June 2011 Vol. 238 No. 6


Pipeline Safety, Keystone XL On API Agenda

A Pipeline & Gas Journal Staff Report

SAN ANTONIO, TX-Meeting amid the backdrop of several headline-making events, a record attendance of nearly 470 participated in API’s 2011 Pipeline Conference held in San Antonio.

Among the key topics of discussion and conversation were several looming issues, including U.S. Transportation Secretary Ray Lahood’s April 18 summit meeting on pipeline safety in Washington, DC; a coordinated effort to stem resistance to the proposed Keystone XL pipeline project; a need to increase drilling activity; and the continued decline in oil production that is jeopardizing the future of the Trans Alaska Pipeline. As in recent years, a growing number of operations officials actively participated in the 62nd annual event.

In discussing the business outlook for products pipelines, Mark Davidson, director of marketing for Buckeye Partners, said there are three key elements that operators need to keep their eyes on:

1. Demographics-how to keep their growing going forward.
2. Consideration of new energy sources over the next 10-15 years and whether diesel will still have a dominant role and uncertainty about a surge in gasoline.
3. New regulations that could reverse the industry’s course or cause other problems without warning.

“It’s getting harder and harder to lay pipelines because they cost a lot of money. There are other ways to reduce costs and you don’t have to face the regulators,” Davidson said. His company, for instance, has begun diverting its attention to other types of projects though that does not mean they will not be laying any more pipelines, he said.

Companies have begun to create “virtual pipeline” involving ships, trains and terminal aggregation. Highway congestion and a lack of access to inland waterways are increasingly giving the nod to trains as a means of transportation. This has been particularly true for ethanol as more liquids are being transported by train, Davidson said. Gasoline and diesel may be next in line to take advantage of railways. Arbitragers are finding that they can buy the product from the refineries on the Gulf Coast and have it delivered by train to Chicago in five days.

One rail system, CSX, has already built a train facility to transport ethanol. More railroads will likely put in infrastructure as ethanol becomes more integrated with the nation’s economy. Meanwhile, pipelines will still be essential for short-distance deliveries, he said. Pipelines will also be able to find other products to fill up their assets such as isobutyl, he said.

Subsequent to the meeting, API announced that the latest U.S. State Department environmental analysis to TransCanad’a Keystone XL project is a positive indicator for eventual approval of the project. The analysis found “no new issues of substance” and “does not alter the conclusions reached in the draft EIS regarding the need for and the potential impacts of the proposed Project.”

“We urge the administration to turn aside any additional efforts to delay this important project,” said Cindy Schild, API’s refining issues manager. “The pipeline has passed every analysis and review over the last two years, while additional American job creation and economic growth from this important project are delayed. We need to expand our energy relationship with America’s number one source of imported oil: Canada.”
For decades, U.S. refineries have been processing crude from Canadian oil sands. The Keystone pipeline could expand access to this vital resource by providing transportation for an additional 830,000 barrels of oil a day. Investing in Canadian oil sands will also produce more than 340,000 U.S. jobs and generate about $34 billion in revenue for the U.S. government, according to an economic analysis by the Canadian Energy Research Institute.

“Nearly 1,000 U.S. businesses in 47 states already provide services, materials or equipment to Canada in support of oil sands development,” said Schild. “The finished pipeline will be a lifeline to nearby Canadian supplies of crude oil for U.S. workers and for businesses and families that depend on secure and affordable energy.”

The 45-day public comment period on the supplemental analysis began April 22. It was scheduled to conclude on June 6.

API reported that nearly 70 U.S. mayors and a coalition of 30 Minnesota lawmakers sent letters to Secretary of State Hillary Clinton urging the State Department to swiftly approve the project which has been under review by the government in consultation with 10 federal agencies for nearly three years.

Regarding the Alaskan oil pipeline, company officials addressed concern about the future of the line, which is carrying less than a third of the volume it once did and at a much slower speed. Executives have said repeatedly for the past 20 years that it is essential for the pipeline to maintain a higher flow of crude if the 48-inch pipeline that services the historic North Slope oilfield is to remain operative.

Reversing that trend will require the opportunity to drill in new areas of Alaska, most of them owned by the federal government, which is being pressured by Alaskan lawmakers to open up more lands for drilling.

While Koch Pipeline out of Wichita, KS won the 2011 Distinguished Award for Safety and Environmental Performance, it was not the only company to win API honors. ExxonMobil Pipeline won the Occupational Safety Performance Award for large operators, for the third straight year.

In the small operator category, three companies shared that honor, including CITGO Pipeline Company (for the second year in a row), Portland Pipe Line Corporation, and TransMontaigne Product Services Inc., all reporting no OSHA recordable incidents for employees and contractors.

The Environmental Performance Award in the small operator category, with each recipient reporting no releases, went to Equistar Chemicals, LP – Equistar Pipelines and Genesis Energy, Inc. 

Meanwhile, as it continues to battle against proposed cuts in industry tax incentives and for increased opportunities to explore for oil and gas, API released another report disclosing that the U.S. oil and natural gas industry supports 9.2 million American jobs and 7.7% of the U.S. economy, according to a new study commissioned by API and conducted by PwC (PricewaterhouseCoopers LLP).

The new report updates data from a previous report and shows that, between 2007 and 2009, the economic activity supported by the industry actually increased in size as a percentage of U.S. GDP, from 7.5 to 7.7%. The economic impact of the oil and natural gas industry reaches all 50 states and the District of Columbia, according to the study.  The top 15 states in percentage of jobs supported by the industry in 2009 were Wyoming, Louisiana, Texas, Oklahoma, Alaska, North Dakota, New Mexico, West Virginia, Delaware, Kansas, Montana, Mississippi, Colorado, Arkansas, and Utah.

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