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]