October 2010 Vol. 237 No. 10


Approvals For TransCanada Tar Sand Pipeline Gets Sticky; Plus PMHSA Low-Stress Tug-Of-War And FERC Posting Edict

Despite criticism of his company’s proposed nearly 2,000-mile pipeline through six states, Robert Jones, vice president, Keystone Pipelines, TransCanada Corporation, is very confident the U.S. State Department will approve construction of the Keystone XL pipeline which would take tar sand from Hardisty, Alberta through six states, picking up conventional oil along the way, and depositing the tar and oil at Gulf Coast refineries. The Environmental Protection Agency (EPA) and Rep. Henry Waxman (D-CA), influential chairman of the House Energy & Commerce Committee, have raised questions about the pipeline.

In response partly to those concerns and others by landowners, TransCanada withdrew in August an application it had submitted to Pipeline Hazardous Materials and Safety Administration (PHMSA) asking to operate XL at a higher operating pressure. That decision came after House and Senate members questioned TransCanada’s plans to use thinner steel in the pipeline if the application to operate at 80% of maximum pressure instead of 72% granted by PHMSA. Jones explains TransCanada pulled the application because it was not doing a good enough job communicating that the permit would have resulted in a safer pipeline.

The withdrawal of the “special permit” application came weeks after the EPA said a State Department draft environmental impact statement (EIS) was “inadequate.” Among concerns is potential for harm to the Ogallala Aquifer, which provides drinking water for almost 80% of Nebraskans. Waxman’s objections related to greenhouse gas emissions. In a letter to Secretary of State Hillary Clinton, Waxman said, “Extracting tar sands bitumen and upgrading it to synthetic crude oil produces roughly three times greater greenhouse gas emissions than producing conventional oil on a per unit basis. Tar sands development also has devastating effects on boreal forests and wetlands, wildlife habitat, migratory bird species, water quality, and air quality. Yet the draft EIS for the Keystone XL decision fails to consider the primary environmental concern associated with the project.”

Jones says he expects a final EIS from the State Department by the end of the year and construction approval soon after. State must approve construction because the pipeline crosses the Canadian-U.S. border. He points out that the Bush administration approved the Alberta Clipper and the Obama administration approved the Keystone pipeline, the only two tar sands pipelines in the U.S. He adds that approval of Keystone XL would help ensure U.S. energy security because the alternative to bringing tar sands from Alberta to Gulf Coast refineries is bringing foreign oil from places such as Saudi Arabia. On greenhouse gas emissions, Jones states that when emissions from transporting Saudi oil are figured in, GHG emissions on tar sands are only 5-15% per barrel more. He notes that Keystone XL will carry conventional oil from the Bakken basin in Montana and North Dakota, where there are pipeline bottlenecks.

The U.S. Geological Survey estimated mean undiscovered volumes of 3.65 billion barrels of oil, 1.85 Tcf of associated/dissolved natural gas, and 148 million barrels of natural gas liquids in the Bakken Shale Formation of the Williston Basin Province located in Montana and North Dakota. In late August, Enbridge Inc. said it will spend about $550 million to expand its pipelines serving oil producers in the Bakken and Three Forks formations in North Dakota, Saskatchewan, Montana and Manitoba.

PHMSA Hears It Both Sides On Low-Stress Pipeline Proposal
Regulation of liquid pipelines is also a current issue with regard to offshore in the Gulf of Mexico, Pacific and Atlantic Oceans. That is one of the issues at the heart of PHMSA’s proposed regulation of low-stress, liquid pipelines not covered in its 2008 final rule. That applied only to rural higher-risk, larger-diameter onshore pipelines that are located in or within a half mile of an unusually sensitive area (USA) and operate at stress levels greater than 20% of specified minimum yield strength.

The remaining low-stress liquid lines would be covered by the proposed rule issued on June 22, 2010. It would extend pipeline safety rules to smaller-diameter (less than 8 5/8-inches diameter) rural low-stress pipelines located in or within a half mile of a USA and all rural low-stress pipelines of any diameter located outside the half mile USA buffer except for those that cross navigable waterways (which are already regulated). PHMSA estimates that 803 miles of rural low-stress pipelines were regulated by the 2008 final rule. This second phase rule would cover an additional 1,384 miles.

Peter T. Lidiak, director, pipeline, American Petroleum Institute, objects to the plan to subject offshore pipelines regulated by the Coast Guard to PHMSA regulation. These are pipelines, for example, running from marine facilities such as a terminal at a refinery to bulk storage facilities. The issue here is not that there are a lot of miles. Lidiak says it makes no sense for two different agencies to oversee the same pipeline, especially here where the Coast Guard does a good job of oversight.

Deborah Hersman, chairman of the National Transportation Safety Board (NTSB), says additional offshore lines besides those regulated by the Coast Guard should also be subject to PHMSA regulation. Those include offshore gathering lines regulated by the Minerals Management Service, an agency which has come under fire because of the BP disaster.

FERC Final Edict On Interstate Posting
The FERC settled the last two remaining issues stemming from its gas posting policy established in Order 720 in 2008. Interstates and intrastates had contested some elements of that policy and its refinement issued as Order 720A in January. The intrastate issues were multiple and incredibly complex. They were contested by the American Gas Association and Atmos Energy Corp., the country’s largest natural-gas-only distributor.

The Interstate Natural Gas Association of America (INGAA) only had two problems with 720A, which were resolved in a split decision on July 30 which INGAA General Counsel Joan Dreskin calls “Solomonic.” Transmission pipelines will have to provide no-notice transportation information based on its best estimate before 11:30 a.m. Central time three days after the day of gas flow and make one update to each posted figure as necessary within 10 business days after the month in which the posted service was performed. INGAA had tried to convince FERC not to require any no-notice information after three days but lost that argument. Dreskin says the fact that companies will have to provide only a single update is a plus.

Orders 720/720A stem from new authority Congress gave the Commission in the 2005 Energy Policy Act so that it could better police natural gas pricing.

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