(Reuters) - * The U.S. Army Corp of Engineers pulled a permit last week for EQT Midstream Partners LP’s Mountain Valley natural gas pipeline from West Virginia to Virginia that could delay the $3.5 billion project’s expected late 2018 in-service date.
* “This is a big one,” Katie Bays, energy analyst at Height Capital Markets in Washington, DC, said in a report on Monday, noting “The loss of the (Nationwide Permit) is not easy to reconcile and could delay the project.”
* The permit, known as Nationwide Permit (NWP) 12, authorizes Mountain Valley to discharge dredged and fill materials into several rivers, including the Gauley, Greenbrier and Elk, at 591 locations.
* Officials at EQT Midstream were not immediately available for comment.
* The Army Corps said in a filing made available on Thursday that it pulled the permit on May 22 to determine if it is at odds with West Virginia environmental rules.
* The Sierra Club and others alleged violations of the West Virginia rules in an appeal to the Army Corps and a lawsuit that is currently before the U.S. Fourth Circuit Court of Appeals.
* Even if the Army Corps reissues the permit, Bays at Height Capital Markets warned if Mountain Valley loses the Sierra Club lawsuit, it could delay the pipeline’s in-service date by a year and require re-routing around three rivers in West Virginia.
* The 303-mile (488-kilometer) pipeline is designed to deliver up to 2 billion cubic feet per day of gas from the Marcellus and Utica shale formations in Pennsylvania, West Virginia and Ohio to meet growing demand for the fuel for power generation and other uses in the U.S. Southeast and Mid-Atlantic.
* One billion cubic feet of gas is enough to fuel about 5 million U.S. homes for a day.
* The project is owned by units of EQT Midstream, NextEra Energy Inc, Consolidated Edison Inc, WGL Holdings Inc and RGC Resources Inc. EQT Midstream will operate the pipeline and owns a significant interest in the joint venture.
* The companies have said they expect to complete the project in the fourth quarter of 2018.
* In April, the companies said they planned to spend about $350 million to $500 million to extend the pipe about 70 miles from Virginia into North Carolina by the fourth quarter of 2020.
Reporting by Scott DiSavino; Editing by Paul Simao