March 2008 Update

In the news...

• Williams and TransCanada Propose New Natural Gas Pipeline for Western U.S. (3/13/2008) Williams and TransCanada may develop a new natural gas transmission pipeline - Sunstone Pipeline - to transport gas from the Rockies to markets in the western US. The proposed 618-mile, 42-inch pipeline will have a capacity of up to 1.2 billion cubic feet per day. If built, the Sunstone Pipeline will parallel the existing Williams Northwest Pipeline system. That pipeline runs from its Opal hub in Wyoming to Stanfield, Oregon and interconnects with TransCanada's Gas Transmission Northwest (GTN). The Sunstone project has the option to serve both Northwest and GTN markets. Additional benefits of the Sunstone Pipeline include: construction of fewer miles of pipeline along an existing utility corridor, favorable rates due to efficiencies from existing operations and infrastructure, and increased access to markets in Nevada, California and Pacific Northwest. The project, if approved, is scheduled to begin service in 2011. [More here]

• Gas Explosion Injures Six, One Missing (3/12/2008) . ....... A March 12 natural gas explosion 15 miles off the coast of Marsh Island, Louisiana injured six crew members of a pipeline maintenance vessel and left another missing. The maintenance vessel Jillian Morrison was clearing gas from a closed section of pipeline when the explosion occurred. The pipeline owner, ANR Pipeline Co. (a subsidiary of TransCanada), said its pipeline system and natural gas supplies to customers were not affected by the blast. However, El Paso Corp's Tennessee gas pipeline was affected leading the company to declare force majeure because it was unable to meet contractual supply obligations. Three crew members have been released from the hospital while three more were listed in serious condition at the hospital in Lafayette, Louisiana. The Coast Guard is continuing its search for the missing crew member. A cause for the explosion has not been determined. [More here]

• Exxon Flexes, Critiques Gas Line (3/10/2008). ............ Exxon Mobil Corp. submitted a 14-page document criticizing a TransCanada bid to build a North Slope natural gas pipeline. TransCanada is the only bidder approved by Alaska Gov. Sarah Palin for the project. Exxon said the 1,715-mile, $26 billion pipeline proposal is seeking too much profit and seeks to send the Alaskan gas only into TransCanada's Alberta pipeline network. The higher shipping rates TransCanada expects to charge could discourage drillers from locating and developing new gas supplies. However, the proposal also offers to share ownership of the pipeline and Exxon expects to be a co-owner with a stake equal to its share of gas flowing through the pipeline. [More here]

• Alaska Mulls Pipeline Options If Big Oil Balks (3/6/2008) Alaska and the U.S. Federal government are considering other options in the event Exxon Mobil, ConocoPhillips and BP Plc refuse to back Gov. Sarah Palin's approval of the TransCanada Corp. pipeline proposal. The natural gas and oil producers are wary of working with Canada's largest pipeline firm. Gov. Palin has threatened to revoke leases for oil fields including Prudhoe Bay if the companies do not participate in her process. Alaska is considering the potential for an alternative liquefied natural gas project along with the TransCanada proposal. The U.S. Department of Energy is evaluating other pipeline construction proposals as well. Congress is also eager to tap into the 35 trillion cubic feet of North Slope gas reserves to meet U.S. demand, according to Drue Pearce, federal co-ordinator for Alaska Natural Gas Transportation Projects. "(Lawmakers have) said: 'Alaska, you need to move because, if we have to, eventually, Congress will step in and make sure this pipeline gets built'," Pearce said. [More here]

• Widening Investigation May Present A Hurdle For Gas Pipeline Project (3/6/2008) Federal prosecutors expanded their Alaska corruption investigation into the executive branch of government after Jim Clark, chief of staff for former Gov. Frank Murkowski, pleaded guilty to a felony conspiracy charge in connection with illegal campaign contributions. Around 10 percent of the 2006 Alaskan Legislature have been implicated in corrupt activity. "This bleed over into another branch of government ... is very, very unfortunate in terms of Alaska's reputation," Gov. Sarah Palin said. She also said past negotiations with oil companies to get a natural gas pipeline built took place behind closed doors. It now appears VECO Corp. was making illegal campaign contributions to the state's lead negotiator to the governor. None of the North Slope oil producers applied for the pipeline license, nor did a respected pipeline company, Mid-American Energy, citing the fallout from the corruption investigation. The governor said her administration is working to set a new standard for ethical and open government. [More here]

• Fatal US-Canada Pipeline Fire Causes Over $3 Spike In Oil Prices (3/3/2008) Fire broke out at an Enbridge Energy pipeline in Northern Minnesota. Two workers repairing the pipeline were killed by the fire. The pipeline carries crude oil from Canada to the U.S. Midwest. In total, five pipelines will have to be shutdown until repairs can be made. Enbridge spokeswoman - Denise Hamsher - said the company stored oil in stations along the line and at refineries thus avoiding disruptions in supply to the Midwest for several day. However, oil prices rose more than $3 on uncertainty of how the pipelines closure would affect supplies. [More here]

• Enbridge Inc. Gets Approval For Southern Lights Diluents Pipeline (2/27/2008) On February 20 Enbridge Inc. announced it received approval from the National Energy Board (NEB) for its Southern Lights pipeline that will transport diluents, gasoline-like liquids, from U.S. refineries to Edmonton, Alberta. The Calgary-based company plans to build a new section of 20-inch pipeline from Chicago, Illinois to Clearbrook, Minnesota and reverse the flow of its Line 13, that currently transports light synthetic crude oil from Edmonton to Clearbrook. In total, the project involves laying 1,085 kilometers of 16-inch pipe and will run through Illinois, Wisconsin, Minnesota, North Dakota, Manitoba, Saskatchewan and Alberta. It will have a capacity of 180,000 barrels-per-day and is expected to cost $2.2 billion. [More here]

• Enbridge Receives NEB Approval On Alberta Clipper Expansion Project (2/22/2008) The National Energy Board (NEB) approved Enbridge's application for the Alberta Clipper Expansion Project. The project involves the construction of a new 1,000-mile, 36-inch crude oil pipeline from Hardisty, Alberta to Superior, Wisconsin. Once completed the pipeline's initial capacity will be 450,000 barrels-per-day (bpd) which can be increased up to 800,000 bpd. It is scheduled to be in service by mid-2010 pending U.S. regulatory approvals.... [More here]

• TransCanada Plots Next Big Oil Line To Gulf Coast (2/21/2008) TransCanada is plotting an even bigger pipeline than its Keystone project to transport Canadian crude to the U.S. Gulf coast. The company is considering a direct route to the huge refining hub in the Gulf. The other option is to send Canadian oil sands crude to more distant refineries via its under-used natural gas pipelines for part of the route similar to its Keystone project. "But if the demand for transportation materializes more quickly, we would look at building a direct line," TransCanada CEO Hal Kvisle told investors at a conference in Whistler, British Columbia. "Either way, the discussions are well advanced and this is one of the future projects that we will be bringing forward here in the months ahead," he said in his Webcast speech. The 2,148-mile, $5.2 billion Keystone pipeline starts construction in the next few months. It is scheduled to start service in 2009 or 2010 and can transport 590,000 barrels of oil per day. The Gulf coast currently demands seven million barrels of crude a day. Canadian crude production could increase by one to two million barrels per day in the next decade, according to Kvisle. [More here]