(Adds analyst comment, estimates on delay and cost)
June 25 (Reuters) - EQT Midstream Partners will stop construction in West Virginia of parts of its $3.5 billion Mountain Valley natural gas pipeline after a U.S. federal appeals court issued an order last week against a permit, a U.S. regulator and the company said.
The pipeline company will not proceed with construction in waters affected by the stay order in West Virginia, the U.S. Federal Energy Regulatory Commission said in a document on Monday.
Mountain Valley Pipeline (MVP) told FERC it was consulting on the implications of the stay by the U.S. Court of Appeals for the Fourth Circuit with the U.S. Army Corps, which issued the permit in December 2017, FERC said in the notice.
In May, the U.S. Army Corp of Engineers pulled a permit for the Mountain Valley natural gas pipeline from West Virginia to Virginia.
In a statement on Friday EQT Midstream said it looking at options to have the permit reinstated.
The Sierra Club and four other environmental groups had challenged permits the Army Corps of Engineers had issued for construction of the pipeline across streams in West Virginia.
The order stops construction in 591 streams and wetlands in the state and "it may affect construction along the entire route of the pipeline," the Sierra Club said in a statement.
Katie Bays, energy analyst at Height Capital Markets in Washington, said in a commentary on Friday that if court rulings go against MVP, its in-service date could be pushed back to mid-2019 or require re-routing around three rivers.
The 303-mile (488-kilometer) pipeline had been expected to be in service by late 2018. It was 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 power generation and other uses in the U.S. Southeast and Mid-Atlantic.
In a court filing in early June, MVP had argued that if there was a construction delay until December, it would be required to suspend construction entirely on 80.6 miles in West Virginia. Construction would be delayed by at least eight months, it said.
"Under the most optimistic scenario, MVP would incur more than $600 million in incremental expense due to the suspension of construction in these areas until December 1, 2018."
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. (Reporting by Nallur Sethuraman in Bengaluru Editing by David Gregorio and Bill Trott)