Where America’s Pipeline Industry Currently Stands

March 2017, Vol. 244, No. 3

Just about every year I have the pleasure of discussing the state of industry with the Houston Pipeliners Association. In case you’re interested, here’s what I said.

“With Donald Trump it’s anyone’s guess what can happen next. Barack Obama wasn’t popular with our industry though when he came in 2009 domestic crude production was just 5 MMbpd, we imported 10 MMbpd, and no exports were allowed. Now we produce 9 MMbpd, import 7 MMbpd and export over 600,000 bpd of crude. We’re also exporting natural gas which is a big boost to the industry, economy and environment.

New regulations and lags in permitting have led costs to spiral to where many projects are no longer economical. Unlike others, Obama never tried to ban fracking, but left it up to the states. The Clean Power Plan is unpopular to many, but should be great for natural gas.

Let’s look at the executive orders Trump has already signed to promote pipelines and create jobs:

  • A directive to expedite review and approval of Dakota Access. Oil should begin flowing in June.
  • Keystone XL: an invitation to TransCanada to resubmit an application for the presidential permit, which they did, and a directive to federal agencies to make a decision within 60 days.
  • A request to the secretary of Commerce to develop a plan to mandate the use of U.S. steel in all pipelines.

On Keystone, do producers still want it, or have current market conditions made it uneconomic? How hard will Justin Trudeau try to shut down the oil sands?

President Trump promised to review NAFTA which could affect Keystone because he’s suggested a border adjustment tax that could shut out exports from Canada, Mexico and the rest of the world by raising the cost of imported oil by 25%. Besides wanting materials to be U.S.-made, he’s suggested asking for some of the revenue. It’s 50-50 it gets built. But if approved, Keystone will kill off TransCanada’s Energy East proposal.

Mexico is a bright spot for natural gas but again we don’t know how this is going to be affected by the administration. Gas deliveries from the U.S. more than doubled the past two years, averaging over 4 Bcf/d from August through October. The pipeline gas and LNG shipments helped producers end a supply glut that had prices at their lowest level in two decades.

With the turnaround for Dakota Access and Keystone and an administration that likes fossil fuels, what is the opposition’s plan? Will they organize protests on a wider scale? They’ve moved into West Texas and into the East Coast, but can they sustain that over the next four years?

Yes they can. They may even be more determined in blocking new pipelines and will try to use every conceivable delaying tactic until developers quit in frustration or a new administration is voted in. This is not the time to relax because the battle isn’t over. They have the time, social media outlets and resources to do it.

Expect to see less restrictive regulations, but is this what we really want? Do we want to return to the ‘drill baby drill days’ when we produced so much oil that we had to beg OPEC to bail us out, and when low natural gas prices hardly made it affordable to produce? If anything we need even stricter regulations because there are still too many leaks and incidents. Many of you here work for companies that profit from those regulations.

Trump’s talked about oil pipelines, but has said nothing about gas pipelines, especially those needed to carry supplies from the Marcellus and Utica. It takes FERC an average of 429 days to review a project compared to 359 days three years ago. Norman Bay’s resignation after he was pushed out as chairman leaves FERC without a quorum, so it can’t act on pending projects.

Expect 17 greenfield natural gas pipeline projects to be completed and online in Pennsylvania, Virginia, West Virginia and Ohio over the next two years to help relieve bottlenecks coming out of the Appalachian Basin to the Northeast, Atlantic Coast and Canada. Some gas will move south to the Gulf Coast for LNG exports and to meet demand in Mexico. Add billions more for related construction projects including expansions and looping.

It’s up to everyone here to support the pipeline industry, whether or not you and your company are directly involved. Don’t expect someone else to do it for you.”

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