Editor’s Notebook: The Silver Lining – Pipelines Work

March 2015, Vol. 242, No. 3

Jeff Share, Editor

You already know that Houston is the energy capital of the nation, most likely the world. But did you know that Houston is also the violent bank robbery capital of the nation with no close second?

I was just back from an energizing workout with my personal trainer at the nearby Memorial Athletic Club and was actually stress-free as I sat down to write this column. Suddenly shouts broke the serenity of our Oildom offices when staffers rushed to the windows overlooking our driveway and parking lot as police cars were already blocking exits and entrances to the property; officers armed with shotguns, the K9 units and a helicopter overhead searched for the two men who robbed the downstairs Wells Fargo bank.

Just another day in the life of the big city, you might say, but these brazen holdups seem to occur almost daily. On Feb. 12 a Brinks agent was shot to death in an armored car holdup at a bank near the heavily traveled Galleria district. They got away just like the Wells Fargo robbers did. That’s the problem in a city where cars rule. In most other cities they can’t easily park their cars for a quick getaway.

Now back to the safe and friendly world of pipelines, excluding for the moment, Keystone XL. The dramatic free-fall of oil prices has been dominating business news for several months. It is unnerving for those of us in the industry, especially as we watch the unemployment numbers spiraling upward. That’s one thing about our industry: when times get tough, they sure know how to cut lots of people and fast. It’s a shortsighted approach, but that’s how they’ve always done business.

Even though many are asking how the price decline will affect pipelines, as FDR once said, “The only thing we have to fear is fear itself.” Pipeline activity has been intense for the past five years, thanks largely to shale activities and regulations. But if production slows down, as eventually will happen, what can we expect on our side of the business?

I wouldn’t worry too much about it. The producers, particularly independents, are the ones feeling the pinch along with their related service companies. That’s what happens during periods of volatility. When and how strong production will come back is anyone’s guess because so many outside factors are involved: OPEC, economic slowdowns in China and in Europe; Iraqi and Libyan production; the declining North Sea; new regulations and EPA Clean Air mandates, etc.

Prices don’t affect pipelines because they are paid the same on a tariff basis no matter what oil, refined products or natural gas sell for. Or course the Obama administration wants us to believe that it loves natural gas which has become an integral part of its energy program. Natural gas is produced, processed and delivered to the customer very quickly. Look what’s happened this winter as blistering cold temperatures have again turned up thermostats throughout most of the nation, yet the price of natural gas has remained low and the supply reliable. Pipelines work!

If anything, most experts agree that we will need plenty more natural gas infrastructure to serve the growing number of households, power plants and industries that will rely on it. New England is in desperate need of more gas pipelines. New and reversed-flow pipelines will be required to take gas from the Marcellus and Utica shales to south and southeast export terminals.

Keep in mind that many of our pipelines are aged and need replacing. The industry is, as it should be, heavily regulated which means that pipeline integrity means just what it says: doing whatever it takes and spending whatever is required to ensure that your pipelines are operating safely and efficiently.

These inspection and maintenance programs will only get stricter in the future, which means that operators and service companies must continue to work in close alliance to protect these valuable assets. That’s good business. No one can afford bad business. Just ask the folks at PG&E or UGI.

Oil pipelines will rebound as producers realize that they are much safer and dependable than rail. Slowing oil production might provide the impetus for long-term planning at which time new pipeline development will again prove the best way to get those products to market.

So, keep an open mind when you read the business pages. Realize that pipelines are here to stay; that we’ll have more of them and that they’ll need to be constantly maintained and inspected.

Things could be a lot worse. You could be a bank manager in Houston.

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