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]