rule 3-09 of SEC Regulation S-X; however, Rule 3-09 does not require the 2021 financial statements to be audited. The 2021 financial statements are unaudited and the 2021 financial statements are not covered by this report.

/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
February 23, 2021





2



MOUNTAIN VALLEY PIPELINE, LLC - SERIES A
BALANCE SHEETS
DECEMBER 31,
($ in thousands)20212020
(Unaudited)
ASSETS
Current assets:  
Cash and cash equivalents$26,358 $146,053 
Capital contributions due from members122,460 — 
Other current assets
Total current assets148,820 146,054 
Property, plant and equipment:
Construction work in process6,429,792 5,844,594 
Other assets2,496 3,704 
Total assets$6,581,108 $5,994,352 
LIABILITIES AND MEMBERS' EQUITY  
Current liabilities:  
Accounts payable$157,432 $213,959 
Due to related parties2,851 2,823 
Total current liabilities160,283 216,782 
Environmental reserve48 304 
Total liabilities160,331 217,086 
Members' equity6,420,777 5,777,266 
Total liabilities and members' equity$6,581,108 $5,994,352 

The accompanying notes are an integral part of these financial statements.

3



MOUNTAIN VALLEY PIPELINE, LLC - SERIES A
 STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
 ($ in thousands)202120202019
 (Unaudited)
Environmental expense$68 $360 $2,416 
Legal expense331 — — 
Allowance for equity funds used during construction26,722 352,323 245,890 
Interest income:
Allowance for borrowed funds used during construction11,452 150,995 105,382 
Other interest18 288 6,243 
Total interest income11,470 151,283 111,625 
Net income$37,793 $503,246 $355,099 

The accompanying notes are an integral part of these financial statements.
4



MOUNTAIN VALLEY PIPELINE, LLC - SERIES A
 STATEMENTS OF MEMBERS' EQUITY
(2021 UNAUDITED)
 MVP Holdco, LLC
US Marcellus Gas Infrastructure, LLC
Con Edison Gas Pipeline and Storage, LLC
WGL Midstream, Inc.
RGC Midstream, LLC
Total
($ in thousands)
Balance at January 1, 2019$1,462,000 $995,957 $400,833 $321,180 $32,096 $3,212,066 
Capital contributions and changes in ownership interest(a)
610,257 415,779 155,214 132,740 13,413 1,327,403 
Less: Capital contributions due from members(b)
(33,845)(23,060)— (6,405)(744)(64,054)
Net income161,576 110,085 44,377 35,510 3,551 355,099 
Balance at December 31, 20192,199,988 1,498,761 600,424 483,025 48,316 4,830,514 
Capital contributions and changes in ownership interest(a)
242,563 165,263 — 45,907 5,331 459,064 
Less: Capital contributions due from members(b)
(8,221)(5,601)— (1,556)(180)(15,558)
Net income230,652 157,147 60,053 50,324 5,070 503,246 
Balance at December 31, 20202,664,982 1,815,570 660,477 577,700 58,537 5,777,266 
Capital contributions and changes in ownership interest(a)
320,034 218,044 35 60,572 7,033 605,718 
Net income17,579 11,977 4,072 3,779 386 37,793 
Balance at December 31, 2021$3,002,595 $2,045,591 $664,584 $642,051 $65,956 $6,420,777 

(a) Includes capital contributions due from members for a total amount of $122,460, zero and $12,749 as of December 31, 2021, 2020 and
2019 respectively that as of the date of issuance of the respective financial statements, such contributions due from members have been
received.    
                                
(b) Represents capital contributions due from members as of December 31, 2020, and 2019 that were unpaid as of the date of issuance of the
respective financial statements. No capital contributions due from members as of December 31, 2021 were unpaid as of the date of issuance.


The accompanying notes are an integral part of these financial statements.
























5



MOUNTAIN VALLEY PIPELINE, LLC - SERIES A
 STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
($ in thousands)202120202019
 (Unaudited)
Cash flows from operating activities:
Net income$37,793 $503,246 $355,099 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Allowance for funds used during construction (AFUDC)(38,174)(503,319)(351,272)
Changes in operating assets and liabilities:
Other assets(1)70 (61)
Environmental reserve(256)304 
Net cash (used in) provided by operating activities(638)301 3,766 
Cash flows from investing activities:
Capital expenditures(602,315)(400,321)(1,780,466)
Net cash used in investing activities(602,315)(400,321)(1,780,466)
Cash flows from financing activities:
Capital contributions from members483,258 456,254 1,564,805 
Net cash provided by financing activities483,258 456,254 1,564,805 
Net change in cash and cash equivalents(119,695)56,234 (211,895)
Cash and cash equivalents at the beginning of the year146,053 89,819 301,714 
Cash and cash equivalents at the end of the year$26,358 $146,053 $89,819 

The accompanying notes are an integral part of these financial statements.
6


Mountain Valley Pipeline, LLC – Series A
Notes To Financial Statements
(2021 Unaudited)
1.    Description of Business
Mountain Valley Pipeline, LLC is a limited liability company formed to develop, construct, own and operate natural gas assets. Mountain Valley Pipeline, LLC – Series A (the Company) is a series of Mountain Valley Pipeline, LLC under Delaware law, formed to construct, own and operate an interstate natural gas pipeline and related facilities (the MVP mainline). The MVP mainline will span approximately 300 miles from northern West Virginia to southern Virginia and will be regulated by the Federal Energy Regulatory Commission (FERC). The MVP mainline will be operated by EQM Gathering Opco, LLC (EQM Gathering), an indirect wholly-owned subsidiary of Equitrans Midstream Corporation (ETRN), pursuant to an Amended and Restated Construction, Operation and Management Agreement, dated as of June 16, 2015, among the Company and EQM Gathering (the COM Agreement).
The Company’s members consist of MVP Holdco, LLC (MVP Holdco), an indirect wholly-owned subsidiary of ETRN, US Marcellus Gas Infrastructure, LLC (NextEra), Con Edison Gas Pipeline and Storage, LLC (ConEd), WGL Sustainable Energy LLC (f/k/a WGL Midstream, Inc.) (AltaGas) and RGC Midstream, LLC (RGC). On November 4, 2019, ConEd exercised its option to cap its investment in the Company at approximately $530 million (excluding allowance for funds used during construction (AFUDC)). ETRN and NextEra Energy, Inc. are obligated, and RGC has opted, to fund the shortfall in ConEd's capital contributions on a pro rata basis. Any funding of the shortfall by such members will correspondingly increase their respective interests in the Company and decrease ConEd’s interest in the Company.
As of December 31, 2021, each member’s ownership interest in the Company was as follows: MVP Holdco (46.84%), NextEra (31.91%), ConEd (10.22%), AltaGas (10.00%) and RGC (1.03%).
2.    Significant Accounting Policies
Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents: Cash and cash equivalents include cash and interest-bearing deposits having original maturities of three months or less.
Capital Contributions Due from Members: Capital contributions due from members are recorded within current assets when there is substantial evidence of the ability and intent to collect the contribution within a reasonably short period of time and such amounts have been received prior to the date the financial statements were available to be issued. Capital contributions due from members that have not been received prior to the date the financial statements were available to be issued are presented in the balance sheet as a deduction from members’ equity.
Property, Plant and Equipment (PP&E): Property, plant and equipment is stated at cost. The Company capitalizes the carrying costs for the construction of its long-term assets and will amortize these costs over the estimated useful life of the related assets once placed in service. As of December 31, 2021 and 2020, all amounts capitalized relate to construction work in process. The capitalized cost of additions to property, plant and equipment includes indirect costs such as engineering, supervision, payroll taxes, other benefits and AFUDC.
The calculated AFUDC includes capitalization of the cost of debt for financing construction of assets subject to regulation by the FERC (the debt component) and the designated cost of equity for financing the construction of these regulated assets (the equity component). The rate used for AFUDC was determined in accordance with regulations of the FERC and is compounded semiannually. The debt component of AFUDC is recorded as interest income on the accompanying statements of operations.
In January 2021, the Company temporarily suspended AFUDC on the MVP mainline due to a temporary reduction in growth construction activities. During the second quarter of 2021, the Company resumed some AFUDC related to certain growth construction activities that resumed on the MVP mainline.
The Company accrues capital expenditures when work has been completed but the associated invoices have not yet been paid. These accrued amounts are excluded from capital expenditures on the statements of cash flows until they are paid in a subsequent period. Accrued capital expenditures included in accounts payable and due to related parties in the accompanying balance sheets were approximately $160.3 million and $216.8 million as of December 31, 2021 and 2020, respectively.
7


Mountain Valley Pipeline, LLC – Series A
Notes To Financial Statements
(2021 Unaudited)

Regulatory Accounting: The Company is constructing and will operate assets that will be regulated by the FERC. The rates that will be charged by the Company are reviewed and approved by the FERC, and it is reasonable to assume the rates are set at levels that will recover the entity's costs. As such, the Company applies the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification 980, Regulated Operations (ASC 980). The Company reviews, at least annually, to determine whether the Company continues to meet the criteria to apply ASC 980.
Asset Retirement Obligations: The Company is under no legal or contractual obligation to restore or dismantle the MVP mainline. After completing construction and starting operations, the Company intends to operate the MVP mainline as long as supply and demand for natural gas exists, which the Company expects for the foreseeable future. As a result, the Company does not have any asset retirement obligations as of December 31, 2021 and 2020.
Income Taxes: The Company is treated as a partnership for federal and state income tax purposes and does not incur income taxes. Instead, its earnings and losses are included in the tax returns of its members.
Allocation of Profits and Losses: The Company’s profits and losses are allocated in accordance with the members’ respective ownership interests in the Company.
Leases: Right-of-use assets represent the right to use the underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized on the consolidated balance sheets at the lease commencement date based on the present value of lease payments over the lease term. The Company determines if an arrangement is a lease at inception based on whether the Company has the right to control the use of an identified asset, the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset during the lease term and accounts for leases in accordance with ASC 842, Leases (ASC 842).
Leases in which the Company is the lessee that do not have a readily determinable implicit rate utilize an incremental borrowing rate, based on the information available at the lease commencement date, to determine the present value of lease payments. When a secured borrowing rate is not readily available, unsecured borrowing rates are adjusted for the effects of collateral to determine the incremental borrowing rate. The Company reassesses the incremental borrowing rate for any new and modified lease contracts as of the contract effective date. Lease expense is recognized on a straight-line basis over the lease term for operating leases.
The Company did not have any leases as of December 31, 2021 and 2020.
3.    Legal and Regulatory Matters
The MVP mainline will be governed by the United States Natural Gas Act (NGA), which requires a Certificate of Public Convenience and Necessity from the FERC before construction can commence. On October 13, 2017, the FERC issued a Certificate of Public Convenience and Necessity to the Company. In the first quarter of 2018, the Company received its first partial notice to proceed from the FERC to begin construction activities on certain facilities and commenced construction. There are several pending challenges, as discussed below, to certain aspects of the MVP mainline that must be resolved before the MVP mainline can be completed. The Company is working to respond to the court and agency decisions and obtain and maintain, as applicable, all permits.
Sierra Club, et al. Petitioners v. State Water Control Board, et al. Respondents and Mountain Valley Pipeline, Intervenor, Docket No. 21-2425, Fourth Circuit Court of Appeals (Fourth Circuit). On December 20, 2021, the Virginia Department of Environmental Quality (VADEQ) certified that the MVP mainline would satisfy Virginia’s water quality standards based on its comprehensive nine-month review of the Company’s Joint Permit Application (VA 401 Permit). On December 22, 2021, Petitioners filed their petition challenging the VADEQ’s approval of the VA 401 Permit with the Fourth Circuit. On December 22, 2021, the Petitioners filed a request for an administrative stay with the VADEQ which was denied on January 4, 2022. On January 4, 2022, the Petitioners filed a petition with the Fourth Circuit seeking a judicial stay of the VA 401 Permit pending a decision on the merits. On February 11, 2022, Petitioners withdrew the stay petition.

8


Mountain Valley Pipeline, LLC – Series A
Notes To Financial Statements
(2021 Unaudited)
Sierra Club, et al. Petitioners v. West Virginia Department of Environmental Protection, et Al. Respondents and Mountain Valley Pipeline, Intervenor, Docket No. 22-1008, Fourth Circuit. On December 30, 2021, the West Virginia Department of Environmental Protection (WVDEP) certified that the MVP mainline would satisfy West Virginia’s water quality standards based on its comprehensive nine-month review of the Company’s Joint Permit Application (WV 401 Permit). On January 3, 2022, Petitioners filed their petition challenging the WVDEP’s approval of the WV 401 Permit with the Fourth Circuit. On January 4, 2022, the Petitioners filed a request for an administrative stay with the WVDEP which was denied on January 11, 2022. On January 11, 2022, Petitioners filed a petition with the Fourth Circuit seeking a judicial stay of the WV 401 Permit pending a decision on the merits. The stay petition was denied by the Fourth Circuit on February 8, 2022.
Jefferson National Forest Crossing and Associated Authorizations. In a different Fourth Circuit appeal, Sierra Club, et al. v. U.S. Forest Service, et al., consolidated under Case No. 17-2399, Fourth Circuit, filed in December 2017, the Sierra Club challenged a Bureau of Land Management (BLM) decision to grant a right-of-way to the Company and a U.S. Forest Service (USFS) decision to amend its management plan to accommodate the MVP mainline, both of which affect the MVP mainline's approximate 3.5-mile segment in the Jefferson National Forest (JNF) in Virginia. On July 27, 2018, agreeing in part with the Sierra Club, the Fourth Circuit vacated the BLM and USFS decisions, finding fault with the BLM's analysis of the practicality of alternate routes and the USFS' analysis of erosion and sedimentation effects. The USFS published a draft Supplemental Environmental Impact Statement (SEIS) to the 2017 FERC Final Environmental Impact Statement for MVP mainline in the Federal Register on September 25, 2020 with a public comment period that closed on November 9, 2020. On December 11, 2020, the USFS published a Final SEIS that addressed the issues raised in the prior proceedings and evaluated the most recent sedimentation analysis submitted to the agency consistent with the findings presented in MVP mainline's Biological Opinion and Incidental Take Statement issued by the Department of the Interior's Fish and Wildlife Service (FWS) on September 4, 2020. See Appalachian Voices, et al. v. U.S. Dep’t of Interior below for additional information. On January 11, 2021, the Company received final approval of the Record of Decision from the USFS and, on January 15, 2021, the BLM issued the required right-of-way permit for the MVP mainline's 3.5-mile segment in the JNF in Virginia (the JNF Right-of-Way). On January 11, 2021, Sierra Club, et al. filed a petition with the Fourth Circuit to reverse the USFS approval of the Record of Decision and, on January 15, 2021, filed a petition with the Fourth Circuit challenging BLM’s grant of the JNF Right-of-Way. See Wild Virginia, et al. v. United States Forest Service, et al., No. 21-1039(L). The Fourth Circuit consolidated the challenges to the Record of Decision and the JNF Right-of-Way and briefing was completed. Oral argument occurred on October 29, 2021. On January 25, 2022, the Fourth Circuit, agreeing in part with the petitioners, vacated and remanded the Record of Decision and the JNF Right-of-Way, finding fault with (i) the USFS’ and BLM’s consideration of certain data from the U.S. Geological Survey and (ii) the USFS’ and BLM’s authorization of the use of conventional bores for stream crossings within the JNF based on a variance issued by the FERC, and, as a result of such issues, (iii) the USFS’ amendments in connection with the Record of Decision to the Jefferson Forest plan. The vacatur of the Record of Decision and the JNF Right-of-Way may result in appellate and/or additional agency proceedings (the outcome of which the Company cannot predict) and has caused a delay in the targeted full in-service date for the MVP mainline (and consequent impacts relating to such delay). The Company cannot predict whether and when any new authorizations will be received from the USFS and BLM and, if received, the result of any challenge to such authorizations.
On August 3, 2018, citing the court's vacatur and remand in Sierra Club, et al. v. U.S. Forest Service, et al., consolidated under Case No. 17-2399, the FERC issued a stop work order for the entire pipeline pending the agency actions on remand. The FERC modified its stop work order on August 29, 2018 to allow work to continue on all but approximately 25 miles of the project (the Exclusion Zone). On October 10, 2018, the Fourth Circuit granted a petition for rehearing filed by the Company for the limited purpose of clarifying that the July 27, 2018 order did not vacate the portion of the BLM's Record of Decision authorizing a right-of-way and temporary use permit for the MVP mainline to cross the Weston and Gauley Bridge Turnpike Trail in Braxton County, West Virginia. On October 15, 2018, the Company filed with the FERC a request to further modify the August 3, 2018 stop work order to allow the Company to complete the bore and install the pipeline under the Weston and Gauley Bridge Turnpike Trail. On October 24, 2018, the FERC granted the Company's request to further modify the stop work order and authorize construction. Additionally, on October 9, 2020, the FERC authorized construction to resume project-wide (as it had been stopped by the FERC on October 15, 2019 in relation to a separate matter discussed below), other than with respect to the Exclusion Zone, which requires additional authorization. On December 17, 2020, the FERC again modified the stop work order and authorized construction to resume in 17 miles of the Exclusion Zone. The Company cannot guarantee whether or when the FERC will act in respect of any or all of the remaining portions of the Exclusion Zone. The FERC's October 9, 2020 and December 17, 2020 actions are the subject of challenges filed
9


Mountain Valley Pipeline, LLC – Series A
Notes To Financial Statements
(2021 Unaudited)
by the Sierra Club in Sierra Club, et al. v. FERC, Case No. 20-1512 (consolidated with No. 21-1040), D.C. Circuit Court of Appeals on December 22, 2020 and January 25, 2021, respectively (a stay request filed by the Sierra Club on January 29, 2021 was denied by the Court of Appeals for the D.C. Circuit (DC Circuit) on February 19, 2021). Briefing in Sierra Club, et al. v. FERC, Case No. 20-1512 (consolidated with No. 21-1040), D.C. Circuit Court of Appeals was completed in January 2022 and oral argument is scheduled for April 7, 2022.
Challenges to FERC Certificate, Court of Appeals for DC Circuit. Multiple parties have sought judicial review of the FERC's order issuing a certificate of public convenience and necessity to the Company and/or the exercise by the Company of eminent domain authority. On February 19, 2019, the DC Circuit issued an order rejecting multiple consolidated petitions seeking direct review of the FERC order under the NGA and certain challenges to the exercise by the Company of eminent domain authority in Appalachian Voices, et al. v. FERC, et al., consolidated under Case No. 17-1271. No petitions for rehearing or petitions for rehearing en banc were filed by the April 5, 2019 deadline. The mandate was issued on April 17, 2019. Another group of parties filed a complaint in the U.S. District Court for the District of Columbia asserting that the FERC's order issuing certificates is unlawful on constitutional and other grounds in Bold Alliance, et al. v. FERC, et al., Case No. 17-1822. The district court plaintiffs sought declaratory relief as well as an injunction preventing the Company from developing its project or exercising eminent domain authority. In December 2017 and January 2018, the FERC and the Company, respectively, moved to dismiss the petitions for lack of subject matter jurisdiction. The court granted the motion and dismissed plaintiffs' complaint on September 28, 2018. On October 26, 2018, plaintiffs appealed the decision in Case No. 17-1822 to the DC Circuit in Bold Alliance, et al. v. FERC, et al., Case No. 18-5322. On December 3, 2018, the FERC, as appellee, filed a joint motion with the appellants to hold Case No. 18-5322 in abeyance pending completion of the appeals of the final agency orders related to the MVP mainline certificate in consolidated Case No. 17-1271 and Atlantic Coast Pipeline’s (ACP) certificate. The Company filed a motion to dismiss the case as to some of the plaintiffs. On February 15, 2019, the DC Circuit entered an order holding this appeal in abeyance pending rulings on the appeals from the ACP and MVP mainline FERC proceedings. Although the members of the ACP project announced the cancellation of that project on July 5, 2020, ACP's proceeding remains pending. Case No. 18-5322 remains in abeyance. Similarly, another group of parties filed a complaint in the U.S. District Court for the District of Columbia in Bohon et al. v. FERC et al., Case No. 20-00006, asserting that the delegation of authority to FERC under the NGA violates the nondelegation doctrine and separation-of-powers principle of the U.S. Constitution. The Company and the FERC filed motions to dismiss which were granted by the court. On July 6, 2020, the landowners filed a notice of appeal to the DC Circuit in Case No. 20-5203. On November 30, 2020, appellants asked the DC Circuit to overturn the decision of the lower court. Oral argument before the DC Circuit was scheduled for March 29, 2021, but the court cancelled and held oral argument in abeyance and directed the parties to file motions to govern future proceedings following a decision by the U.S. Supreme Court in PennEast Pipeline Co. v. New Jersey, Case No. 19-1039, which decision was published on June 29, 2021. Briefing in Bohon et al. v. FERC et al., Case No. 20-00006 on the significance of the PennEast Pipeline Co. opinion was completed on July 29, 2021. The DC Circuit issued an order on September 15, 2021 denying appellants' motion for summary reversal of the decision of the lower court and supplemental briefing was completed as of October 6, 2021. Oral argument occurred on December 15, 2021 and the parties are awaiting a decision. Due to the uncertainty regarding the timing of permitting and the outcome of legal challenges facing the MVP mainline, on August 25, 2020, the Company filed a request with the FERC for and, on October 9, 2020, the FERC granted, an extension of time to complete the MVP mainline for an additional two years through October 13, 2022. On December 22, 2020, a challenge to the FERC’s action to grant an extension of time to complete the MVP mainline was filed in the DC Circuit in Sierra Club, et al. v. FERC, Case No. 20-1512 (consolidated with No. 21-1040, DC Circuit). On January 29, 2021, Sierra Club requested a stay of the FERC’s action to grant the Company an extension of time to complete the MVP mainline from the DC Circuit, which stay request was denied by the DC Circuit on February 19, 2021. Briefing in Sierra Club, et al. v. FERC, Case No. 20-1512 (consolidated with No. 21-1040, D.C. Circuit), was completed in January 2022 and oral argument is scheduled for April 7, 2022.
Appalachian Voices, et al. v. U.S. Dep’t of Interior, et al., Fourth Circuit Court of Appeals, Case No. 20-2159. In August 2019, Wild Virginia and certain other petitioners filed a petition in the Fourth Circuit in Wild Virginia et al. v. United States Department of the Interior; Case No. 19-1866, to challenge the Company’s Biological Opinion and Incidental Take Statement issued by FWS which was approved in November 2017 (the Original BiOp). On October 11, 2019, the Fourth Circuit issued an order approving the petitioners’ requested stay of the Original BiOp and holding the litigation in abeyance until January 11, 2020. On October 15, 2019, the FERC issued an order requiring the Company to cease all forward-construction progress (the FERC modified this order on October 9, 2020 and December 17, 2020, which the Sierra Club has appealed to the DC Circuit as discussed above under "Jefferson
10


Mountain Valley Pipeline, LLC – Series A
Notes To Financial Statements
(2021 Unaudited)
National Forest Crossing and Associated Authorizations"). On September 4, 2020, FWS issued the Company a new Biological Opinion and Incidental Take Statement (the New BiOp) for the MVP mainline and the Fourth Circuit subsequently dismissed the litigation regarding the Original BiOp. On October 27, 2020, Appalachian Voices et al. filed a petition with the Fourth Circuit challenging the New BiOp and filed a request for an administrative stay of the New BiOp with FWS, which FWS subsequently denied. On November 2, 2020, the petitioners filed a motion to stay the New BiOp with the Fourth Circuit. On November 18, 2020, the Fourth Circuit issued an order denying the requested stay. The matter was fully briefed as of March 19, 2021. Oral argument occurred on October 29, 2021. On February 2, 2022, the Fourth Circuit vacated and remanded the New BiOp holding, in part, that the FWS did not adequately analyze the environmental context for species at issue. The vacatur of the New BiOp may result in appellate and/or additional agency proceedings (the outcome of which the Company cannot predict) and has caused a delay in the targeted full in-service date for the MVP mainline (and consequent impacts relating to such delay).
FERC Rulemaking on Construction Commencement. The Company is a party to a FERC rulemaking proceeding that may potentially affect when the Company is permitted to commence the crossings of streams and wetlands utilizing trenchless construction methods to effect approximately 120 water crossings following issuance by FERC of an amended Certificate for the MVP mainline. On May 4, 2021, the FERC issued Order No. 871-B. Order No. 871-B and its predecessors relate to an industry-wide rulemaking regarding construction commencement while a rehearing request is pending before the FERC. The Company filed a request for clarification or rehearing of the certificate amendment aspects of Order No. 871-B with the FERC on June 3, 2021. The FERC issued Order No. 871-C on August 2, 2021.
4. Related-Party Transactions
In the ordinary course of business, the Company has transactions with related parties. Pursuant to the COM Agreement, EQM Gathering was engaged by the Company as operator of the MVP mainline to perform certain tasks related to the MVP mainline development, construction, marketing and operation. Costs incurred by EQM Gathering and its affiliates related to development, construction, marketing and operation of the MVP mainline are reimbursed by the Company under the terms of the COM Agreement. As of December 31, 2021 and 2020, amounts due to EQM Gathering and its affiliates pursuant to the COM Agreement were approximately $2.9 million and $2.8 million, respectively. The Company is also a party to a Verified Emission Reduction Purchase Agreement dated July 21, 2021 with an affiliate of NextEra.
Excluding MVP Holdco, each member or an affiliate of each member of the Company has entered into a 20-year transportation service agreement with the Company to transport natural gas on the MVP mainline once it is placed in service. Under these transportation service agreements, the Company contracted a total of 0.6 Bcf per day of firm capacity on the MVP mainline.
5. Commitments and Contingencies
The Company has commitments with various contractors and vendors to provide materials and services associated with construction of the MVP mainline. Future payments associated with these commitments as of December 31, 2021 totaled $1.3 billion. The Company expects to pay the majority of this amount in 2023.
In the ordinary course of business, various legal and regulatory claims and proceedings may be pending or threatened against the Company. While the amounts claimed may be substantial, the Company is unable to predict with certainty the ultimate outcome of such claims and proceedings. The Company accrues legal and other direct costs related to loss contingencies when actually incurred. The Company establishes reserves when it believes it to be appropriate for pending matters and, after consultation with counsel and giving appropriate consideration to available insurance, the Company believes that the ultimate outcome of any matter currently pending against the Company, excluding the legal and regulatory matters described in Note 3, will not materially affect the Company’s business, financial condition, results of operations or liquidity.
The Company has been participating in condemnation proceedings in West Virginia and Virginia. As part of the proceedings, the Company was required to make a cash deposit equal to approximately three times the fair market value of the condemned parcels to ensure sufficient funds were available to pay each landowner. The amount in excess of the approximate fair values represents the amount the Company estimates will be refunded as the parcels are settled or condemned through the condemnation proceedings. The condemnation asset included in other assets in the accompanying balance sheets was approximately $2.5 million and $3.7 million as of December 31, 2021 and 2020, respectively.
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Mountain Valley Pipeline, LLC – Series A
Notes To Financial Statements
(2021 Unaudited)
6. Guarantees and Letters of Credit
Pursuant to the Company’s limited liability company agreement (the LLC Agreement), each member of the Company is obligated to provide a form of performance assurance in an amount equal to 33% of its proportionate interest in the remaining obligations to make capital contributions to the Company associated with the most recently approved construction budget, less, subject to certain limits, any credit assurances issued by any affiliate of such member under such affiliate’s precedent agreement. Pursuant to the terms of the LLC Agreement, such performance assurances may take the form of a guarantee, a letter of credit or cash collateral.
In the first quarter of 2020, the credit ratings for EQM Midstream Partners, LP (EQM), a subsidiary of ETRN, were downgraded by certain credit rating agencies. As a result, MVP Holdco was obligated to deliver new performance assurances in the form of a letter of credit to the Company, which letter of credit was originally in the amount of approximately $220.2 million. In connection with delivering such letter of credit as a replacement performance assurance, MVP Holdco’s performance guarantee associated with the Company was terminated. During the fourth quarter of 2020, based on the midpoint of the targeted project cost, MVP Holdco delivered a replacement letter of credit with respect to the MVP mainline in the amount of approximately $231.2 million.
As of December 31, 2021, such performance assurances totaled approximately $287.9 million, composed of an aggregate of approximately $68.2 million in member guarantees and approximately $219.7 million in member letter of credit. As of December 31, 2020, such performance assurances totaled approximately $299.4 million, composed of an aggregate of approximately $68.2 million in member guarantees and approximately $231.2 million in member letter of credit.
7. Subsequent Events
Subsequent events have been evaluated through February 23, 2022, the date the financial statements were available to be issued.
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