September Newsreel: Peak Oil’s Simmons Dies, Causes Of Enbridge MI Spill, AK Pipeline Could Cost $11B

September 2010 Vol. 237 No. 9

Peak Oil Theorist Matthew Simmons Dies At 67
Enbridge Oil Spill Caused By Tear In Pipeline
In-state Alaska Pipeline Could Cost Up To $11 Billion
Clifford Johnson Named President Of PRCI

EPA Considers Forcing Pipelines to Remove Remaining PCBs
Regency Energy Partners Acquiring Zephyr Gas Services
Special Permit Application Withdrawn For Keystone Gulf Coast Expansion
Florida Public Utilities Buys Natural Gas Assets Of Indiantown Gas
Corrpro Secures $5.3 Million Work Order for Pipeline Integrity Program
Report Finds Underground Utility Damages Decline Again

Peak Oil Theorist Matthew Simmons Dies At 67
Matthew Simmons, who shook the energy industry by arguing the world was rapidly approaching peak oil production capacity, died Aug. 8 at his home in North Haven, ME, according to the Ocean Energy Institute, a research group he founded. He was 67.

A former adviser to President George W. Bush, Simmons had a heart attack while in a hot tub, according to the Knox County Sheriff’s Office, Reuters News Service reported.

In his 2005 book “Twilight in the Desert,” Simmons claimed that Saudi Arabia’s oil reserves were nearing the highest levels of production they were capable of achieving, after which point the world’s yearly oil supply would begin to decline.

Simmons’ views on peak oil often raised eyebrows but he created an even bigger stir in an interview with Fortune magazine, predicting that BP would be driven bankrupt in “about a month” because of the cleanup costs from the Gulf of Mexico oil spill.

Shortly afterwards, Simmons & Co International (SCI), the Houston-based investment bank that Simmons founded in 1974, cut ties with Simmons, who was serving as chairman emeritus. Simmons said he would devote his time to The Ocean Energy Institute, a think tank and venture capital fund addressing the challenges of U.S. offshore renewable energy.

“Matt Simmons was an innovative thinker who pushed ideas that have the potential to yield a more environmentally and economically sustainable future for Maine and the world,” Maine Gov. John Baldacci said in a statement.

Enbridge Oil Spill Caused By Tear In Pipeline
Oil that fouled a Michigan river system spewed from a rip less than five feet long in an Enbridge pipeline, according to a company executive after crews extracted the ruptured piece.

The pipeline, part of Enbridge’s system that carries most of Canada’s crude oil exports into the United States, ruptured on July 26 near Marshall, MI and there is still no estimate when it might be restarted.

Looking at the length-wise tear does not provide enough information to determine what caused at least 800,000 gallons of heavy crude oil to spill into the Kalamazoo River system, Reuters quoted the president of Enbridge’s liquids pipelines division, Steve Wuori, telling reporters in a conference call to discuss the incident.

Under the watch of the National Transportation Safety Board, crews extracted a 50-foot section on Aug. 6 which was shipped to Washington for analysis. Authorities must approve Enbridge’s restart plan before it can resume shipping crude on the 190,000 bpd pipeline, called Line 6B.

The Environmental Protection Agency had enforcement officials at the excavation as they investigate whether Enbridge was negligent in the period leading up to the spill, EPA administrator Susan Hedman said.

The pipeline serves refineries in Michigan, Ohio, Pennsylvania and Ontario that produce more than 700,000 bpd. At least three plants have cut output and others have been forced to seek supplies on alternate pipelines. The spill represents one of the largest pipeline leaks in recent U.S. history.

In-state Alaska Pipeline Could Cost Up To $11 Billion
ANCHORAGAn intrastate natural gas pipeline from Alaska’s North Slope to the southern part of the state would cost $5.7-11.8 billion to build and would likely require state subsidies or at least partial state ownership, members of a task force told state legislators on Aug. 9.

According to Reuters, the “Alaska Stand Alone Pipeline Project” would include a 737-mile, 24-inch pipeline delivering up to 500 MMcf/d from Prudhoe Bay to the Anchorage region. The in-state project was sought as a backup to the huge export pipeline that would deliver 4.5 Bcf/d from Prudhoe Bay on the North Slope to major North American markets.

Alaska’s population centers will likely need new natural gas supplies before the 2020 startup date anticipated if the interstate pipeline is built, said Dan Fauske, chairman of the team studying in-state pipeline options.

Clifford Johnson Named President Of PRCI
The Board of Directors of Pipeline Research Council International, Inc., (PRCI), has selected Clifford M. Johnson to be its next president, succeeding George W. Tenley, Jr., who is retiring at the end of the year. Johnson comes to PRCI from NACE International where he held numerous positions during his 13-year career. His most recent position was as NACE’s Director of Public Affairs where he led several of NACE’s legislative initiatives.

PRCI Board Chairman, Paul MacGregor stated: “With this appointment we believe strongly that we are providing PRCI with the leadership it will need as it looks to sustain its success and enhance its service to the energy pipeline industry. During his career at NACE, Cliff demonstrated a strong ability, and justified reputation, in building diverse and valuable relationships with key stakeholders within and outside the industry, including government agencies.”

Johnson earned his master of public affairs degree from the Lyndon Baines Johnson School of Public Affairs at the University of Texas at Austin, and a bachelor of arts in political science from Austin College in Sherman, TX. He lives in Houston with his wife and two children.

EPA Considers Forcing Pipelines to Remove Remaining PCBs
The Environmental Protection Agency may require interstate and distribution pipelines to remove all polychlorinated biphenyls (PCBs) from their pipelines by 2020. The EPA is in the very early stages of making a determination whether that is necessary, based on any public health or environmental threat that residual amounts of PCBs pose by remaining in pipelines.

PCBs were used as a fire retardant in the lubricating oil used in some pipeline compressor engines and turbines. Lubricating oils containing PCBs sometimes leaked from the compressors and could be carried downstream into natural gas distribution systems by small amounts of oily liquid hydrocarbons entrained in the natural gas.

EPA prohibited the use of PCBs at concentrations greater than 50 ppm in natural gas pipeline systems effective May 1, 1980. After nearly 30 years of operations and after all known sources of PCBs were removed from these systems, EPA says it has information indicating that PCBs at levels greater than 50 ppm continue to be found in natural gas pipeline systems including within equipment which is not specifically designed to collect such material.

The EPA is considering whether to require gas utilities to notify EPA “when PCBs are found in any pipeline system, regardless of the source of the PCBs or the owner of the pipeline.” Second, the agency is considering the elimination of all PCBs at greater than or equal to 50 parts per million (ppm) in all distribution or pipeline systems.

Lisa Beal, director, environment and construction policy, INGAA, says, “It is impossible for me to say definitively how much PCB remains in the system, but we can say that since the ban no new PCBs have been introduced into the system and when found, they are removed. Hence the overall mass of PCB is constantly decreasing.”

Pamela A. Lacey, senior managing counsel, environment, American Gas Association, states that if the EPA insists on eliminating all PCBs by 2020, companies would have to remove and replace millions of miles of distribution pipes at astronomical cost and disrupting service to millions of homes and businesses. –Stephen Barlas

Regency Energy Partners Acquiring Zephyr Gas Services
Dallas-based Regency Energy Partners LP will acquire Zephyr Gas Services, a field services company based in Houston, for $185 million. Zephyr’s assets closely align with Regency’s gathering and processing and compression segments as both are strategically located in high-growth areas, including the Haynesville and Eagle Ford shales.

In addition to treating, Zephyr provides a full range of field services, including gas cooling, dehydration, JT plant leasing and sulfur treating services. Regency expects to integrate Zephyr’s current management into the existing reporting structure of its contract compression segment.

Special Permit Application Withdrawn For Keystone Gulf Coast Expansion
TransCanada has withdrawn its request to the Pipeline and Hazardous Materials Safety Administration (PHMSA) for a special permit that would have allowed it to operate the proposed Keystone XL pipeline at a slightly higher pressure than federal regulations for oil pipelines in the United States, subject to building the pipeline using stronger steel and additional safety conditions.

After listening to concerns from the public and various political leaders, TransCanada made the decision to withdraw the permit application. The company will build Keystone XL using the as-proposed stronger steel but will operate it at a lower level of pressure, consistent with current U.S. regulations.

The Keystone XL project received approval in March 2010 from both the South Dakota Public Utility Commission and the National Energy Board in Canada. Pending receipt of additional permits, construction is planned to begin in 2011. When completed, the project will increase commercial capacity of the overall Keystone Pipeline System from 590,000 bpd to 1.1 million bpd. The $12 billion system is 83% subscribed with long-term, binding contracts that include commitments of 910,000 bpd for an average term of 18 years.

Commercial operations of the first phase of the Keystone system began June 30. Construction of the extension from Steele City, NE to Cushing, OK is one-third complete and the pipeline is expected to be operational in 2011.

Keystone XL is a planned 1,959-mile (3,134-km), 36-inch crude oil pipeline stretching from Hardisty, Alberta and moving southeast through Saskatchewan, Montana, South Dakota and Nebraska. It will connect with a portion of the Keystone Pipeline that will be built through Kansas to Cushing and facilitate take away capacity from U.S. hubs located on the pipeline. The pipeline will then continue on through Oklahoma to a delivery point near existing terminals in Nederland, TX to serve the Port Arthur, TX marketplace. To view a map of the proposed pipeline route, visit www.transcanada.com/keystone

Florida Public Utilities Buys Natural Gas Assets Of Indiantown Gas
Florida Public Utilities Company (FPU), a subsidiary of Chesapeake Utilities Corp., bought the natural gas operating assets of Indiantown Gas Company (Indiantown Gas or IGC), a natural gas distribution and transportation company headquartered in Indiantown, FL.

Indiantown Gas was founded in 1960 to bring natural gas and propane service to the Indiantown area and provides service to 700 customers, including two large industrial customers. Since its inception, Indiantown Gas has been locally owned and operated by the Powers family. In conjunction with their decision to focus on the propane business, the owners decided to sell the assets of the natural gas business to FPU. Headquartered in West Palm Beach, FPU distributes natural gas, propane and electric services to 100,000 customers.

Corrpro Secures $5.3 Million Work Order for Pipeline Integrity Program
Insituform Technologies, Inc. said its subsidiary, Corrpro Canada, Inc. received work orders with a combined value of $5.3 million (US) from TransCanada Corp. as part of its three-year term contract for cathodic protection. Corrpro will supply and install cathodic protection systems for existing TransCanada pipelines across Canada. The majority of the materials will be manufactured in Corrpro’s production facility located in Edmonton.

Report Finds Underground Utility Damages Decline Again
The Common Ground Alliance (CGA) reported underground utility damages in the U.S. decreased to an estimated 170,000 in 2009, down 15% from 2008, and down 58% from 2004.

Of the total number of damages reported in 2009, nearly 60% had a known root cause, and the top causes were identified as follows:

1. Excavation practices not sufficient: Root cause for 38% of reported damages
For these damages, excavators notified the one call center to have underground utilities marked, but damage still occurred due to the lack of careful excavation practices around the marks.   

2. One call center notification not made: Root cause for 34% of reported damages
The first step in the damage prevention process, excavators must contact their local one call center by calling 811 a few days before digging. These damages were caused due to the failure of the excavator to contact the one call center. 

3. Locating practices not sufficient: Root cause for 24% of reported damages
These damages were caused when excavators, who had contacted their local one call center before digging, struck an underground line (or lines) that the facility operator did not properly or accurately mark.

CGA analyzed the right-of-way type affected in the reported damages and found 49% occurred under public streets, with an additional 24% occurring under privately owned land. The remaining events took place under dedicated public utility easements (10%) and private easements (4%). “Other right of way type” comprised the remaining 13% of incidents.

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