February 2009 Update

In the news...

• Denali Group to Build Gas Treatment Plant (2/15/2009) The Denali pipeline group (owned by ConocoPhilips and BP) has awarded an engineering contract for a $2 billion gas treatment plant in Prudhoe Bay, Alaska to Fluor WorleyParsons Arctic Solutions. The engineering firm, a joint venture between Fluor and WorleyParsons, has retained CH2M Hill as its subcontractor for Alaskan support services during the design phase of the project. The size of the contract is confidential, but according to Denali spokesman, Dave MacDowell, "It is in the range of several million dollars." Technical studies for the plant will include cost estimates, execution planning, project design and anything else needed to move the project forward, MacDowell said. The plant will be a part of the planned $30 billion Alaska natural gas pipeline project that will run from Alaska's North Slope to Alberta, Canada. If built the gas treatment plant will be the largest of its kind in the world and be responsible for removing hydrogen sulfide, carbon dioxide and other impurities as well chill and compress natural gas before being sent to the pipeline. [More here]

• Enbridge Has Plans for Big Gas Pipelines (2/14/2009) ... As a result of a number of oil pipeline projects being delayed or set aside, Enbridge Inc. is now considering large-scale natural gas pipeline projects to fill the void. The company has already delayed its plans to build the Fort Hills oil pipeline. "It is fair to say we will see some delay and push-out beyond ... our long-range plans on some of the oil projects, and some gas projects to fill it in," said Pat Daniel, Enbridge's chief executive. "We're very active on the gas side already in developing alternate opportunities." Projects such a proposed Rockies Alliance Pipeline that would connect Chicago with the natural gas fields in the Colorado Rockies could take a more significant role in the company's plans after 2012. [More here]

• State Agency OKs New Pipeline Rules After Calls from Residents, Officials in Barnett Shale (2/14/2009) ............. In response to citizen's concerns about the Barnett Shale field, the Texas Railroad Commission has approved a set of new rules for natural gas pipelines in the state of Texas. The state commission, which oversees gas, oil and pipeline industries, has approved new rules that state safety regulations for low-pressure production and flow lines that connect gathering lines that run through heavily populated areas. Previously, the pipelines were virtually unregulated and were only inspected after a complaint or problem was noticed during inspections of a well or lease. Inspections will take place on an annual basis. In addition, gas distribution systems will now have to report any leaks and any unrepaired lines to the commission every six months instead of just writing reports without submitting them. Funding has been requested by the commission for 13 more pipeline inspectors and 21 more gas and oil well inspectors. [More here]

• Obama Will Discuss Proposed Alaskan Gas Pipeline with Canadian Leaders (2/12/2009) President Barack Obama promised to discuss Alaska's proposed gas pipeline with Canadian leaders during his trip to Ottawa on February 19. "It's a project of great potential and something I'm very interested in... as I mentioned during the campaign, I actually think that for us to move forward on the natural gas pipeline as part of a comprehensive energy strategy - that includes both more production as well as greater efficiency - makes a lot of sense," Obama said. "As it happens, Prime Minister Harper, as well as President Calderón of Mexico, have a great interest in energy. Obviously, Canada is one of the biggest energy players in the world. They share an interest in not only the production side, of the economic benefits, but I think they're also interested in a broader conversation about efficiency and how it relates to issues like climate change." Alaskan Gov. Sarah Palin wrote a letter to Pres. Obama earlier in the month requesting he discuss the pipeline with Prime Minister Stephen Harper during his visit. The Alaska legislature granted a Canadian company, TransCanada, an exclusive state license to build the pipeline last year. [More here]

• TransCanada CEO Downbeat about Mackenzie Line (2/11/2009) Despite years of planning and rising costs, regulatory delays have increased the chances that the Mackenzie natural gas pipeline will not be built according to TransCanada's CEO. "I confess to some pessimism on the Mackenzie project, and it may well not proceed," Harold Kvisle said. The most recent setback came at the end of last year when two regulatory panels said they expected to deliver their reports on the project months later than originally scheduled. TransCanada currently does not have a stake in the pipeline but can acquire 5 percent through the native-owned Aboriginal Pipeline Group, which aims to control a third of the project. In January, the Canadian government offered financial aid for the proposal to cover pre-construction costs, roads and airstrips. "I have great sympathy for the current government of Canada, which is doing everything it can to move the project forward," Kvisle said. "But it inherited a mess that's been building up for a couple of decades." Despite Kvisle negative comments, Canadian Environment Minister, Jim Prentice, told reporters in Ottawa, "I continue to be optimistic about the project. It's a very important project for our country." The proposal, led by Imperial Oil Ltd, calls for the construction of a 760-mile pipeline through the Northwest Territories to Alberta and will be able ship up to 1.9 billion cubic feet of natural gas a day. [More here]

• Massive Gas Release on North Slope Could Have Destroyed Pump Station, Officials Say (2/8/2009) According to investigators, on a January 15, a massive release of Prudhoe Bay natural gas that filtered into Trans-Alaska Pump Station 1, the gas could have destroyed the building and shutdown Alaska's North Slope oil fields. The incident occurred, when a "bullet shaped" cleaning pig (a device used to scrape walls and detect problems) became stuck after workers "lost track of its exact location" along the pipeline. Workers for BP PLC were using pressurized natural gas to move the pig through a corroded 34-inch pipeline. The pig was being to used to swab oil out of the pipeline in preparation for its decommission. After the release, Pump Station 1 (through which all oil from the North Slope must pass) was shut down from 3:06 PM to 3:41 PM. Alyeska Pipeline Service Co., operator of the 800-mile pipeline, said the pipe section was among the major Prudhoe trunk lines found to be severely corroded because of BP's lack of proper maintenance. Alyeska acknowledged an explosion or fire could have jeopardized the safety of over 60 workers at the pump station and caused shutdown of the oil fields. The incident, which alarmed regulators, BP and Alyeska workers, was not reported to the authorities until January 20 - five days after it happened. The U.S. Pipeline and Hazardous Material Safety Administration, the Joint Pipeline Office - an Anchorage umbrella agency for federal and state regulators overseeing Alaskan pipelines and Congressional offices with oversight over energy development and safety are investigating the matter. [More here]

• Lawmaker Sends Note to Hillary Rodham Clinton on Gas Pipeline (2/5/2009) Texas State Rep. Chente Quintanilla has sent a letter to Secretary of State Hillary Rodham Clinton asking her to determine why a presidential permit was granted last October for the construction of a gasoline pipeline from El Paso, Texas to Juárez, Mexico without a proper review of an environmental impact study. Specifically the letter requests she provide answers as to why the interests of PMI Service North America - a U.S. subsidiary of Mexico's national oil company Pemex - had more priority than those of U.S. citizens. "Our arguments were ignored," Quintanilla wrote. "What is worse, those individuals in the State Department who are charged with protecting the interests of U.S. citizens allowed Pemex to use our arguments in making their case against our interests." PMI officials have said the pipeline is a safer way to transport diesel and gas than the trucks they currently use. Work has started on the pipeline and it is expected to be in operation later this year. [More here]

• Butte County Could Host New Natural Gas Pipeline (1/29/2009) American Oil & Gas is seeking to install a new natural gas pipeline along county roads in the north central section of Butte County, South Dakota. According to company engineer, Neal Neumiller, a six-inch diameter steel pipeline would be buried five to six feet underground following the public right of way. The 20-mile line would travel from wells and a compressor located near U.S. Highway 85 west to the Williston Basin Instate pipeline. If the project is approved by the Butte County Commission, an American Oil & Gas land agent said the county will receive a one-time fee of $60,000 for the access. [More here]

• Aboriginal Leaders Applaud Mackenzie Delta Pipeline (1/26/2009) Mackenzie Delta aboriginal leaders cheered and celebrated the start of the northern pipeline hearings in Inuvik, North West Territories. "We're ready,'' said Fred Carmichael, president of the Gwich'in Tribal Council and chairman of the Aboriginal Pipeline Group (APG). "We've had 30 years to get ready since (Thomas) Berger,'' he added, in reference to the 1970s commissioner who stopped the first attempt at constructing the pipeline so the northern communities could gain strength to deal with the gas industry. APG owns one-third of the $4.8 billion proposed natural gas pipeline that will run 1,200 kilometers through the Mackenzie Valley to Alberta. National Energy Board (NEB) chairman Ken Vollman called the $7 billion Mackenzie Gas Project "an historic undertaking" that is the largest proposal to seek NEB's approval. Project manager Randy Ottenbreit said, "The Mackenzie Gas Project needs all the components in order to succeed," including the approval of a $2.2 billion Mackenzie Delta production facility or nothing will go ahead. In an area with unemployment approaching 40 percent Mackenzie Delta residents seek jobs that require 12-hour days in -40 degrees F winter weather. "The biggest challenge is to get our people off dependence on government,'' Carmichael said. "That creates a terrible society. The only way out I see is to become self-sufficient.'' Despite most residents' enthusiasm for the project several groups oppose it including the Sierra Club of Canada and the Deh Cho - a lone aboriginal holdout who is not participating in ownership of the pipeline. The environmentalists claim protecting the northern boreal forest from destructive development will preserve the value of the forest they estimate to be around $93.2 billion a year or more than double the expected $37.8 billion net revenue generated from resource extraction. [More here]

• BP Official: Alaska Natural Gas Pipeline Prospects Dim (1/23/2009) The overall economic collapse, declining energy prices and the emergence of unconventional energy sources has dimmed prospects for constructing a pipeline from Alaska's North Slope according to a senior BP executive. "It's not a pretty story right now in terms of North American natural gas markets," said Brian Frank, president of BP Energy Co and BP's North America Gas and Power at an annual industry conference in Anchorage, Alaska. BP and ConocoPhillips - two of the three major North Slope oil producers - are competing with their Denali proposal against TransCanada to build a pipeline around 1,700 miles long from the North Slope to Alberta. Although TransCanada, which has an exclusive license for the project from the state of Alaska, estimates the project will cost $26 billion, Frank thinks the cost will be in the $30 to $40 billion range. "It's very difficult to find the financing and funding for projects and infrastructure," he said. In fact economic conditions are so bad that each week several major customers for BP's natural gas are filing for bankruptcy and others are now on prepayment plans "because they are not credit worthy," he said. The project also faces competition from shale gas produced in the Rocky Mountain and Midwest states. Despite the adverse conditions, Frank believes the project can move forward but only if there is a "stakeholder aignment" that includes regulatory and fiscal "reliability" from the state of Alaska. "How do you know the economics for your project if you don't know what you're going to pay in taxes?" he said. Both the Denali and TransCanada proposals would seek a license from the Federal Regulatory Energy Commission in 2014 and then financing for the project assuming economic conditions have recovered by that time. [More here]

• Scientist: New Fault Could Mean Major Arkansas Temblor (1/21/2009) A recently discovered fault near Marianna in eastern Arkansas could trigger a magnitude 7 earthquake with an epicenter located near a major natural gas pipeline. According to Haydar Al-Shukri, director of the Arkansas Earthquake Center at the University of Arkansas at Little Rock, the fault is separate from the New Madrid fault responsible for several quakes in 1811-12 that caused the Mississippi River to flow backwards. The fault is thought to have formed in the last 5,000 years and already experienced at least one magnitude 7 earthquake. "This is a very, very dangerous (area) at risk of earthquake," Al-Shukri said. "When you talk about (magnitude) 7 and plus, this is going to be a major disaster." Al-Shurkri did not say when a quake may happen though he did predict it would affect Little Rock, Tennessee and Mississippi. Although he declined to name an owner of the pipeline, an Arkansas Public Service Commission map of the area indicates Arkla Energy Resources has a pipeline in the area. Rebecca Virden, spokeswoman for CenterPoint Energy Inc. which owns Arkla, said pipes are "all over the place... We, CenterPoint Energy, or someone else has a pipeline everywhere." Several quakes occur each year in Arkansas near the New Madrid Seismic Zone but so far none of the temblors have been connected with the Marianna fault according to Al-Shukri. [More here]

January 2009 Update

In the news...

• EnCana Offers Up to $500,000 for Info on B.C. Pipeline Bombings (1/14/2009) A week after the fourth attack on a pipeline near Dawson Creek, British Columbia, the Royal Canadian Mounted Police (RCMP) have identified "persons of interest". RCMP Sgt. Tim Shields said although those people are not co-operating with the ongoing investigation, "We are asking that they do the right thing." The comments were made during a news conference at which EnCana Corp. - one of Canada's largest energy companies and operator of the bombed pipeline - offered a $500,000 reward for information leading to the arrest and prosecution of those responsible for the attacks. EnCana executive Mike Graham said the company is grateful no one has been seriously hurt up to now. "But if the attacks continue there is a serious risk of injuries or even death," Graham said. He went on to say, "After consulting with the RCMP and the Crown assigned to the prosecution, EnCana will determine the monetary value, if any, of the information provided to the investigation." [More here]

• Iroquois Announces 08/09 Expansion Phase 2 In-Service (1/14/2009) Iroquois Gas Transmission System, L.P. has constructed Phase 2 of its 08/09 Expansion Project - two new 10,300 horsepower (hp) compressor units at its Milford, CT compressor station. Phase 1, a 1.6-mile pipeline in Newtown, CT, was completed on November 14, 2008. After completing the third phase of the project, a second 10,300 hp compressor at their Brookfield, CT compressor station, Iroquois will be able to receive and additional 200 million cubic feet per day of natural gas at its interconnect with the Algonquin Pipeline in Brookfield, CT. [More here]

• Inter Pipeline Slashes 2009 Capital Spending (1/13/2009) After almost completing its Corridor pipeline expansion project, Inter Pipeline Fund is cutting its 2009 capital budget to C$209 million from C$628 million a year ago. The $1.8 billion Corridor expansion consists of an approximately 470-kilometer, 42-inch diluted bitumen pipeline and related facilities between the Muskeg River mine and Scotford up-grader in Canada's oilsands region near Edmonton, Alberta. When completed and in-service by 2010, the pipeline will boost bitumen capacity to 465,000 barrels per day from 300,000 bpd. The expansion project is a joint venture between Shell Canada (60 percent stakeholder), Chevron Canada and Marathon Oil Canada Corp. (each with 20 percent). After acquiring the Corridor system almost two years ago for C$760 million from Kinder Morgan, Inter Pipeline became the largest bitumen transporter in the Alberta oilsands region moving half of all production. [More here]

• Oil Market Manipulation Alleged (1/10/2009)........... . Several weeks after Flying J filed for Chapter 11 protection, a memo written by a union official at the company's Big West refinery located in Bakersfield, CA, has led to accusations that Shell Oil is trying to manipulate California's gasoline market. The memo states "the refinery is out of crude oil" and blames Shell for closing a pipeline that brings crude into the plant, thus depriving it of raw material. In 2004, Shell owned the refinery and threatened to close it, claiming it wasn't profitable. At the time California politicians suspected Shell was seeking to raise gas prices by reducing gasoline supplies and the company was pressured to sell the plant instead. Sen. Barbara Boxer has asked Attorney General Jerry Brown to investigate the memo's accusations. "The Big West Refinery supplies our state with 2 percent of its gasoline and 6 percent of its diesel fuel, and in these tough economic times, Californians can't afford high gas prices stemming from refinery closures," Boxer, D-Calif., wrote in a letter to Brown, who said he'd "take a hard look at the situation." Shell spokeswoman Alison Chassin responded that Flying J owes Shell "tens of millions" of dollars for crude already delivered to the plant and, although Shell is no longer shipping oil, other suppliers are free to use the pipeline. She also said the refinery has another pipeline not owned by Shell that supplies crude. [More here]

• TransCanada Completes $2-Billion Debt Issue (1/10/2009) Pipeline and power company TransCanada Corp. has completed a $2-billion debt financing. The offering done in the U.S. through TransCanada Pipelines Ltd., consisting of $1.25 billion in 30-year notes and $750 million in 10-year notes that will be used to partially fund capital projects and retire maturing debt. [More here]

• Alaskan Gas Pipeline Tops P&GJ's Pipeline Opportunities Conference (1/8/2009) The fifth annual Pipeline Opportunities Conference, slated for March 11, 2009 at the George R. Brown Convention Center in Houston, TX will highlight the most recent developments in the Alaskan natural gas pipeline project. Jeff Share editor of Pipeline & Gas Jouranal and conference chairman, said the conference provides a rare opportunity to bring together for the first time executives from TransCanada Pipelines and the Alaskan Natural Gas Development Authority (ANGDA) with officials from Gov, Sarah Palin's administration and the Office of Federal Coordinator - who are all involved in the project. “On one issue Gov. Palin and President-elect Obama agree: they want that pipeline built," Share said. "Alaska needs that revenue and the lower 48 needs that gas and the jobs it will create.” [More here]

• Pipeline Build-Out Helped State Avoid Economic Disaster in 2008, but Future Is Uncertain (1/7/2009) Wyoming managed to avoid economic disaster in 2008, in large part due to a six-year, $9 billion natural gas pipeline build-out. The state's natural gas production has grown from 4 billion cubic feet per day (cfd) in 2002 to 6.5 billion cfd this year, resulting in an increasing reliance on natural gas revenues. However, the future outlook is perplexing. "I've been through three downturns, but this has just been an unbelievably rapid change from $150 per barrel in July to $50 per barrel," said Don Likwartz, outgoing supervisor of the Wyoming Oil and Gas Conservation Commission. Spot price for Wyoming gas has proven to be just as volatile. Even though the Rockies Express substantially increased export capacity, natural gas production continues to outpace export capacity. When the Rockies Express was taken off-line last September for hydrostatic testing, 800 million cubic feet of daily capacity was lost, causing Wyoming's wholesale price to plunge to $1.78 per thousand feet while the price on the NYMEX was $8.39. Even though there are nine new pipeline projects planned to expand the regions natural gas export capacity, none are on schedule. If construction is not accelerated, Wyoming may face another regional price collapse in the 2009-2010 time frame....... [More here]

• Fourth Pipeline Blast - EnCana Targeted with Another Explosion Near Tomslake, B.C. (1/6/2009) The fourth in a series of bombings striking EnCana Corp.'s pipeline and facilities partially destroyed a metering shed at a wellhead near Tomslake in northeastern British Columbia. The most recent attack occurred 20 kilometers southeast of Dawson Creek and approximately 5 kilometers from the site of the third explosion in October. Royal Canadian Mounted Police (RCMP) Sgt. Tim Shields considers the latest attack directly linked to the previous ones. “The explosive sites have been successively closer and closer to nearby residents ... the previous explosion occurred about 800 meters away from the nearest house. This explosion took place 250 meters away from the nearest house ... This poses a very real risk to the public,” said Shields. No motive for the attacks has been determined. “We don’t know if this is some type of message that the suspect or suspects is trying to send to the public, but what it does solidify in the mind of our investigators is that we need help from the public. There must be someone out there who knows exactly who it is that’s setting off these explosions,” said Shields. EnCana community advisor, Brian Lieverse, said he had no idea why the company was being targeted. Although no sour gas leaks have resulted from the attacks Lieverse said there are safety protocols in place at all of EnCana's facilities in the event a leak does occur. [More here]

• Show Us Mackenzie Pipeline Decision in March: Agencies to Panel (1/5/2009) Two of the three agencies responsible for creating a panel to review the proposed Mackenzie Valley natural gas pipeline in the Northwest Territories have called on the panel to release a "decision document" by March 31, 2009. The report on potential impacts along the route of the proposed pipeline on people and the environment along its route was scheduled to be released in December 2009. However, a letter to panel chairman Robert Hornal from chairmen of the Mackenzie Valley Environmental Review Board and the Unuvialuit Game Council (Rick Edjericon and Frank Pokiak) demanded the Joint Review Panel release its decision on the pipeline by March with a final published report by the end of June 2009. After concluding public hearings in November 2007, the panel has been silent on the subject, only saying the report would be released sometime in 2009. A consortium of companies led by Imperial Oil wants to build a 1,200-kilometer natural gas pipeline through the Northwest Territories to the Alberta connecting to existing pipelines serving southern markets. [More here]

• Oil Company Flying J Files for Bankruptcy (12/22/2008) Pipeline operator, oil producer and refiner, Flying J, has filed for Chapter 11 bankruptcy protection. The privately held company cited weak oil prices and financial turmoil in the credit markets has the reason for the filing. "With this sudden and unanticipated inability to meet our liquidity needs, we regret that we had no other choice than a Chapter 11 filing to enable us to stabilize our financial base," J. Phillip Adams, president and chief executive, said in a statement. The company has around 200 oil and gas wells in the Rocky Mountain region, a 70,000-barrels-per-day refinery in Bakersfield, California, a 35,000-bpd refinery in Utah, a 700-mile refined products pipeline owned by its Longhorn Pipeline Holdings unit and 250 retail outlets. Last year the company had sales of more than $16 billion. The company does not expect to layoff any employees as a result of the bankruptcy filing. [More here]

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]