April 2017, Vol. 244, No. 4

In The News

In the News

Enbridge at 66,000 Miles of Pipelines with Addition of Spectra

Oil and natural gas pipeline giant Enbridge is now the dominant energy transportation and storage company in North America after finalizing its buyout of Spectra Energy Partners on Feb. 27. The Calgary-based company bought Spectra in a deal valued at $28 billion. Before the buyout, Enbridge had 17,500 miles of liquids pipelines and 34,000 miles of natural gas pipelines. By acquiring Spectra, Enbridge added 15,000 miles of pipeline infrastructure. With an enterprise value of $166 billion CAD ($126 billion US), the combined entity is now the largest energy infrastructure company in North America.

Enbridge had to meet terms tied to offshore pipeline holdings to satisfy the U.S. Federal Trade Commission. Regulators feared reduced competition for energy transport from three major gas-producing areas in the Gulf of Mexico. The rise of onshore shale gas has reduced the Gulf’s importance to the North American gas market and its impact on natural gas prices. With the acquisition of Spectra, Enbridge has acquired significant pipeline capacity in the Marcellus Shale, the dominant gas play in North America and one that’s poised to become even larger. The merger will also result in an unspecified number of layoffs as part of the $540 million in expected savings.

ExxonMobil to Spend $20 Billion Expanding Manufacturing in U.S. Gulf Region

ExxonMobil is expanding its manufacturing capacity along the U.S. Gulf Coast through planned investments of $20 billion over a 10-year period to take advantage of the American energy revolution, Darren Woods, chairman and CEO, said last month at CERAWeek. The projects are expected to generate thousands of new high-paying jobs in Texas and Louisiana, Woods said.

“The United States is a leading producer of oil and natural gas, which is incentivizing U.S. manufacturing to invest and grow,” said Woods. “We are using new, abundant domestic energy supplies to provide products to the world at a competitive advantage resulting from lower costs and abundant raw materials. In this way, an upstream technology breakthrough has led to a downstream manufacturing renaissance.”

ExxonMobil is strategically investing in new refining and chemical-manufacturing projects in the U.S. Gulf Coast region to expand its manufacturing and export capacity. The Growing the Gulf expansion program consists of 11 major chemical, refining, lubricant and LNG projects at proposed new and existing facilities along the Texas and Louisiana coasts. Investments began in 2013 and are expected to continue through at least 2022.

“All told, we expect these 11 projects to create over 45,000 jobs. Many of these are high-skilled, high-paying jobs averaging about $100,000 a year. And these jobs will have a multiplier effect, creating many more jobs in the communities that service these new investments,” Woods said.

“These projects are export machines, generating products that high-growth nations need to support larger populations with higher standards of living. Those overseas markets are the motivation behind our investments. The supply is here; the demand is there,” he said.

White House: Keystone Exempt From ‘Buy American’ Requirement

The proposed Keystone XL Pipeline will not be subject to President Trump’s executive order requiring infrastructure projects to be built with American steel, a White House spokeswoman said March 3. Shortly after his inauguration Trump signed the order calling for the Commerce Department to develop a plan for U.S. steel to be used in “all new pipelines, as well as retrofitted, repaired or expanded pipelines” inside the U.S. projects “to the maximum extent possible.”

By the White House’s judgment, that description would not include Keystone XL, which developer TransCanada first proposed in 2008.

“The Keystone XL Pipeline is currently in the process of being constructed, so it does not count as a new, retrofitted, repaired or expanded pipeline,” the White House spokeswoman said. That interpretation removes one potential hurdle for Keystone and it clarifies shifting rhetoric from Trump on the order. Eliminating the condition could help persuade TransCanada to fully drop the $15 billion NAFTA complaint against the U.S., which it suspended earlier this week.

Police Kill man Reportedly Seen Shooting at Gas Pipeline

Police in Citrus County, FL said Feb. 26 that a man reportedly seen shooting at a natural gas pipeline was shot by officers after a vehicle chase. Citrus County Sheriff Mike Prendergast said the chase began in Marion County and ended with a “crash” near Floral City in Citrus County.

“This is where the suspect engaged the deputies and was subsequently shot and killed. We know the suspect was armed and extremely dangerous, and pending the examination of the evidence at the scene, we will be able to determine what other weapons he had in his possession at the time of the shooting,” Prendergast said. The initial call to police came into Marion County where witnesses said a man was shooting at the Sabal Pipeline natural gas pipeline and associated equipment, with what they believed to be a “high power rifle.”

Kinder Morgan Selling 49% Stake in Elba Island Project

Kinder Morgan will sell a 49% stake in its LNG export project in Georgia for $555 million to the EIG Global Energy Partners private-equity firm. Kinder Morgan began construction on the $2 billion Elba Island project in November. CEO Steve Kean had indicated he was seeking a financial partner to help bear the cost burden. Shell originally owned a 49% share but pulled out in 2015. Shell is still helping fund the project through a 20-year contract to buy all of the plant’s output. Elba Island, which is near Savannah, GA, is the smallest of six U.S. LNG export projects under construction and expansion of an import facility built in the 1970s. The project is scheduled to begin exports in late 2018 with full operations in early 2019.

Howard Midstream Expanding Port Arthur Terminal Facilities

Howard Midstream Energy Partners, LLC has a long-term terminal services agreement with a third-party shipper and plans to significantly expand its bulk liquids terminal facility in Port Arthur, TX. HEP will construct or install more than 15 tanks, adding over 1 million barrels of storage for a variety of products, and construct new marine facilities for both blue water and inland marine vessels. The company plans to construct a pipeline system to transport products between its Port Arthur facilities and other third-party supply points.

“Our proximity to over 1.4 million barrels of local refining capacity and significant refined product pipeline infrastructure, such as Explorer Pipeline and Colonial Pipeline, make this terminal a logical clearinghouse for refined products.”

Permitting for development of the Port Arthur Terminal began early last year; final engineering of the facilities and pipelines is underway and construction will begin shortly. The facility will take 18 months to construct with operations expected to begin in 2018. If warranted, the terminal can be expanded to include up to 24 million barrels of storage.

Delta Natural Gas Being Acquired by Peoples Gas

Delta Natural Gas has entered into a definitive agreement to merge with an affiliate of Peoples Natural Gas (Peoples). Delta is headquartered in Winchester, KY and has 36,000 customers in central and southeastern Kentucky. Peoples, headquartered in Pittsburgh, PA, serves 700,000 customers in Pennsylvania, West Virginia and Kentucky. It is controlled by SteelRiver Infrastructure Fund North America LP.

Peoples plans to increase Delta’s investments in infrastructure improvement projects and grow the Delta business over time. Delta’s customers’ rates will not be affected by the transaction. In the last five years, PNG Companies purchased the T.W. Phillips Gas & Oil Company and Equitable Gas to become the largest gas distribution company in Pennsylvania. These purchases also provided Peoples with service territories in West Virginia and Kentucky.

“Peoples started serving customers in 10 eastern Kentucky counties in late 2013,” said Morgan O’Brien, president and CEO of Peoples. “Kentucky is a good place to do business and there are strong growth opportunities in this region. We have committed to increasing investments in infrastructure modernization. We will implement Peoples’ state of the art technology solutions for the customers of Delta and support community based organizations and initiatives throughout central and eastern Kentucky.”

PGW Seeks 11.3% Rate Hike, Citing Warming Weather Patterns Share

Philadelphia Gas Works asked the Pennsylvania Public Utility Commission for a $70 million rate increase that would raise monthly residential bills by $10.59, or 11.3%, according to phillynews.com. In its first request for a rate hike since 2009, the city-owned utility said sales are falling because of warmer weather and more efficient energy use. The utility cited higher costs for employee health care, equipment and regulatory compliance.

PGW has changed its forecasting method to a 10-year average from 30 years it had used to calculate projected need for heat. With warming trends, the 30-year projection is increasingly inaccurate, leading the utility to boost customer bills through its “weather normalization adjustment,” an official said, adding, “A 10-year average is more reflective of what we see in warming weather trends. That projection is more accurate, and indicated that projected customer demand will be lower.”

Montana Legislator Seeks to Restrict Pipelines Crossing Under Water

Montana legislators are mulling a bill that would ban fossil fuel pipelines with a diameter of 10 inches or greater from going under navigable water bodies. It would establish construction requirements for them to cross aboveground, including rules on casings and leak detection. The new rules would apply to fossil fuels such as crude petroleum, coal and their products.

The bill’s introduction comes after several major spills into Montana rivers over the last decade and as the nation debates the best methods for transporting crude oil, what level of risk to water sources is acceptable, and how far tribal sovereignty extends when projects cross aboriginal lands that are no longer tribe-owned, as was the case outside Standing Rock.

The current industry standard for crossing streams, rivers and lakes is to use horizontal drilling to dig tunnels underneath them. Federal rules require pipelines to be at least four feet deeper than water bodies, but opponents of the bill said most are now dug 20-60 feet deep, depending on geographic features. Rep. George Kipp III introduced the bill and said it is as much about protecting underground aquifers from contamination as it is about rivers and streams. “The further you get from the surface, the closer you get to the (aquifers). It’s not reasonable or rational to go between two fresh water sources with a major contaminant.”

WhiteWater Midstream Announces Delaware Basin Natural Gas Pipeline

WhiteWater Midstream has begun construction of the Agua Blanca Pipeline, a Delaware Basin intrastate natural gas pipeline. The initial path will be from Orla, TX to the Waha Hub, servicing portions of Culberson, Loving, Pecos, Reeves and Ward counties. Agua Blanca will have multiple direct downstream connections including to the Trans-Pecos Header.

“Agua Blanca will provide producers and processors with a much needed outlet for the rapidly growing natural gas volumes in the Delaware Basin. Our customers will have a direct path to multiple delivery points including the attractive, growing Mexican power market”

Agua Blanca will initially consist of 75 miles of 36-inch pipe with a capacity of 1.25 Bcf/d, expandable to 1.75 Bcf/d. The project is supported by over 500 MMcf/d of long-term commitments. WhiteWater expects to accept first volumes by the fourth quarter. “Agua Blanca will provide producers and processors with an outlet for the rapidly growing natural gas volumes in the Delaware Basin. Our customers will have a direct path to multiple delivery points including the growing Mexican power market,” said WhiteWater CEO Christer Rundlof.

Enterprise Extends Gas Processing Agreement in Wyoming

Enterprise Products Partners L.P. renegotiated and extended an agreement with Ultra Petroleum Corp. to process natural gas from Ultra’s production in the Pinedale Field in southwestern Wyoming. The deal secures a 20-year supply of gas for Enterprise’s Pioneer cryogenic processing plant in Sublette County, WY which has total capacity of 750 MMcf/d and can extract up to 36,000 bpd of natural gas liquids (NGL). The Pioneer complex includes a silica gel unit that can process 600 MMcf/d of natural gas and extract up to 1,800 bpd of NGLs, sold as a condensate in the local market. Enterprise’s Mid-America Pipeline provides takeaway capacity for the NGLs extracted and offers access to markets along the Gulf Coast.

Chesapeake Utilities Starts Natural Gas Service IN Ocean City, MD

Chesapeake Utilities Corp. said Sandpiper Energy, a wholly owned subsidiary, is delivering natural gas to Ocean City, MD. The company expects to make over 250 conversions to natural gas for residents and business owners by June 1 before the start of the tourism season. The conversions are part of the company’s ongoing initiative to increase energy options for residents.

Sandpiper has converted over 4,000 homes and businesses in Worcester County since the project began in 2013. With over 3,500 accounts in Ocean City to convert and taking into consideration the tourism season, the process will take several years to complete.