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]