December 2008 Update

In the news...

• Environmental Impact Statement Underway for Gas Pipeline Between Fairbanks, Beluga Gas Field ............ (12/14/2008) The Alaska National Gas Development Authority (ANDGA) has awarded a contract to prepare an environmental impact statement (EIS) to URS Corp. for a planned natural gas pipeline in Alaska. If built the 480-mile pipeline will run north from the Beluga gas field located west of Anchorage to Fairbanks, Alaska - with 90 percent following existing rights-of-way and easements. ANGDA's plan calls for 20-inch steel pipeline from the gas field to Delta Junction and an eight-inch plastic pipeline carrying gas from Delta Junction to Golden Valley Electric Association's North Pole power generation plant. If a large diameter gas pipeline is built from Alaska's North Slope the flow direction will be reversed to carry gas south and eventually feeder lines and take-off points will be added to meet Alaska's needs. ANGDA's plan comes after a request from Gov. Sarah Palin that the state authority find a way to get gas to Fairbanks before the North Slope pipeline is built, estimated at the earliest by 2018. [More here]

• Post-Hurricane Gas-Line Fixes Slow Return of US Gulf Oil (12/12/2008) Three months after Hurricanes Gustav and Ike, 14.9 percent of Gulf oil output and 21 percent of gas output were still shut as of December 3 awaiting repairs, according to the U.S. Minerals Management Service (MMS). "We had some major impacts to gas transmission lines. That's what we still see, at this point, being the holdup on the gas as well as associated oil," said Lars Herbst, the MMS Gulf Region director, adding, "If you can't get the gas flowing in those transmission lines, the oil associated with that platform is also curtailed or shut in." Burning off gas to facilitate oil production is forbidden by the MMS. Almost all pipeline damage was caused by the toppling of platforms by towering waves generated by the storms. This experience may cause relocation of pipelines and tighter standards on construction of pipeline junction platforms. Herbst said the pipeline breaks affecting TransCanada ANR Pipeline Co.'s Central Gulf Gathering System kept 66,000 barrels of oil per day off line. Natural gas transportation through Williams Transcontinental Gas Pipeline Corp and Southeast Louisiana Lateral pipelines kept an unspecified amount of gas out of production. Herbst did not indentify oil companies whose production is affected by the repairs. [More here]

• New Alaska Senator Doubtful on Natural Gas Loan Guarantees (12/11/2008) Alaskan Senator-elect, Mark Begich, said he doubts the U.S. Congress will give additional loan guarantees to TransCanada Corp. to back the company's plan to build a natural gas pipeline from Alaska's North Slope. Although he supports the $18 billion federal loan-guarantee provision that includes an inflation clause, he was "troubled" by reports TransCanada wants additional loan guarantees. Adding the inflation clause to the 2004 legislation "has already increased the loan guarantee by $2 billion over the last four years," Begich said. "In this economic condition the country's in, getting loan guarantees and these kinds of things is very difficult," he said. Last week TransCanada, Gov. Sarah Palin's choice as the project sponsor, was awarded a state license to construct and operate a 1,715-mile natural gas pipeline that will run from Prudhoe Bay to an existing pipeline hub in Alberta. The company estimates the pipeline will cost $26 billion....... [More here]

• Striker Oil & Gas Announced Completion of 4-Mile Gas Pipeline on Its Catfish Creek Prospect (12/11/2008) Striker Oil & Gas have finished installing a 4-mile pipeline connecting its gas production from its Catfish Creek Prospect. Pressure testing and final mechanical hook-up were expected to be done in 7-10 days allowing new gas production. Upon completion, the company will own a 25% working interest in the pipeline. [More here]

• Pipeline Companies Weather Darkest Hour; Executives Say Crisis Worst in Canada's Oil Patch History (12/9/2008) According to the leaders of Canada's oldest and largest oil pipeline companies, Calgary's energy sector is in the midst of its worse economic decline in its history - even worse than the devastating collapse of the 1980s. Enbridge CEO, Pat Daniel said emphatically, "I think -- no, I won't think -- this is the worst I've experienced in my entire career. When you go from$150 (US) crude to $50, that's the biggest absolute drop in history. This is the worst of the hard times we've ever had . . . I hope we've seen the worst of it, but it's really hard to know." The combination of falling commodity prices and the continuing financial crisis has lead to the oil patch's darkest hour. Hal Kvisle, TransCanada's president, said, "Clearly we're in a 12-to 24-month period of contraction--in everything," he said. "Financial markets are in as difficult shape as I've ever seen them." Even though pipeline companies are usually unaffected by the daily fluctuations of the financial markets, theirr customers are not. Large oilsands producers such as Shell Canada, Petro-Canada, Nexen Inc. and others have delayed major new projects and expansion of existing ones because of the economic uncertainty. Despite the economic turmoil, TransCanada easily sold a $1.16 billion share offering and Enbridge is one of the top performing stocks on the TSX, losing only 1.7 percent year-over-year vs. the TSX main board's 41 percent loss and the TSX's capped energy index loss of 56 percent since June. [More here]

• The Alaskan Pipeline - A Wolf in Sheep's Clothing? (12/10/2008) The recent Alaskan gas pipeline license awarded to TransCanada Corp. may have a negative long-term impact on Canada's natural gas industry according to a firm that specializes in evaluating the economic impact of oil and gas reserves. According to Ralph Glass, VP Operations of AJM Petroleum Consultants, said, "While construction of the Alaskan pipeline will likely have a positive impact on Canada's economy in the shorter term, once it is up and running it will make Alaska into a direct and effective competitor for Alberta and British Columbia's natural gas industry. Looking ahead we have to consider the fact that the Alaskan pipeline will increase natural gas volumes in the US market. That could keep natural gas prices low in future years; low natural gas prices will have a significant impact on future drilling here in Canada." Glass recommends Canada reduce its dependency on the US market and aggressively pursue an LNG and oil export terminal on British Columbia's coast to gain access to world markets. [More here]

• Palin to Sign State Pipeline License, Giving $500 Million to TransCanada (12/7/2008) Calgary based company TransCanada Corp. has been awarded the Alaska Gasline Inducement Act license (AGIA) to build a more than $30 billion natural gas pipeline to Alaska's North Slope. The license includes up to $500 million in state grants that will pay for up to half the company's costs in preparing for a 2010 open season. Because of the limited time in preparing for the open season, TransCanada's vice president, Tony Palmer, said the company has already started preliminary environment and engineering work as well as taken aerial photographs along two possible routes. He also said the project has not been affected by current difficulties in the financial markets. A rival project - the Denali pipeline - led by BP and ConocoPhillips also plans to have an open season in 2010 to solicit customers. The 1,715-mile pipeline from the North Slope to Alberta, is "huge, but not unprecedented for TransCanada," said Palmer adding the company's legacy pipeline system built across Canada 50 years ago was larger and technically more challenging. The company's Keystone project, currently being built in the continental U.S., will have 4,000 miles of new pipe when completed in 2010. If completed the Alaska project will represent on approximately 5 percent of TransCanada's exiting pipelines. [More here]

• Mackenzie Pipeline Going Ahead: Prentice (12/4/2008) Construction of the proposed $16.2 billion Mackenzie Valley Pipeline in the Arctic has faced numerous regulatory delays, negotiations with aboriginal groups and prolonged discussion over fiscal breaks for the lines backers. Despite these setbacks, Canada's Minister of the Environment, Jim Prentice said he is "actually very optimistic because a lot of the work that needed to be done has now been done." Prentice expects to receive a report on the environmental and social impacts of the pipeline between March and May of 2009 and felt the Mackenzie project was now most likely five to six years ahead of the proposed Alaska gas pipeline. The 1,200-kilometer Mackenzie pipeline will transport 1.9 billion cubic feet of gas a day along the Mackenzie River Valley in the Northwest Territories to Alberta, where it will link to existing lines serving U.S. and Canadian markets. It is expected to be in operation by the middle of the next decade. [More here]

• U.S. Supreme Court Rejects Pipeline (12/2/2008) ... The U.S. Supreme Court ruled in favor of a decision by the Connecticut Department of Environmental Protection to deny environmental permits necessary for the construction of a 50-mile pipeline crossing Long Island Sound. The court rejected an appeal by Islander East, an interstate natural gas pipeline company, thus forcing the company build the pipeline without crossing the Sound. Connecticut Gov. M. Jodi Rell said in a press release it was and environmental victory not only against this pipeline but also the 2007 Broadwater proposal to build an LNG storage and re-gasification facility in the Sound. “First Broadwater — now Islander East: With today’s Supreme Court announcement, we have succeeded in turning back two ill-conceived energy projects,” she said in a press release. [More here]

• Enbridge Gets Go Ahead for Pipeline (11/25/2008) Despite environmental concerns by the Minnesota Center for Environmental Advocacy (MCEA), the Minnesota Public Utilities Commission voted unanimously to approve Enbridge Energy's request to build nearly 1,000 miles of oil pipeline between Alberta, Canada and Superior, Wisconsin. MCEA opposes the project arguing it contradicts Minnesota's goals to reduce green house gas emissions and increase energy efficiency. Enbridge Energy spokesperson, Denise Hamsher, countered that the company had already taken environmental issues into account. "Think about tens of thousands of trucks on Highway 2, the government would have to expand the highway,' she said. "This is a much safer alternative for transporting oil underground. It is not without risk, we wish it would be absolutely risk free, but we do everything we can to reduce that risk and have shown again year after year that pipeline transportation is by far the safest mode of transportation." MCEA representatives said they are investigating other options to stop construction of the pipeline, including taking their case to the court of appeals. [More here]

November 2008 Update

In the news...

• Study Shows Alaska Holds Another Source of Energy (11/16/2008) The U.S. Geological Survey has determined hydrates found 2,000 feet below Alaska's North Slope contain as much as 85.4 trillion cubic feet of recoverable natural gas. The Department of Energy describes hydrates as "ice-like solids that result from the trapping of methane molecules within a lattice-like cage of water molecules." Advances in techniques used to access more conventional fuel sources may open up the possibility of recovering this potential energy source. Government research shows depressurizing deposits through drilling and other techniques is enough to release natural gas found in the hydrates. Globally "hydrates have more potential for energy than all other fossil fuels combined," according to Interior Secretary Dirk Kempthorne. Large hydrate deposits also exist in the Gulf of Mexico. Along with the estimated 35 trillion cubic feet of proven natural gas reserves, the hydrates could add to the utility and lifespan of the planned natural gas pipeline from Alaska's North Slope. [More here]

• Alberta Ranchers Want Moratorium on Proposed Pipeline (11/12/2008) Concerned about a proposed Petro-Canada pipeline running through Kananaskis County, Alberta, local ranchers are seeking a moratorium on oil and gas development. Petro-Canada is applying to build a 56-kilometer (35-mile) pipeline and drill 11 sour gas wells on the Southeastern slopes of the Canadian Rockies. "The potential impact of this pipeline goes far beyond the miles of trenches. Everywhere a pipeline has been built, it's been followed by weeds, motorbikes, ATVs, trespass, clearcuts, more wells, more roads, and more industrialization," said Mac Blades, president of the Pekisko Group (a group of local families who view themselves as stewards of the land). Currently the area is inaccessible to vehicles. The group is also concerned about possible damage to the 72 water courses in the Willow Creek and Pekisko Creek drainage areas which are home to Alberta's provincial fish, the Bull Trout - considered a "species at risk" by the Alberat Ministry of Sustainable Resources and Development. Hearings on Petro-Canada's application began on November 12 in High River. [More here]

• $40 Million Going into Ethanol Project (11/11/2008).. Kinder Morgan Energy Partners (KMEP) will begin shipping ethanol through a 106-mile Florida pipeline running from Tampa to Orlando starting mid-November. As many as 40 fuel trucks a day will be eliminated from area highways and transportation savings will be approximately 3 cents per gallon. So far the company has spent $30 million on improvements to facilities and equipment located in Tampa and Orlando. KMEP also spent another $10 million on fortifying the existing gasoline pipeline to enable it to transport the more corrosive ethanol. “This sets the precedence for pipeline ethanol distribution,” said Bradley Krohn, president of U.S. EnviroFuels LLC in Riverview. “I don’t know of it being shipped through pipeline distribution anywhere else in the U.S. now.” [More here]

• Enbridge Expansions to Go Ahead Despite Falling Oil Prices, Credit Crunch (11/5/2008) Pat Daniel, Enbridge Inc. CEO, said plans for $12 billion in pipeline projects will not be derailed by distressed financial markets and declining oil prices. The company had a 90-percent increase in third quarter earnings thanks to some major projects entering service earlier this year. "This increase in earnings is primarily due to the progress that we've made on our first wave of liquids pipeline projects," said Danial, adding, "Wave 1 projects are commercially secured and under construction and this drop in crude prices will in no way affect their in-service dates or their earnings profiles once they're placed into service." He went on to caution it was too early to know if Enbridge's Wave 2 projects, worth $15 billion, will be affected by current market conditions. However, Daniel remains optimistic the expansions will begin construction in 2012 and beyond. "Just as producers didn't use $150 a barrel as a planning benchmark during the price run up earlier this year, we're probably not going to be using $65 per barrel crude oil long term... In a lot of ways these longer-term projects make even more sense," Daniel said. [More here]

• Flint Announces Oilsands Pipeline Maintenance Contract Award (11/3/2008) FT Services, a 50 percent-owned Flint Energy Services Ltd. joint venture, has been awarded a C$12 million, 2-year contract to provide pipeline maintenance services for Canadian Natural Resources Ltd's Horizon Project near Fort McMurray, Alberta. "This new contract builds upon our current maintenance capabilities with Canadian Natural and excellent performance to-date," said Andy Mackintosh, President and CEO, FT Services. "The addition of the pipeline maintenance work demonstrates our capabilities and growing relationships with our customers in the Fort McMurray oil sands region." Between 50 and 60 personnel will be employed by FT Services to do pipeline maintenance services starting in mid-December. [More here]

• B.C. Pipeline Bombings May Not Be Eco-terrorism: Says Expert (11/3/2008) According to University of Alberta sociology researcher, Paul Joosse, extreme frustration over property rights and sovereignty - and not environmental radicalism - is likely the reason behind three recent attacks on a natural gas facility in northeast British Columbia. "This person, I would say, is ensconced in their own local struggle and probably started to use these tactics after being frustrated for years in their community with a lack of success at getting results." The first two attacks targeted a natural gas pipeline running south of Dawson Creek, B.C. on the Alberta border. The most recent bombing occurred at a natural gas wellhead operated by Encana Corp. in the same area. Joosse a PhD student whose research focuses on radical environmental groups including EarthFirst! and the Earth Liberation Front (ELF), said the Dawson Creek bomber profile doesn't fit that of the typical "eco-terrorist." Groups like ELF tend to focus their efforts on more expansive issues like clearcut logging, are quick to broadcast their affiliation and even offer manuals on how to place incendiary devices to achieve maximum damage said Joosse. Except for an unsigned handwritten letter warning Encana to close its operations and to leave the area no public attention has been sought. Furthermore, Sgt. Tim Shields of The Royal Canadian Mounted Police said police believe they are dealing with a local person, or group of people, "because of their familiarity with the community as well as a knowledge of oil and gas." So far, the blasts have done minimal damage and no one has been injured. Encana released a statement saying crews had sealed "a small leak" by injecting cement into the damaged wellhead. [More here]

• Alliance Pipeline Receives FERC Waiver Approval (10/30/2008) The Federal Energy Regulatory Commission (FERC) approved a revision to Alliance Pipeline LP's tariff allowing the company to waive a gas quality specification on "a first come, first served basis". Consequently, EOG Resources, Inc. subsidiary, Pecan Pipeline Inc., can now flow dense phase rich gas outside the liquefiable hydrocarbon specifications currently found in Alliance's FERC Gas Tariff. "The FERC's decision shows a strong commitment to swiftly and effectively develop North Dakota's natural gas resources by utilizing existing infrastructure," said Murray Birch, president and chief executive officer, Alliance Pipeline. "We are very pleased, and appreciative of, the support we received for this application." [More here]

• TransCanada Boosts Keystone Stake, Profit Rises (10/28/2008) TransCanada Corp has increased by almost 30 percent its stake in the $12 billion Keystone pipeline project and despite the global credit crisis expects to have financing in place by the end of the year. The other stakeholder in the project - ConocoPhillips - now holds only 20.1 percent. However, TransCanada said it will give other shippers an opportunity to acquire up to a 15 percent stake in the project. The $5.2 billion first phase of the of pipeline running to Illinois and Oklahoma is expected to be in service next year and will carry 590,000 barrels per day (bpd) of oil. Keystone's $7 billion second phase is will carry another 500,000 bpd of oil to refineries based on the Gulf Coast and is expected to be completed by 2012 or 2013 at the latest. TransCanada's also reported profits increased by 20 percent in the third quarter. [More here]

• Engineer Pitches Denali Pipeline (10/24/2008) ................. Since announcing their intention in April to build a private natural gas pipeline from the North Slope to the continental U.S., BP and ConocoPhillips have have spent $40 million on summer field work. Speaking at an Anchor Point, Alaska Chamber of Commerce luncheon, John White, an engineer with BP said, "We've got a team mobilized and it's growing every day. I'd say we have the critical mass to actually get the project started." He went on to say that the proposed Denali gas line will follow the Trans Alaska oil pipeline to the Delta Junction, at which point it will then follow the Alaska Highway crossing the Alberta border into Canada and connecting with existing infrastructure in Alberta. In total, the pipeline will travel around 2,000 miles and require 2 million to 3 million tons of steel. Most of the steel will have to be produced overseas as the U.S. currently does not have the manufacturing capacity to make the pipe. The project may also add another 1,500 miles of pipeline traveling from Alberta to the U.S. The pipeline will transport 4 billion cubic feet per day (cfpd) of natural gas or approximately 7 percent of U.S. daily consumption. The project consists of four phases - the first phase will be an open season targeted for 2010, with filing of applications for permits by year end, followed by development of detailed designs during the permit approval process. The third phase involves equipment and material contracts. The fourth and final phase will need five years - a year for material procurement, a year for mobilization, and three years for construction. "That sounds like a long time, but that is a tight timeline," White said adding "It's all about regulatory process and how fast that goes." Although Denali is competing with TransCanada Corp.'s pipeline proposal, White said he thinks the two projects will combine. "Ultimately, there can only be one pipeline," White said. [More here]

• Enbridge Mulls Pipeline Stake for Native Groups (10/24/2008) In order to gain support for its proposed Northern Gateway oil sands export pipeline, Enbridge Inc. may offer aboriginal groups an equity stake in its 525,000 barrels-per-day pipeline. Details have yet to be decided on the size of the stake to be offered to native communities residing along the pipeline's route from Edmonton, Alberta to Kitimat, British Columbia, as well as how to finance the stakes have yet to be decided. Another project - the C$16.2 billion Mackenzie Valley natural gas pipeline - by Imperial Oil has included native groups as a partner (the Aboriginal Pipeline Group) since 2000. However, the Mackenzie project still has not been constructed due to regulatory delays and cost overruns. The Northern Gateway pipeline is estimated to cost more than C$4.5 billion and is expected to be completed by early 2015. [More here]

• Plateau Mineral Development, Inc. Announce Building of a Pipeline to Produce Significant Revenues (10/21/2008) Plateau Mineral Development, Inc, (PMD) and its partner Plateau Mineral Development LLC. has completed a 6.16-mile long pipeline with a six-inch and four-inch main trunk line which in turn are fed by an additional four miles of two-inch pipeline. The pipeline system, located in Morgan County, Tennessee, is capable of gathering and delivering 300,000 cubic feet of natural gas per day from twelve gas wells to a PMD Compressor Station that feeds gas into the 24-inch east-west SPECTRA high-pressure main pipeline Further expansion of the pipeline will allow production from fields that have been shut in for more than 20 years. Robert Matthews, President of Plateau Mineral Development, said, "This pipeline is a major step towards increased revenue for our company. We look forward to reaping its benefits." [More here]

October 2008 Update

In the news...

• Legislators Take Aim at Interior Alaska Gas Bullet Line (10/13/2008) A proposal to build an Alaskan in-state natural gas pipeline has gained new support from Alaskan legislators. Increasing energy costs and air quality concerns have spurred the renewed interest. Possible routes for the "Bullet Line" include a line from the North Slope, which already is producing gas, or the foothills, where Andarko Petroleum Corporation is exploring new reserves, to Fairbanks, AK. Between September 30 and October 1, Alaskan Legislators joined Endstar Natural Gas Company executives in examining possible routes on a trip to northern Alaska. "I'm even more convinced that the Bullet Line gives us an opportunity to jump-start first gas for Alaskans," said Rep. Mike Kelly, a Fairbanks Republican. "We'll have gas sooner, we'll be ready for the big line and we'll have a trained Alaskan work force, I saw nothing but positives. Enstar company spokesman, Curtis Thayer said Enstar has committed $15 to $20 million for preliminary work on a route next year. He added Enstar is interested in working with the state but wants an "independent analysis" of the two suggested routes. Earlier this year, Gov. Sarah Palin announced the Alaska Natural Gas Development Authority, the state and Enstar would work together on developing an in-state line. [More here]

• Natural Gas Pipeline Approved (10/10/2008) ............ ...... On September 18, the Federal Energy Regulatory Commission (FERC) voted 4 - 1 in favor of plans by NorthernStar Energy LLC to build a liquefied natural gas terminal at the Bradwood site on the Columbia River and a 36-mile pipeline connecting Bradwood with an existing natural gas system owned by Northwest Pipeline Corp., near Kelso, Washington. The plan was opposed by Oregon's Governor Ted Kulongoski, local tribes and environmental groups, who are concerned about the facility increasing river temperatures. Legal counsel for the Columbia Riverkeeper, Brett VandenHeuvel, said “Salmon are already struggling because of the heat increase in the Columbia River,” he said. “We are spending millions of dollars every year restoring salmon habitat in the estuary, and this project would degrade it.” The group is currently working with other industries along the river to minimize their impact on the salmon runs. The four FERC commissioners voting in favor of the project did so based on the findings of the environmental impact statement and the increased demand for natural gas in the region. In 2009, NorthernStar Energy plans to start construction and be operating by 2012. [More here]

• Northwest Gas Line to Run South of Idaho's Southern Border (10/8/2008) El Paso Corp. executives Richard Wheatley and Daniel Gredvig said plans to build a 680-mile natural gas pipeline from Opal Hub, Wyoming to Malin, Oregon are on the "fast track". The 370 miles of the $3 billion pipeline will travel through Nevada on its route from Wyoming to Oregon and is the first pipeline to transport gas west from the Rocky Mountain gas fields located in Wyoming, Colorado, Utah and New Mexico. Currently, all other existing or planned pipelines travel in an eastward direction. "This provides benefits for Rocky Mountain gas producers as well as western end users," said Wheatley. The company hopes to have FERC and other permitting completed by 2009 with an operational date starting March 2011. [More here]

• Billion Here and a Billion There - Gas Pipeline Total Escalates In Political Debate (10/4/2008) Six years ago the proposed natural gas pipeline running from Alaska's North Slope to the lower continental U.S. was expected to cost $20 billion. As recently as around a year ago, ConocoPhillips estimated the cost to between $25 billion and $42 billion. While in January TransCanada, the company partnered with the state to build the pipeline, said it will cost $26 billion to get the pipeline to Alberta. However, by this summer, consultants for the state pegged the price at $31 billion. Now Gov. Sarah Palin has raised the price to nearly $40 billion. During the Vice-Presidential debates, Gov. Palin said, “We’re building a nearly $40 billion natural gas pipeline, which is North America’s largest and most expensive infrastructure project ever to flow those sources of energy into hungry markets.” Factors causing the large discrepancies in price include uncertain material costs and major tax and regulatory issues which have yet to be worked out. Only after the entire pipeline is completed will the true cost be known. [More here]

• Grand Prairie Sued Over Gas Line Ordinance (10/2/2008) ... In the first lawsuit of its kind, Chesapeake's subsidiary, Texas Midstream, is suing Grand Prairie over an ordinance passed by the city to oversee the placement of equipment used to push natural gas through pipelines. This is the first time the company has taken a city to court over pipeline regulation. Grand Prairie's city council says it wants to protect its citizens and has the right to decide what a natural gas pipeline operator does in its city. Texas Midstream says pipeline safety is controlled by federal and state authorities, not cities. Attorney Jim Bradbury and Forth Worth's Natural Gas Drilling Task Force member said, "You might believe that the city could and should protect you, but it may in fact be true that they can't. We can do this our way whether you want us to or not." But Bradbury added, he hopes to find a legal solution that protects the rights of citizens and industry. [More here]

• Exxon Quits 2nd-biggest U.S. Gas Area Amid Price Drop (10/2/2008) Exxon Mobile Corp. has sold its stakes in gas fields and an 80-mile pipeline located in the second-largest U.S. natural gas region, Texas' Barnett Shale, to Dallas-based Harding Energy Partners LLC which had formed a joint venture with Exxon in 2006. Harding then sold the gas fields and pipelines to Chesapeake Energy Corp. Exxon cited a supply glut slashing the value of natural gas in half over the past three months as the reason for the sale. Exxon spokesman Patrick McGinn said the company "has a long-standing practice of continually reviewing all assets for their contribution to the company's operating needs and financial objectives, as well as their potential value to others." Details on the terms of the transaction were not disclosed. [More here]

• Another Pipeline Wouldn't Help, Officials Say (10/1/2008) Pipeline officials said a third pipeline running from Louisiana to Cobb County would not have prevented hurricane-induced gas shortages like Ike and Gustav did in the Atlanta, GA area. Last year, Colonial attempted to get approval from Georgia's legislature for the fast-track construction of 460-mile $2 billion pipeline, stating a third line will remove a bottle-neck between Houston and New York. The bill, which would have eased the permitting process was defeated on grounds it would erode property rights and evade environmental scrutiny. “Right now, the third line would not matter; we’re pumping everything we can get,” said Sam Whitehead, a spokesman for Colonial, headquartered in Alpharetta, GA. “This is a refining problem, not a pipeline capacity problem. On the gasoline line, we’re at pre-hurricane rates.” Currently, Colonial has two 36-inch pipelines that can deliver 100 million gallons of fuel a day to the Eastern coast but are operating at less than 85 percent capacity. One pipeline only transports gas and the other aviation fuels, diesel, heating oil and other products. The proposed third pipeline which Colonial still hopes to get approved and operating by 2012, will increase Colonial's capacity to 135 million gallons a day. [More here]

• Global Industries, Ltd. Awarded $75 Million Pipeline Project in PEMEX's Bay of Campeche Ixtal Field (9/29/2008) Global Industries, Ltd. has been awarded a $75 million project from Pertroeos Mexicanos (Pemex) for over 12 km of 24" pipeline. The project consists of several pipeline crossings, riser and expansion curves in Pemex;s Ixtal Field in teh Bay of Campeche. B.K. Chin, Global's Chairman and Chief Executive Officer, stated, "We have a close working relationship with PEMEX, and have been active in the Ixtal Field for well over a year. The award of this project demonstrates PEMEX's confidence in Global as a reliable contractor and solutions provider."[More here]

• Southern California Company Fined for Offshore Gas Shipment (9/29/2008) Pacific Operators Offshore LLC of Carpinteria, CA was fined $450,000 and placed on five years' probation after pleading guilty for transporting natural gas through a pipeline deemed unfit for service off the Southern California. In 2002, U.S. Department of the Interior officials said inspectors discovered the company was transporting natural gas through the pipeine even though Pacific Operators were notified in February 2000 that the line was unfit for service. Charles Cappel, the company's legal counsel, said two of its employees "on limited occasions" sent low and medium pressure natural gas through the pipeline engineered to handled higher pressures. He said, "The action was totally against company policy. They didn't tell anyone what they were doing." After the company learned what happend officials agreed to pay the fine. The pipeline goes to offshore platforms that are no longer operated by the company. [More here]

• Energy Solutions Completes the Oil & Gas Supply Chain with Its PipelineTransporter Gas (PLTG) Solution Certified for Integration with SAP® Solutions (9/24/2008)Energy Solutions International, Inc. a world-leading supplier software for the gas and oil pipeline industries has received SAP® Certified Integration status for the interface between its PipelineTransporter® Gas (PLTG) software, version 4.0 and the SAP® ERP application. "EnergySolutions' customers include many of the world's leading oil and gas transportation companies," said Dr. Jo Webber, chief executive officer, Energy Solutions International. "Increasingly, over the last few years we have seen many of our customers select and implement SAP solutions for their full ERP requirements. In order to provide a full end-to-end integrated solution, from product flow to final invoicing, we are pleased to announce the SAP certified interface between PLTG 4.0 and SAP ERP." PipelineTransporter is an intuitive, nomination, scheduling, allocation and invoicing system that integrates shipper information with critical pipeline and business data to manage the commercial aspects of a pipeline. [More here]

• Shell Hopes to Reroute Auger Pipeline in US Gulf (9/22/2008) In an effort to restart its Central Gulf gathering system, Shell Oil said it hopes to reroute natural gas and oil flows through its Auger pipeline in the Gulf of Mexico around the Eugene Island platform damaged by Hurricane Ike. "Plans are in development to reroute the Auger pipeline system around the damaged Eugene Island 331 Platform," Shell said in a press release. "Work is progressing to restart the Central Gulf gathering system." The Auger pipeline system can transport 415 million cubic feet of gas per day (cfd) and more than 100,000 barrels per day (bpd) of oil. Almost 80 percent of the Gulf of Mexico's 1.3 million bpd of crude and 65 percent of its 7.4 billion cfd of natural gas production remains shutdown. The company said its Boxer, Cougar and Eugene pipeline systems remained down until repairs can be completed. [More here]

• Hurricane Ike: The Aftermath (9/19/2008) ..... ............ ... ... After shutdowns caused by hurricanes Gustav and Ike offshore oil and gas operators are re-staffing their installations. According to the federal government, almost 90 percent of oil and over 75 percent of natural gas production was off-line as of September 19, 2008. Start up had been delayed by required inspections and testing subsea pipelines. Interior Department's Minerals Management Service (MMS) spokeswoman, Eileen Angelico, said oil pipelines need some production running to induce the pressure required for testing while natural gas pipelines are able to keep pressure when shut down. Despite the shutdowns, the Southeast Texas gasoline suppy was sufficient to avoid releasing emergency stockpiles. "Producing platforms in the Gulf now seem generally to have fared well, as did other infrastructure," said Paris-based International Energy Agency. Hurricane Ike has destroyed 49 platforms in the Gulf of Mexico that are responsible for producing approximately 13,000 barrels of oil and 83 million cubic feet of gas per day. The normal daily output for the region is 7.4 billion cubic feet of gas and 1.3 million barrels of oil. [More here]

September 2008 Update

In the news...

• Ike Destroys Oil Facilities, Damages Pipelines (9/14/2008) According to federal officials, Hurricane Ike seems to have destroyed at least 10 out of approximately 3,800 production platforms and damaged numerous pipelines in the Gulf of Mexico. “It’s too early to say if it’s close to Katrina- and Rita-type damage,” said Lars Herbst, regional director for the U.S. Minerals Management Service. Based on initial assessments it appears the damage is much worse than that done by Hurricane Gustav. Areal inspections revealed several large pipelines were damaged but at this time it is unknown how badly they are damaged. For more than two weeks now, almost 100% (about 1.3 million barrels per day) of Gulf Coast crude production has been stopped while 98% of all natural gas production is on hold after the passage of Hurricanes Gustave and Ike. With more than half of Texas' refineries being shut down by Ike, some areas of the country have seen the cost of a gallon of regular gas rise past $5 per gallon. [More here]
  

• Colonial Says Oil Product Pipelines Shut Due to Ike (9/12/2008) Colonial Pipeline - the nation's largest operator of pipelines for refined petroleum products - has shut down their main gasoline line between Houston and New York. The action was taken after supplies from Gulf Coast refineries have slowed or stopped ahead of Hurricane Ike. In addition, the company's distillate pipeline has also been shut down. Up to 2.3 million barrels of refined products flow through Colonial's pipelines each day. [More here]

• Congressmen Show Pipeline Support (9/12/2008) Senators Tom Harkin - (D-Iowa), and Richard Lugar - (R-Indiana) have introduced legislation that may spur the feasibility of ethanol pipelines. If passed, the Biofuels Pipeline Act of 2008 will give pipeline owners who transport ethanol the same tax benefits as those received by operators who move petroleum based products. Current tax law for publicly traded partnerships (PTPs) requires they earn 90% of their income from the exploration, transportation, storage or marketing of oil, gas and coal. Renewable fuels are currently excluded from the law. Congressmen Leonard Boswell - (D-Iowa), and Lee Terry - (R-Nebraska) are also seeking to amend the Energy Policy Act of 2005 with the introduction of the Renewable Fuel Pipeline Act - that provides loan guarantees on the construction of renewable pipelines. [More here]

• DCP Midstream Partners to Buy Michigan Pipeline & Processing for $145 Million (9/11/2008) Oil and gas pipeline company DCP Midstream Partners, LP has finalized a deal for the 100% buyout of Michigan Pipeline & Processing, LLC (MPP) for $145 million. MPP's holdings include MPP Antrim Gas, MPP Bay Area Pipeline, MPP Grands Lacs Holding, MPP Jackson Pipeline, and MPP Litchfield Pipeline. "This acquisition allows us to further diversify our operations in a new geographic area while adding 100% fee-based revenues to our contract mix," said Mark Borer president and CEO of DCP Midstream........ [More here]

• TransCanada (NGTL) and Canadian Utilities Limited (ATCO Pipelines) Subsidiaries Reach Proposed Agreement to Provide Alberta Natural Gas Transmission Service (9/8/2008) Canadian Utilities Ltd's indirectly wholly owned subsidiary, ATCO Pipelines, and TransCanada Corporation's wholly owned subsidiary, NOVA Gas Transmission Ltd. (NGTL), have agreed to a proposal that will provide uniform natural gas transmission service to customers across Alberta. The seamless pipeline transmission model has been promoted by regulators and, if approved, will combine the two companies' physical assets into a single rates and services structure. Customers will deal with a single commercial interface, but each company will manage their assets within distinct operating territories in the province. More efficient regulatory processes are expected through the elimination of duplicate operational activities and tolling. [More here]

• Range Resources Pipeline Progresses Ahead of Schedule (9/8/2008) Range Resources Corp.'s Marcellus Shale pipeline and processing build-out is ahead of schedule by a full quarter. Originally targeted for completion in the first quarter of 2009, year-end production for 2008 is expected to reach 30 million cubic feet equivalent per day (MMcfe/d). Eventually pipeline capacity is expected to increase to more than 300 (MMcfe/d). “Our solid drilling results coupled with the faster than expected Marcellus Shale ramp up and the pipeline constraint resolution in the Barnett Shale give us significant momentum for the remainder of 2008 and into 2009,” said Range Resources' CEO John H. Pinkerton. [More here]

• North Dakota Oil Pipeline Capacity Limited as Production Imports Climb (9/4/2008) According to Federal Energy Regulatory Commission (FERC) Chairman Joseph H. Kelliher, North Dakota crude oil production and imports from Canada exceed current pipeline capacity in the region. "Both domestic and Canadian crude oil production are increasing, exacerbating the competition for limited pipeline capacity. There have been additions to pipeline takeaway capacity in the region, not enough to limit constraints or accommodate future increases," he told a U.S. Senate subcommittee. Although FERC supports the development of energy infrastructure, Kelliher said. "The parties themselves must resolve who will commit to support the development of new infrastructure and who is willing to pay for it." Oil production in the state rose from 125,000 barrels per day (b/d) to 147,000 b/d in March 2008. In addition Canadian oil imports increased 3% last year to 1.86 million b/d and are projected to 3.4 million b/d by 2017. Oil imported from Canada accounts for 20% of all U.S. crude supplies and is the largest foreign source. [More here]

• Enbridge Commences Construction of Alberta Clipper Expansion Project (8/27/2008) Enbridge Inc. has begun mainline construction on the Canadian portion of the Alberta Clipper Expansion Project near Hardisty and Provost, Alberta. It has also started construction on facilities located in Hardisty, Milden Saskatchewan and Cromer, Manitoba. "The Alberta Clipper pipeline is the largest expansion project in Enbridge's history and demonstrates our commitment to accelerating energy delivery throughout North America. Together with our Southern Access project, Alberta Clipper will ultimately deliver an incremental 1.2 million barrels-per-day from Alberta to Eastern Canadian markets and U.S. refineries throughout the Midwest, the mid-continent and the U.S. Gulf Coast", said Al Monaco, Executive Vice President, Major Projects, Enbridge Inc. When completed, the 1,000-mile 36-inch diameter pipeline running from Hardisty to Superior, Wisconsin in the U.S.will have an initial capacity of 450,000 barrels-per-day (bpd) with the ability to expand capacity to 800,000 bpd. It is scheduled to be in service by mid-2010. [More here]

• Canada's Harper Still Optimistic on Mackenzie Gas (8/27/2008) Canadian Prime Minister Stephen Harper said he is optimistic the proposed $15.4 billion Mackenzie gas project in the Arctic will happen despite years of delays. "I'm optimistic that in the not-too-distant future this project will come to fruition," Harper said in Tutohaktuk a small Arctic village near the Mackenzie River and Beaufort Sea. "It is ultimately about opening up a region of the country in a way that it has not been opened up before and of establishing our economic reach and sovereignty in a way it has never been done before." If completed, the Mackenzie pipeline will transport up to 1.9 billion cubic feet per day of natural gas traveling 750 miles from the Mackenzie River valley in the Northwest Territories to the Alberta border. The pipeline is estimated to be in operation at the earliest around 2015. [More here]

• A Map Of U.S. Crude Oil Pipelines and Infrastructure Is Now Available: Including Over 150 Crude Oil Pipeline Systems (8/27/2008) Marketing research company -- Research and Markets Ltd. -- has added the "U. S. Crude Oil Pipelines and Infrastructure Wall Map" to its product offerings. The full color map includes information on over 150 crude pipeline systems, oil producing field locations, crude refinery locations, oil seaport locations, petroleum power plants, offshore lease blocks, oil & gas basins and Petroleum Administration For Defense Districts (PADD). The 60" x 42" map sells for 168 Euros. [More here]

• Microorganisms that Convert Hydrocarbons to Natural Gas Isolated (8/20/2008) University of Oklahoma researchers have isolated a community of microorganisms that can convert hydrocarbons into natural gas through a groundbreaking process known as anaerobic hydrocarbon metabolism. Researchers believe the microorganisms may be involved in problems ranging from the deterioration of fuels to the corrosion of pipelines. These microorganisms can grow inside pipelines because of the presence of water, that often accompanies hydrocarbons pumped from the ground, resulting in biocorrosion and biodeterioration. “We think cells grow in communities that adhere to the inner surface of pipelines and form three-dimensional biofilms that can sometimes cause pitting. Once we understand what these microorganisms are doing, we can interrupt their processes or diagnose them more effectively. The science is rudimentary at this stage. The modern tools of molecular microbiology have not been applied yet, but a National Science Foundation grant, support from the DOE’s Joint Genome Institute and the cooperation of the energy industry, allowed us to study pipeline biocorrosion on the North Slope,” said Joseph Suflita, Director of the Institute for Energy and Environment within the Mewbourne College of Earth and Energy. Conversely, the microorganisms have an upside as well. They can be used to stimulate methane gas production from more mature oil reservoirs like those found in Oklahoma. [More here]

• Pipeline Threat Covers Tri-State (8/17/2008) A 5,000-barrel oil spill from Marathon Oil Company's 20-inch interstate transit line on a remote farm field in Wayne County, Illinois appears to have had minimal impact on the environment. Oil erupted from a pipeline buried 4 feet underground covering a three-acre area. Illinois EPA spokeswoman, Maggie Carson said, "It was more or less an explosion because it was under pressure, so it covered a large area. It went into farm fields and some areas where it was not immediately accessible. Considering the geographic area covered, this appears fairly minimal, but the agencies involved will conduct a formal damage process." Although the spill was located in a remote location this time, it is probable a leak in will eventually occur in a more populous area as developers increasingly build next to pipelines. A network of oil and gas pipelines crisscrosses the U.S. with high densities in the central and eastern states. According to federal records, there have been 5,894 spills since 1988 releasing nearly 3 million barrels of petroleum products and resulting in more than $3.8 billion in property damage. [More here]

August 2008 Update

In the news...

• TransCanada's Alaskan Pipeline Proposal Wins License to Build (8/13/2008) Alaskan lawmakers awarded TransCanada a license to begin building the $25 billion Alaska Pipeline Project. The Alaskan Legislature also approved House Bill 3001 that authorizes the state government to provide TransCanada with up to $500 million in funding from the Alaska Gasline Inducement Act (AGIA) to be spent on pre-construction costs. Governor Sarah Palin a key proponent of the license and bill, proclaimed, “This is an historic day in Alaska. Today, with the affirmative vote of both chambers of the Alaska State Legislature, we now begin a lifelong partnership with a company that has shown its true commitment to Alaska’s future.” The license authorizes TransCanada to develop and construct a 48-inch diameter 2,700 km (1,680 mile) natural gas pipeline from Prudhoe Bay in northern Alaska to link with another pipeline grid in northwest Alberta. “The Legislature’s decision represents a significant milestone in advancing this major natural gas pipeline project to connect stranded U.S. natural gas reserves to Alaskan and Lower 48 consumers,” said Hal Kvisle, TransCanada’s president and CEO. Lawmakers who voted against the license expressed more confidence in the competing Denali Pipeline project spearheaded by BP and ConocoPhilips. TransCanada hopes to have the pipeline in service by September 2018. [More here]

• U.S. Refinery Operations Status: Marathon Shuts Down Pipeline to Kentucky (8/12/2008) Marathon spokesman Robert Calmus said a 20-inch oil pipeline that runs from an oil hub based in Patoka, Illinois to Owensboro, Kentucky had to be shutdown because of a leak detected early Sunday morning. Operations at the company's Catlettsburg, Kentucky refinery had to be cut as a result. Approximately 4,000 barrels of oil spilled onto a farm located in Illinois. Calmus went on to say the company is analyzing and replacing the failed hardware but did not know when repairs will be completed. [More here]

• U.S. Green Groups Target Keystone Oil Pipeline (8/8/2008) Environmental groups - the National Resources Defense Council, the Dakota Resources Council and Dakota Rural Action - filed suit in the U.S. District Court in Washington D.C., against Secretary of State Condoleezza Rice, the Department of State and Reuben Jeffery undersecretary of state for economic, energy and agricultural affairs over TransCanada's and ConocoPhillips' planned $5.2 billion Keystone oil pipeline system. The groups state in the suit the defendants did not comply with the U.S. National Environmental Policy Act (NEPA) prior to receiving a presidential permit that allows the pipeline to cross the U.S.-Canadian border into the U.S. The act requires an assessment of all reasonable foreseeable environmental impacts from the pipeline before being granted the permit. The groups claim the project will promote refinery expansions, causing increased greenhouse gas emissions as well as more air and water pollution in the Midwest and surrounding states. The environmental groups are requesting the court force the State Department to rescind the presidential permit. The 2,148-mile pipeline is expected to be completed in 2009 and will transport up to 590,000 barrels of oil a day from Canadian oil sands to the U.S. Midwest. [More here]

• Man Gets 13-Year Term for Plotting Pipeline Blast (8/8/2008) Canadian Alfred Heinz Reumayr was sentenced to 13 years in prison for planning a series of explosions along the Trans-Alaska oil pipeline to disrupt the oil supply. "His motivation in doing it was to play the futures market so that after the pipeline blew up and the price of oil increased he could make whatever profit on it," Assistant U.S. Attorney Steve Yarbrough said. "That shows, at least in his mind, that it was going to be a significant enough impact to affect the financial markets in a way that he would enrich himself." Reumayr, 58, who has been in U.S. custody since August 1999 pleaded guilty in March to one count of terrorism transcending national boundaries. [More here]

• New 'Voyager' Company to Explore Natural Gas Midstream Opportunities (8/7/2008) Tenaska Capital Management, LLC (TCM) has formed a Houston-based company - Voyager Midstream LLC - focused on acquiring, developing and managing midstream natural gas industry assets including gathering systems, processing plants, pipeline transportation and gas storage facilities. Dr. Tom Shaw, who has a Ph.D. in geology and 15 years experience in oil and gas exploration and production as well as 6 years developing natural gas facilities will head the new company. [More here]

• Lease Dispute May Cloud Exxon Role in Alaska Pipeline (8/7/2008) Although ExxonMobil Corp. has an unresolved dispute over revoked Point Thompson drilling leases. It is ready to work with the Alaskan government and three other companies competing to build a natural gas pipeline to bring natural gas from Alaska's North Slope. "We are ready to work with the state, TransCanada, ConocoPhillips and BP to move forward one of the largest and most complex projects ever undertaken in the United States," Exxon spokeswoman Margaret Ross said. The state revoked Exxon's Point Thompson leases in 2006 because, after decades of control, Exxon on its partners failed to put them into production as required by the lease. Exxon believes Point Thompson could produce 1 billion cubic feet per day (cfpd) of natural gas by 2014 if a $1.3 billion plan for drilling moves ahead next year. Two competing natural gas pipeline projects -- BP and ConocoPhillips' Denali Alaska Gas Pipeline and TransCanada's state-backed Alaska Pipeline project -- are vying for Exxon's support. Without Exxon's support, the pipeline project is unlikely to succeed since they have the most gas leases on Alaska's North Slope. "The fact that Exxon has yet to commit to one project or the other is perfectly reasonable and not at all unexpected from them at this early stage, but we want to see them make tangible commitments sometime in the near future," said Kurt Gibson, deputy director of the Alaska Division of Oil and Gas. He added that Exxon's litigation with the state over the leases is likely a factor in the company's delay in taking a position on the pipeline but the state treats them as separate issues. Exxon, after suing the state in December 2006, said gas supply from Point Thompson would be critical to a natural gas pipeline and the outcome from the litigation could affect an agreement for the pipeline. [More here]

• Pipeline Project Proposed to Push Shale Gas (8/7/2008) Denver-based DCP Midstream Partners LP and Houston-based M2 Midstream LLC, have agreed to pursue the development of a natural gas pipeline from Haynesville Shale in Louisiana. The pipeline - diameter to be determined by customer demand - will start at the western side of DeSoto Parish and go 150 miles to a hub located in Delhi. If built, the pipeline could start deliveries as early as the third quarter of 2009 with a capacity of 1.5 billion cubic feet per day by the beginning of 2010. [More here]

• Expansion of Pipeline Stirs Concerns Over Safety (8/4/2008) A record 4,400 miles of new pipeline will be constructed in the U.S. this year, carrying 47 billion cubic feet per day of natural gas, a lot of it crossing very populous and environmentally sensitive areas. Much of the boom is driven by the need to distribute a growing domestic supply of natural gas and an increasing reliance on electricity generated from gas (20% of all U.S. electricity in 2006 versus 13% a decade ago). However, construction of highly pressurized pipelines near residential areas and farms has raised fears about safety and the environment. While facing relatively little opposition in rural areas, companies that build pipeline are seeing more lawsuits, eminent-domain battles and jurisdictional disputes between local, state and federal authorities overseeing the projects. "The greatest need is in the most densely populated areas, which in turn are the most challenging places to site infrastructure," said Robert Cupina, principal deputy director of the Federal Energy Regulatory Commission. Several projects have been blocked due to concerns about accidents, like the rupture of a natural gas pipeline near Carlsbad, N.M. in August 2000 that killed 12 campers, and environmental issues such as potential groundwater contamination and disruption of plant and animal life on the surface. Projects in the Northeast typically have the most difficulty getting approval. Local authorities in northeastern Massachusetts thwarted efforts by El Paso Corp. to build a 7.8-mile pipeline and Connecticut rejected on environmental grounds the Islander East plan to build a 50-mile pipeline across Long Island Sound. While companies seek to avoid conflict by building in existing rights-of-way (e.g. along old railroads), invariably projects encounter problems associated with suburban sprawl. [More here]

• Willbros Announces New Project Awards (7/29/2008) Willbros Group, Inc. has been awarded contracts to build an expansion to Enbridge Pipelines Inc.'s Canadian Mainline Pipeline Project and part of the Alberta Clipper pipeline. The Enbridge project, for Contract A Line 4 Expansion, will be 135-kilometer, 36-inch pipelines in three loops from Sherwood Park to Hardisty, Alberta. The Alberta Clipper project involves the construction of a 99-kilometer, 36-inch pipeline segment from Hardisty to the Alberta/Saskatchewan border near Kerrobert, Saskatchewan. Work is scheduled to be completed by March 2009. The Alberta Clipper project is a new 1,607-kilometer crude oil pipeline that will connect Enbridge's Hardisty, Alberta terminal to Superior, Wisconsin. [More here]

• Virgin Islands Weighs Gas Pipeline to Puerto Rico (7/24/2008) The U.S. Virgin Islands is considering the construction of a natural gas pipeline from Puerto Rico to replace diesel used to generate power. Hugo Hodge Jr., chief of the U.S. Virgin Islands Water and Power Authority (WAPA) told an annual meeting of the utility's board that its customers would save a significant amount of money if they recalibrated oil-dependent generators to use natural gas. If a deal is reached in the coming months, an undersea pipeline would transfer natural gas to St. Thomas from the Puerto Rican island of Culebra. [More here]

• Work Begins on Second Local Off-Shore LNG Site (7/17/2008) Action Energy has started staging for the construction of a $6 million liquefied natural gas terminal - named Neptune - ten miles off the coast of Gloucester, MA. When completed, it will be the second local intake terminal for the New England market according to Elliot Jacobson, director of Action Energy in Gloucester. The local fishing community had challenged Neptune and another LNG terminal further south on the Massachusetts coastline, but both were approved by then-governor Mitt Romney in December 2006. Action Energy made mitigation payments of $23.5 million, including $6.3 million to the Gloucester Fishing Community Preservation Fund, upon the start of Neptune’s construction. Excelerate Energy, which built the first terminal to the south, also paid $23.5 million in mitigation fees. When completed, natural gas from Neptune will be transported via a 13-mile pipeline to existing pipeline in Salem, MA and accommodate up to 400 million cubic feet of natural gas a day. [More here]

• Keystone Pipeline to Expand to Serve the U.S. Gulf Coast (7/16/2008) TransCanada has announced plans to expand its Keystone crude oil pipeline system by 2012, providing an additional capacity of 500,000 barrels per day (bpd) to the U.S. Gulf from Western Canada. The plans are based on binding open season commitments of 300,000 bpd from several prospective shippers to the U.S. Gulf for an average duration of 18 years. "The Keystone expansion will be the first direct pipeline to connect a growing and reliable supply of Canadian crude oil with the largest refining market in North America," says Hal Kvisle, TransCanada president and CEO. The Keystone Pipeline - a joint venture of TransCanada and ConocoPhillips -- currently transports 590,000 barrels per day to the U.S. Gulf. The expansion will increase this amount to approximately 1.1 million bpd and includes around a 1,980-mile, 36-inch crude oil pipeline that starts at Hardisty, Alberta and terminates near Port Arthur, Texas. Further expansion up to 1.5 million bpd is possible with the addition of incremental pumping facilities. [More here]

July 2008 Update

In the news...

• House Speaker Votes to Have TransCanada License Vote by July 16 (7/13/2008) Alaskan legislators returned to Juneau, Alaska on July 9 to complete work on a natural gas pipeline license proposal for TransCanada. House Speaker John Harris said he hopes a vote on the license will be taken by July 16. However three key issues must be addressed - first, how much gas is available for the pipeline company, second, if the license could trigger financial penalties against the state thus impeding the rival Denali pipeline being pursued by BP and ConocoPhillips and third, whether penalties would be enacted if the Legislature wants to help an industrial operator in southern Alaska needing more than 500 million cubic per day of gas (cfd) moved through a spur pipeline. The 500 million cfd through a spur pipeline is the threshold at which TransCandada can seek treble-damages under a provision in the TransCanada agreement. The proposed 48-inch pipeline by TransCanada is expected to move 4 to 4.5 billion cfd. [More here]

• Enbridge Delays Plans for Major Pipeline to Ship Crude to the U.S. Gulf Coast (7/9/2008) Because of a worse outlook for oilsands production in northern Alberta, Enbridge is delaying for about two years its plans for completing construction of a major oil pipeline. The project is now expected to be complete in 2013 or 2014. Instead the company plans to ship Canadian crude to the U.S. Gulf coast. "The best market possible for Canadian heavy crude at the moment is the U.S. Gulf Coast (where much of that country´s refineries are located). What this project really does is provide a nifty interim solution to get volumes to the Gulf without waiting for a large diameter pipeline proposal that would take much more volume than is currently envisioned to be generated in the near term," said Enbridge vice-president Al Monaco in an interview. Enbridge's $350 million "Tailbreaker" project will use oil tankers to move 200,000 barrels of oil per day (bpd) to the U.S. Gulf. "When the volumes of Canadian heavy crude seeking access to the U.S. Gulf Coast exceed the capacity of Trailbreaker, we´ll be ready to meet that requirement with our Texas Access joint venture at a lower toll," Monaco said. The $2.6 billion Texas Access pipeline will connect Enbridge's mainline in Patoka, Illinois with hubs in the Houston, Texas area and transport up to 400,000 bpd. [More here]

• TransCanada Pipeline Expansion May Cost C$7 Billion (7/9/2008) Construction of the next phase of TransCanada's Keystone oil pipeline from Hardisty, Alberta to refineries in Port Arthur and Houston, Texas is expected to cost C$7 billion. The 3,200 km expansion will transport 700,000 barrels of oil per day and has a target in-service date of late 2011. It adds to the C$5.2 billion Keystone project which will transport 590,000 bpd from Alberta to Cushing, Oklahoma starting late next year. The Keystone project is a 50-50 partnership with ConocoPhillips. [More here]

• Alaska Governor Announces In-State Pipeline Plan (7/7/2008) Gov. Sarah Palin announced the Alaska Natural Gas Development Authority (ANGDA) and Enstar have proposed to build an in-state natural gas pipeline. The 450-mile pipeline will run from the Cook Inlet basin in southern Alaska going north to Fairbank, Anchorage and other Alaskan markets. The governor told a news conference the project would seek to "deliver our natural gas to our homes and to our businesses as quickly as possible to finally unlock the energy potential throughout Alaska." Gene Dubay senior vice president at Continental Energy, Enstar's parent company, said a partnership with Alaska and ANGDA would make the gas pipeline cheaper and easier to build. The Cook Inlet is thought to have a 50-year supply of gas. The pipeline construction, which is expected to be completed by 2013 will deliver 460 million cubic feet a day of natural gas. [More here]

• Pipelines Continue to Be Safe However National Energy Board Concerned With Increase in Worker Injuries (7/3/2008) In a new report by Canada's National Energy Board (NEB) Canadian oil and gas pipelines are operating safely but there has been a spike in workplace injuries. According to the NEB's annual report "Focus on Safety and Environment: A Comparative Analysis of Pipeline Performance 2000-2006" between 1991 and 2002 an average of 2.5 pipelines regulated by the NEB ruptured each year. However, between 2002 and 2006 there were no ruptures. On the other hand the injury rate for pipeline workers more than doubled in 2006 versus the previous year, going from 0.7 injuries to 1.5 injuries for every 100 full time equivalent workers. It is the highest injury rate since 2001. In 2006 the 45,000 kilometers of NEB-regulated pipeline had 37 incidents related to safety, pipeline integrity and the environment. [More here]

• Exxon-Alaska Relationship Tenses Up Over Pipeline (6/27/2008) After the U.S. Supreme Court's decision to reduce the amount of punitive damages Exxon Mobil is required to pay for the 1989 Exxon Valdez oil spill, many Alaskans are bitter about the ruling. But the relationship between the state of Alaska and the oil-producing giant may get worse. Gov. Sarah Palin has made building a natural gas pipeline from the Alaska's North Slope to the lower 48 states a priority for her administration. But first she needs Exxon Mobil to commit its portion of the gas in Prudhoe Bay to the project. So far the company has refused to commit to shipping gas through the proposed pipeline and, under a 1977 agreement among Prudhoe Bay producers, Exxon can stop its partners from committing their gas production to any pipeline. "In terms of the parties that have to be out on the field, so to speak, and playing for this to go forward, we have four out of the five: the state, BP, TransCanada and Conoco," said Joe Balash, special assistant to Ms. Palin. However, Balash said the relationship between the governor and Exxon wasn't close adding, "We don't think this is impossible to overcome, but it is going to require a certain amount of accommodation by Exxon, which is not their first choice in dealing with governments or commercial parties." Margaret Ross, an Exxon spokeswoman said, "We look forward to working with the state, the legislature and the people of Alaska to develop the state's resources in the future. We want to work with the state. Everyone believes it's important for a pipleline project to move forward." [More here]

• Rocky Mountain Pipeline System LLC Announces Reversal of Wamsutter Pipeline (6/27/2008) After getting a long-term customer commitment Rocky Mountain Pipeline System LLC (RMPS), an indirect subsidiary of Plains All American Pipeline, L.P. plans to reverse its Wamsutter pipeline in the first quarter of 2009. Currently the pipeline transports Southwest Wyoming Sweet (crude oil) from RMPS's facilities in Wamsutter, Wyoming to Ft. Laramie, Wyoming. [More here]

• ShawCor Completes Acquisition of Flexpipe Systems (6/27/2008) ShawCor Ltd. has completed its acquisition of all outstanding shares of Flexpipe Systems, Inc. for a total consideration of around $130 million. Flexpipe Systems manufactures spoolable, composite pipe used by oil and gas producers. ShawCor Ltd. is an energy service company that specializes in products and services for the pipeline and pipe services utilized by the oil and gas industries. [More here]

• FERC OKs Review for BP-Conoco Alaska Natural Gas Pipeline (6/26/2008) The Federal Energy Regulatory Commission (FERC) has agreed to an early review of ConocoPhillips and BP's plan for a $30 billion natural gas pipeline from Alaska's North Slope to the lower 48 states. Due to the complexity of the project, an early review was advised by FERC. The "Denali Pipeline" plan proposes constructing a 48-inch or 52-inch diameter pipeline from Prudhoe Bay through western Canada. By "pre-filing," BP and Conoco can work with FERC in drafting economic, engineering and environmental studies before their final application is submitted for approval. A similar project was rejected by Gov. Sarah Palin in January when Conoco insisted on having tax deal talks before the prelimary work was started. The governor has express preference for a plan proposed by TransCanada over one owned by the North Slope oil producers, arguing an independent pipeline would allow greater access to new participants in the oil and gas fields. [More here]

• Canadian Oil Pipeline Capacity Remains Tight (6/26/2008) Although there is some spare capacity in certain Canadian oil pipeline systems, additional capacity will soon be needed according to the Canadian Pipeline Transportation System Assessment from the National Energy Board. "Capacity constraints on oil pipelines in Canada were evident in 2007," said NEB Vice Chair, Sheila Leggett. "While there was some spare capacity, periods of apportionment meant that some pipelines were at times not able to fully meet shipper demand." Growth in oil-sands production and strong demand in the U.S. has resulted in high capacity utilization of Canadian oil pipelines. However, even during the peak winter season, there is adequate capacity on existing natural gas pipelines and, in some cases, excess capacity. The annual report examines more than 45,000 km of oil, gas and petroleum product pipelines to determine their adequacy and economic efficiency. [More here]

• Magellan Midstream Assets Remain Fully Operational Despite Midwest Flooding (6/23/2008) Despite flooding in parts of the Midwest, Magellan Midstream Partners, L.P. has confirmed that its pipeline assets and petroleum products terminal remain fully operational. [More here]

• Alberta Ceding Control of Gas Distribution Web to Federal Agency (6/20/2008) Ten years ago, TransCanada acquired Nova and its natural gas pipeline network based in Alberta. The Nova grid transports more than 10 billion cubic feet of gas per day. Last year it moved more than four trillion cubic feet of gas - more than two-thirds of western Canadian production or around 16 percent of the total North American gas output. Jurisdiction of the grid, currently under the control of the Alberta government, will be transferred to the Canadian National Energy Board. Alberta Energy spokesman Jason Chance said the reason for an independent transportation web is gone and its future lies in extensions beyond Alberta's boundaries, developing into a "hub" for continent-wide traffic in gas and byproducts. "Integrated" provincial, national and international service under federal supervision will make Nova the route to markets for new gas production from B.C., the Northwest Territories and Alaska, TransCanada predicted. [More here]