From a little boy peppered with Band-Aids, the result of weekend mishaps from driving go-carts he’d build in the family’s garage, Larry Alexander went on to use his tenacity for design to build two highly successful companies.
Alexander, president of Crimson Pipeline and Crimson Gulf LLC, launched his pipeline career at Shell Oil Co. and was chosen to lead Crimson Pipeline when Shell farmed out their Southern California crude oil pipeline system.
Crimson Pipeline, based in Southern California, was created in 2005 after the acquisition of Shell’s Southern California assets and operates around 700 miles of pipelines in the area. Crimson Pipeline’s sister company, Crimson Gulf LLC, based in Louisiana, was formed in 2012 and operates about 500 miles of pipelines in the Gulf of Mexico.
In an interview with Pipeline & Gas Journal, Alexander discusses his strategies for Crimson’s growth, challenges the company is facing in the midstream industry and lessons learned from an oil spill back in 2010.
P&GJ: What motivated you to work in the energy industry?
Alexander: Upon graduation from Louisiana State University, the energy industry was offering the most interesting (and best-paying!) jobs for engineering graduates. The oil industry seemed to have many exciting things going on and many opportunities for an engineer to make a difference.
P&GJ: Where are you from, what were some of your interests as a young man, and what was the career path that led to this position?
Alexander: I grew up in Houston, and my father was an engineer who taught me to enjoy tinkering with mechanical items and working with my hands. I was always good at taking things apart but not so good at always getting them put back together. I built many homemade go-carts using various lawnmower engines and parts. I would drive the go-cart on Saturday, wreck it or break something on it (or apply some Band-Aids to myself), and then spend the next week or so fixing it so I could repeat the process.
I started my career as an engineer in the pipeline construction department at Shell Oil Co. in Houston. I quickly learned that my engineering degree did not teach me everything I needed to know and I learned the importance of seeking the insights of the many experienced people at all levels of the business. I was fortunate to gain experience in many different areas at Shell including project management, operations engineering, research and development, project coordination, joint ventures, environmental management, engineering management, and business development. I worked for Shell in Houston, Midland, TX, and in Southern California. I am grateful for my time at Shell that provided many career-broadening opportunities and the chance to work with outstanding people who taught me so much.
P&GJ: What is the history of Crimson Pipeline; what was the reason for starting Crimson Gulf in 2012, and how do the two complement each other?
Alexander: Crimson Pipeline was formed in 2005 at the time Shell sold its Southern California crude oil pipeline system. The timing was right for the firm to purchase the pipeline system and fortunately it had been well-maintained, and there were very few operational problems, which provided Crimson a solid foundation. Crimson hired experienced pipeline professionals and operations personnel who were attracted to the atmosphere of a smaller company focused on one thing – shipping crude oil safely and effectively.
After the initial acquisition, Crimson continued acquiring Southern California crude oil pipeline systems. With these acquisitions, Crimson’s system has become an integral part of Southern California’s pipeline network and now touches nearly every locally produced barrel of crude oil in Los Angeles, Ventura and Orange counties.
Crimson Gulf LLC was formed in 2012 with the acquisition of approximately 500 miles of crude oil pipelines and joint-interest ownership in the Gulf of Mexico. Our Louisiana network is comprised of five pipeline systems connected to more than 75 offshore oil platforms located on the outer continental shelf in the Gulf. We sought out and hired experts in Gulf of Mexico pipeline operations to ensure we could continue our company’s practice of consistently meeting or exceeding all local, state and federal regulations.
Although these pipeline systems are located several states away and in a very different physical environment, there are remarkable similarities with the pipeline systems we operate in California. Like our California network, we utilize top technology and as much automation and control as possible.
P&GJ: Is it challenging to operate in Southern California, a state that has typically not been as friendly to the industry as other states? What made the company decide to operate there?
Alexander: A former boss of mine once said, “California is not different from the other states, it is just first.” His point was that the stricter regulatory climate we see in California often serves as the basis for other state and federal regulations. It is no secret that California’s regulatory landscape, especially as it pertains to pipelines, can be tough, but these challenges provide many opportunities for Crimson to get out ahead of the competition and ensure our network is operating under the highest safety standards. The strict regulations fall in line with our business model as Crimson is committed to continually working to improve operations and keep pipelines safe.
P&GJ: Last year Crimson settled its case with the state in connection with a 2010 leak from one of your inherited pipelines. What did you learn from this incident? With the company emphasizing safety and regulatory compliance as core values, what initiatives are you taking to improve these two factors? What advanced technologies and protocols are you using to drive pipeline safety operations?
Alexander: The incident only added to Crimson’s resolve to operate our pipelines safely and maintain the highest regulatory standards. While we maintain that the release was small and caused from third-party damage, we treat any incident as an opportunity to learn and we have taken additional steps to ensure we are operating and maintaining our pipelines at the highest levels of safety. Further, we learned that solid relationships with local regulators and public officials are equally important as operational and safety initiatives in order to facilitate open and productive dialogue.
As our company continues to grow, we recognize that the way in which we conduct business will need to shift in some ways to reflect our increased role and responsibilities to our customers and the communities in which we operate. To help raise awareness about pipeline safety, we are adding significant resources into strengthening our relationships in the communities where we operate. That includes meetings with local officials and regulators, membership in local Chambers of Commerce, improved information and educational resources being made available on our website, and outreach and education efforts about the importance of calling 811 before digging and general pipeline information.
While public awareness is very important, safety and regulatory compliance are the driving forces behind Crimson’s operations and day-to-day business. As such, the company consistently meets or exceeds all local, state and federal regulations.
P&GJ: With the company emphasizing safety and regulatory compliance as core values. What initiatives are you taking to improve these two factors? What advanced technologies and protocols are you using to drive pipeline safety operations?
Alexander: Crimson’s top priority is the safety of the public and employees, the environment, and property. As such, we use state-of-the-art technology to ensure our systems are operating safely and efficiently. We believe in implementing a robust integrity management plan for all of our pipelines to ensure safe and reliable operation. Safety and regulatory compliance are the driving forces behind Crimson’s operations and day-to-day business.
Our surveillance system includes up to two forms of leak detection for all of our pipelines, our 24-hour control center evaluates each pipeline’s operating conditions using trending, while also monitoring the pressure and flow of the pipelines to make sure any irregularity is swiftly addressed.
We have always employed state-of-the-art technology and operations, including the use of smart pigs, but we’ve increased the frequency of testing on certain pipelines and now go above and beyond what is required by law. Crimson prides itself in being proactive, flexible and nimble in our operations, allowing us to be responsive to events, customers, the market and the industry.
P&GJ: Of the 700 miles of pipeline systems in California, how frequently are they pigged or inspected, and what is the approximate age of most of those 19 systems?
Alexander: As Crimson’s pipeline network is comprised of legacy pipelines from various oil companies, the age of the pipeline network varies. When properly maintained a pipeline can be in as good a condition today as it was when it was originally installed, regardless of age. Crimson is dedicated to maintaining our network’s integrity and works hard to ensure that our pipelines are inspected even more frequently than what is required by law.
The active pipeline systems in California are all on a five-year or shorter inspection cycle to perform either hydrotest or smart pig inspections. We have made significant investments into modification of many pipeline systems to allow smart pig inspections.
P&GJ: In keeping with that last question, which of the 19 pipeline systems serve the most customers, and are any of the pipelines located in areas where maintenance is challenging?
Alexander: Our two pipelines that run from the Ventura area to Los Angeles serve the most customers and are connected to nearly every refinery in Los Angeles. These pipelines transport virtually all of the crude oil production in Ventura County, much of the offshore Santa Barbara crude oil production, and the urban crude oil production in west Los Angeles.
Being located in Southern California means these pipelines traverse rural areas, mountainous areas and highly congested urban areas. Our staff of experts have performed maintenance activities in every one of these areas, and this work requires careful planning and consideration of the unique challenges in every location. We work hard to ensure the residents in any neighborhood or area that we’re working so they are informed of our activities in advance and have information about what will be going on and who to contact if they have any questions.
P&GJ: Regarding Crimson Gulf, what is the approximate age of your five pipeline systems and how often are they inspected?
Alexander: The various offshore crude oil pipeline systems we acquired in 2012 include some systems that were constructed in the 1960s and the 1970s, as well as some much newer systems. Like our California system, these pipelines are routinely inspected and continuously monitored with top of the line technology. Some of these systems were not constructed with smart pigging in mind, so in order to ensure the integrity and safety of each pipeline we are engaged in a study to analyze and determine the most appropriate inspection and testing methods.
P&GJ: Is part of Crimson’s strategy to grow through acquisition? Are there any projects underway in either California or the Gulf? Where will you be looking to expand in the future?
Alexander: Crimson’s basic strategy is to grow by acquiring marginal assets from major pipeline companies, then making efficiency improvements to these pipelines and capitalizing on overlooked revenue and business enhancements on those assets. We consider ourselves a “merchant pipeline company” without any related oil trading functions. The strategic vision is to expand the marketplace by creating new interconnections and creating an effective network that gives customers new options.
We now have a private equity partner and do not feel constrained on the size of any possible acquisition. Crimson is privately held but if and when we grow to a sufficient size, we may consider forming an MLP. However, that decision will involve a number of factors in determining what makes sense for the company long term.
We are evaluating a few acquisition opportunities in California and Louisiana, which would be strategic and synergistic with our existing footprint. We have evaluated and bid on other acquisitions in other parts of the U.S., and we will evaluate all future opportunities that we feel will be a good fit for us.
P&GJ: What are the biggest challenges and opportunities facing midstream companies today in the U.S.?
Alexander: Recently, a number of high-profile oil spills have garnered a lot of media attention – it is events like these that will remain a challenge for midstream companies and the oil industry as a whole. When the images and impact of the spills are shown far and wide, it makes it more difficult to get the message out that pipelines are in fact the safest and most efficient way to transport oil. Our nation relies on pipelines to deliver the crude oil that supports our daily lives. Therefore, it is important that our industry continues to work together to lessen the number of incidents and improve safety measures across the board.
P&GJ: How would you describe your leadership style, and how has it evolved through the years?
Alexander: I consider myself to be details-oriented but also creative in my thinking. I like to encourage a collaborative style of management, but ultimately it is my responsibility to make the final decision for Crimson. It is important to give people the space to do their work, but equally important to hold high expectations and standards – in the end our company is better when we all strive to do our best.
At Crimson, I am part of a leadership team with extensive experience. This collective experience allows Crimson to operate with the highest standards and principles. Our leadership team works together to ensure we maintain a company culture that emphasizes the importance of operating with integrity, providing connectivity and ensuring reliability, ultimately serving our customers while protecting people and the environment.
By Kate Permenter, Pipeline News Editor