ANCHORAGE - TransCanada Corp. has awarded a contract to URS Corp. to develop a preliminary feasibility and engineering study for a multi-billion dollar gas treatment plant that would be part of an Alaska natural gas pipeline project, TransCanada vice president Tony Palmer said.
Arctic Slope Energy Services, a subsidiary of Arctic Slope Regional Corp., will provide engineering services to URS on the contract, he said.
Palmer said the engineering and design work, as well as cost estimates for the gas plant, would be combined with other engineering and environmental work TransCanada is doing to develop overall cost estimates for its project.
Cost estimates are needed for an open season planned in 2010 in which the pipeline company will solicit customers to ship gas on its pipeline. The URS and ASRC Energy work is due to be complete in early 2010, Palmer said.
Tuesday, March 31, 2009
Hawk awarded personnel services contract by Alyeska Pipeline
ANCHORAGE - Hawk Consultants LLC has been awarded a multi-year contract by Alyeska Pipeline Service Co. to provide professional personnel services to support operation and maintenance of the trans-Alaska pipeline.
Hawk is an Alaskan-owned firm specializing in project management services supporting client organizations with people and resources to ensure project success.
Hawk is an Alaskan-owned firm specializing in project management services supporting client organizations with people and resources to ensure project success.
Monday, March 30, 2009
Fuel leak being cleaned up at New York’s JFK Airport
NEW YORK – New York state officials are trying to clean up a serious fuel leak near a runway at JFK Airport.
They discovered the leak last fall along a pipeline that supplies the airport and the rest of the region with millions of gallons of fuel a day.
Buckeye Partners L.P. supplies jet fuel to JFK through a 40-mile pipeline system running from a storage facility in Linden, N.J., via the New York boroughs of Staten Island and Queens. The pipeline consists of two parallel 12-inch pipes buried three to four feet deep. JFK has a total fuel storage capacity of 32 million gallons. It includes 62 tanks in bulk storage as well as 50 miles of underground pipe.
It has not yet been disclosed if Buckeye lines or distribution lines owned by the airport are involved. Buckeye airport lines have leaked in the past.
On March 24, crews were at work digging test holes along the pipeline and looking for more leaked fuel. So far, about 90,000 gallons have been recovered.(Source: WABC)
They discovered the leak last fall along a pipeline that supplies the airport and the rest of the region with millions of gallons of fuel a day.
Buckeye Partners L.P. supplies jet fuel to JFK through a 40-mile pipeline system running from a storage facility in Linden, N.J., via the New York boroughs of Staten Island and Queens. The pipeline consists of two parallel 12-inch pipes buried three to four feet deep. JFK has a total fuel storage capacity of 32 million gallons. It includes 62 tanks in bulk storage as well as 50 miles of underground pipe.
It has not yet been disclosed if Buckeye lines or distribution lines owned by the airport are involved. Buckeye airport lines have leaked in the past.
On March 24, crews were at work digging test holes along the pipeline and looking for more leaked fuel. So far, about 90,000 gallons have been recovered.(Source: WABC)
Saturday, March 28, 2009
Did Goldman Sachs engineer 2008 energy price flyup?
TULSA, Okla. – According to an article in the April 13 issue of Forbes magazine by Christopher Helman and Liz Moyer, when oil prices spiked last summer to $147 a barrel, the biggest energy company casualty was Semgroup Holdings, a private firm in Tulsa, Okla., with $14 billion in annual sales.
Semgroup racked up $2.4 billion in trading losses by betting that oil prices would go down, including $290 million in accounts personally managed by then chief executive Thomas Kivisto. Its short positions amounted to the equivalent of 20 percent of the nation's crude oil inventories.
With the credit crunch eliminating any hope of meeting a $500 million margin call, Semgroup filed for bankruptcy on July 22.
Now some of the people involved in cleaning up the financial mess are suggesting that Semgroup's collapse was more than just bad judgment and worse timing. There is evidence of oil price manipulation by traders orchestrating a short squeeze to push up the price of West Texas Intermediate crude to the point that it would generate fatal losses in Semgroup's accounts.
"What transpired at Semgroup was no less than a $500 billion fraud on the people of the world," says John Catsimatidis, the billionaire grocer turned oil refiner who is attempting to reorganize Semgroup in bankruptcy court. The $500 billion is how much the world would have overpaid for crude had a successful scam pushed up oil prices by $50 a barrel for 100 days.
Numerous people familiar with the events insist that Citibank, Merrill Lynch and especially Goldman Sachs had knowledge about Semgroup's trading positions from their vetting of an ill-fated $1.5 billion private placement deal last spring.
"Nothing's been proven, but if somebody has your book and knows every trade, it would not be difficult to bet against that book and put the company into a tremendous liquidity squeeze," says John Tucker, who is representing Kivisto.
What's known for sure is that Goldman Sachs, through J. Aron & Co., its commodities trading arm, was in position to use such data - and profited handsomely from Semgroup's fall.
Read the rest of the story: http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-...
Semgroup racked up $2.4 billion in trading losses by betting that oil prices would go down, including $290 million in accounts personally managed by then chief executive Thomas Kivisto. Its short positions amounted to the equivalent of 20 percent of the nation's crude oil inventories.
With the credit crunch eliminating any hope of meeting a $500 million margin call, Semgroup filed for bankruptcy on July 22.
Now some of the people involved in cleaning up the financial mess are suggesting that Semgroup's collapse was more than just bad judgment and worse timing. There is evidence of oil price manipulation by traders orchestrating a short squeeze to push up the price of West Texas Intermediate crude to the point that it would generate fatal losses in Semgroup's accounts.
"What transpired at Semgroup was no less than a $500 billion fraud on the people of the world," says John Catsimatidis, the billionaire grocer turned oil refiner who is attempting to reorganize Semgroup in bankruptcy court. The $500 billion is how much the world would have overpaid for crude had a successful scam pushed up oil prices by $50 a barrel for 100 days.
Numerous people familiar with the events insist that Citibank, Merrill Lynch and especially Goldman Sachs had knowledge about Semgroup's trading positions from their vetting of an ill-fated $1.5 billion private placement deal last spring.
"Nothing's been proven, but if somebody has your book and knows every trade, it would not be difficult to bet against that book and put the company into a tremendous liquidity squeeze," says John Tucker, who is representing Kivisto.
What's known for sure is that Goldman Sachs, through J. Aron & Co., its commodities trading arm, was in position to use such data - and profited handsomely from Semgroup's fall.
Read the rest of the story: http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-...
Friday, March 27, 2009
Buckeye Partners units lose $2.03 per share as new offering issued
EMMAUS, Pa. - Buckeye Partners, L.P. (NYSE: BPL) on March 26 announced that it has increased its previously announced public offering of 2,350,000 limited partnership units to 2,600,000 limited partnership units and has priced the offering at $36.25 per unit.
Buckeye units closed on March 26 at $35.90 a unit, down $2.03 from the prior day and 35 cents under the unit price of the new offering, which diluted the value of units existing before the new offering.
Buckeye offered the underwriters of the offering an option to purchase up to 390,000 additional limited partnership units at a bargain price.
Buckeye intends to use the net proceeds from the offering to reduce indebtedness outstanding under its revolving credit facility.
Barclays Capital, Citi, J.P. Morgan, and Wachovia Securities acted as joint book-running managers of the limited partnership unit offering. Deutsche Bank Securities was the co-manager of the offering.
The general partner of Buckeye Partners, L.P. is owned by Buckeye GP Holdings L.P. (NYSE: BGH).
Buckeye shares were heavily traded on the day of the new offering, with 1,783,490 units changing hands.
Buckeye limited partner units are currently paying an annual dividend of $3.55 per share. At the March 26 closing price of $35.90 a share, Buckeye common units were paying a yield of 9.88 percent. With the new float, 48.8 million common units are outstanding.
Buckeye units closed on March 26 at $35.90 a unit, down $2.03 from the prior day and 35 cents under the unit price of the new offering, which diluted the value of units existing before the new offering.
Buckeye offered the underwriters of the offering an option to purchase up to 390,000 additional limited partnership units at a bargain price.
Buckeye intends to use the net proceeds from the offering to reduce indebtedness outstanding under its revolving credit facility.
Barclays Capital, Citi, J.P. Morgan, and Wachovia Securities acted as joint book-running managers of the limited partnership unit offering. Deutsche Bank Securities was the co-manager of the offering.
The general partner of Buckeye Partners, L.P. is owned by Buckeye GP Holdings L.P. (NYSE: BGH).
Buckeye shares were heavily traded on the day of the new offering, with 1,783,490 units changing hands.
Buckeye limited partner units are currently paying an annual dividend of $3.55 per share. At the March 26 closing price of $35.90 a share, Buckeye common units were paying a yield of 9.88 percent. With the new float, 48.8 million common units are outstanding.
Thursday, March 26, 2009
Sem Group’s Sem Logistics oil storage site in UK for sale by auction
TULSA, Okla. - Britain’s largest oil storage facility has been put up for sale after its troubled American owner filed for bankruptcy protection from creditors.
The sale of Sem Logistics, operator of more than 50 huge storage tanks at Milford Haven, Pembrokeshire, with the capacity to store 8.5 million barrels of crude oil, or about 10 per cent of global daily production, is being handled by Blackstone Group, the American private equity firm.
The auction follows the collapse of Sem Logistics’ parent, the oil trading and services group Sem, which was once one of America’s 20 largest private companies. Last year, Sem suffered hedging losses of more than $2 billion when it was caught on the wrong side of the extreme volatility in global oil prices.
The Sem Group, based in Tulsa, Okla., was later forced to file for Ch. 11 bankruptcy protection from creditors and is facing restructuring. Among those affected by the collapse of Sem Group are the private equity firms Carlyle Group and Riverstone, whose European division is now led by Lord Browne of Madingley, the former chief executive of BP. They were among the biggest shareholders in the group.
Despite the problems faced by its American parent, the Sem Logistics operation in Wales remains profitable and was isolated from the bankruptcy filing. In recent weeks it has been discreetly offered for sale by Blackstone to a number of potential bidders, including large oil companies and other private equity firms. It is thought that a buyer could be announced within weeks.
As well as the oil storage tanks, the site includes a deep-water port and two jetties capable of handling super-tankers weighing up to 165,000 dead-weight tonnes. Between 2006 and last year, the group invested more than $50 million on the Milford Haven site, refurbishing tanks and improving infrastructure.
The sale of Sem Logistics, operator of more than 50 huge storage tanks at Milford Haven, Pembrokeshire, with the capacity to store 8.5 million barrels of crude oil, or about 10 per cent of global daily production, is being handled by Blackstone Group, the American private equity firm.
The auction follows the collapse of Sem Logistics’ parent, the oil trading and services group Sem, which was once one of America’s 20 largest private companies. Last year, Sem suffered hedging losses of more than $2 billion when it was caught on the wrong side of the extreme volatility in global oil prices.
The Sem Group, based in Tulsa, Okla., was later forced to file for Ch. 11 bankruptcy protection from creditors and is facing restructuring. Among those affected by the collapse of Sem Group are the private equity firms Carlyle Group and Riverstone, whose European division is now led by Lord Browne of Madingley, the former chief executive of BP. They were among the biggest shareholders in the group.
Despite the problems faced by its American parent, the Sem Logistics operation in Wales remains profitable and was isolated from the bankruptcy filing. In recent weeks it has been discreetly offered for sale by Blackstone to a number of potential bidders, including large oil companies and other private equity firms. It is thought that a buyer could be announced within weeks.
As well as the oil storage tanks, the site includes a deep-water port and two jetties capable of handling super-tankers weighing up to 165,000 dead-weight tonnes. Between 2006 and last year, the group invested more than $50 million on the Milford Haven site, refurbishing tanks and improving infrastructure.
Wednesday, March 25, 2009
Enterprise, Duncan announce completion of Sherman Extension
Enterprise Products Partners L.P. and Duncan Energy Partners L.P. on March 23 announced that construction has been completed on the 174-mile Sherman Extension expansion of the Enterprise Texas Intrastate natural gas pipeline system which extends through the heart of the prolific Barnett Shale play of North Texas.
Current throughput on the Sherman Extension is approximately 360 million cubic feet per day (MMcf/d) and is expected to reach about 950 MMcf/d during April 2009, as the remainder of the system’s 48,000 horsepower of compression is brought on line.
The 36-inch diameter pipeline originates at a delivery point on the partnerships’ Texas Intrastate natural gas pipeline system near Morgan Mill, Texas, southwest of Fort Worth, and extends northward to an interconnect with Boardwalk Pipeline Partners L.P.’s Gulf Crossing pipeline near Sherman, Texas.
The completion of the Sherman Extension adds 1.1 billion cubic feet per day (Bcf/d) of incremental takeaway capacity from the region, while providing producers in the Barnett Shale and as far away as the Waha area of West Texas with greater flexibility to reach the most attractive markets, particularly those in the Northeast and Southeast areas of the country.
Current natural gas production from the Barnett Shale is approximately four Bcf/d and is projected to surpass six Bcf/d by 2011.
Current throughput on the Sherman Extension is approximately 360 million cubic feet per day (MMcf/d) and is expected to reach about 950 MMcf/d during April 2009, as the remainder of the system’s 48,000 horsepower of compression is brought on line.
The 36-inch diameter pipeline originates at a delivery point on the partnerships’ Texas Intrastate natural gas pipeline system near Morgan Mill, Texas, southwest of Fort Worth, and extends northward to an interconnect with Boardwalk Pipeline Partners L.P.’s Gulf Crossing pipeline near Sherman, Texas.
The completion of the Sherman Extension adds 1.1 billion cubic feet per day (Bcf/d) of incremental takeaway capacity from the region, while providing producers in the Barnett Shale and as far away as the Waha area of West Texas with greater flexibility to reach the most attractive markets, particularly those in the Northeast and Southeast areas of the country.
Current natural gas production from the Barnett Shale is approximately four Bcf/d and is projected to surpass six Bcf/d by 2011.
Tuesday, March 24, 2009
Colonial gets eminent domain approval for postponed new mainline
ATLANTA, Ga. - The state has extended the power of eminent domain to Colonial Pipeline Co. of Alpharetta, Ga., so it can expand its petroleum pipeline from Louisiana.
Colonial was issued the first permit by the state Environmental Protection Division under a 1995 law regulating petroleum pipelines. The permit allows Colonial to add a third pipeline that will run from Jackson, La., to Austell, Ga.
The company’s two existing mainlines provide 70 percent of the state’s gasoline, diesel, jet fuel and other petroleum products.
Colonial now needs to purchase 25-foot easements from about 500 landowners in Cobb, Paulding, Carroll and Haralson counties to build the Georgia portion of the 460-mile, $3 billion pipeline expansion. Most of the 44-mile expansion in Georgia is expected to run alongside existing Colonial lines.
In February, Colonial announced it had indefinitely postponed its plans for the project because demand for gasoline and other petroleum products is down.
The EPD permit gives Colonial two years to begin purchasing easements from approximately 500 landowners in Georgia. The EPD director could extend the permit for another two years.
Colonial was issued the first permit by the state Environmental Protection Division under a 1995 law regulating petroleum pipelines. The permit allows Colonial to add a third pipeline that will run from Jackson, La., to Austell, Ga.
The company’s two existing mainlines provide 70 percent of the state’s gasoline, diesel, jet fuel and other petroleum products.
Colonial now needs to purchase 25-foot easements from about 500 landowners in Cobb, Paulding, Carroll and Haralson counties to build the Georgia portion of the 460-mile, $3 billion pipeline expansion. Most of the 44-mile expansion in Georgia is expected to run alongside existing Colonial lines.
In February, Colonial announced it had indefinitely postponed its plans for the project because demand for gasoline and other petroleum products is down.
The EPD permit gives Colonial two years to begin purchasing easements from approximately 500 landowners in Georgia. The EPD director could extend the permit for another two years.
Monday, March 23, 2009
Flammable water pours from faucets in Colorado home
FORT LUPTON, Colo. - A family here is living in fear that their house could go up in flames at any moment.
Amee Ellsworth of Fort Lupton can turn on a faucet in her kitchen or bathroom, light a match and watch as flames shoot out because natural gas from nearby wells has seeped into her groundwater supply.
Officials from the Colorado Oil and Gas Conservation Commission say the gas is likely leaking from one of eight nearby wells, but they are not sure which one, nor are they even sure which of the two companies operating in the area - Anadarko Petroleum or Noble Energy - own it.
We just hope someone has warned her not to smoke while she’s sitting on the pottie.
Amee Ellsworth of Fort Lupton can turn on a faucet in her kitchen or bathroom, light a match and watch as flames shoot out because natural gas from nearby wells has seeped into her groundwater supply.
Officials from the Colorado Oil and Gas Conservation Commission say the gas is likely leaking from one of eight nearby wells, but they are not sure which one, nor are they even sure which of the two companies operating in the area - Anadarko Petroleum or Noble Energy - own it.
We just hope someone has warned her not to smoke while she’s sitting on the pottie.
Sunday, March 22, 2009
Making money with LPs (Part 1): A different kind of partnership
The following six articles have been developed to introduce expanded coverage in Energy Pipeline News of the high-yield investments called master limited partnerships (MLPs) or simply limited partnerships (LPs). For further information, please visit http://www.energypipelinenews.com
LPs – limited partnerships - specialize in mineral and natural resource development that can be traded on securities exchanges. Investors buy and sell LP "units" just like shares of stock, but instead of receiving dividends, "unit holders" get cash distributions typical of a partnership structure.
Established by Congress in the 1980s, LPs were originally developed to spur investment in energy and natural resource projects. According to the Revenue Act of 1987, only companies engaged in "the exploration, production, mining, processing, refining, marketing or transportation" of mineral and natural resources may use this structure.
Today, there are about 100 LPs, more than 75 percent of which are energy infrastructure companies. These partnerships run a variety of businesses - including pipelines, refineries, processing plants and more - for a range of natural resources such as oil, coal, propane, natural gas, timber. They even cover alternative fuels like ethanol and biodiesel.
Because most LPs own physical assets that operate independently of the commodities transported, processed or refined, the income of these companies depends less on energy prices and more on energy demand. And since demand is much less volatile than pricing, LP income remains relatively stable even when energy prices go haywire. So unit holders usually see a steady, predictable increase in their cash distributions.
LPs – limited partnerships - specialize in mineral and natural resource development that can be traded on securities exchanges. Investors buy and sell LP "units" just like shares of stock, but instead of receiving dividends, "unit holders" get cash distributions typical of a partnership structure.
Established by Congress in the 1980s, LPs were originally developed to spur investment in energy and natural resource projects. According to the Revenue Act of 1987, only companies engaged in "the exploration, production, mining, processing, refining, marketing or transportation" of mineral and natural resources may use this structure.
Today, there are about 100 LPs, more than 75 percent of which are energy infrastructure companies. These partnerships run a variety of businesses - including pipelines, refineries, processing plants and more - for a range of natural resources such as oil, coal, propane, natural gas, timber. They even cover alternative fuels like ethanol and biodiesel.
Because most LPs own physical assets that operate independently of the commodities transported, processed or refined, the income of these companies depends less on energy prices and more on energy demand. And since demand is much less volatile than pricing, LP income remains relatively stable even when energy prices go haywire. So unit holders usually see a steady, predictable increase in their cash distributions.
Making money with LPs (Part 2): American energy demand is growing
Back when I (Energy Pipeline News editor Noel Griese) was working on a graduate degree at the University of Wisconsin in the 1970s, I ran data on more than 140 independent nations of the world looking for the correlates of economic development. What factors, I wanted to know, using three-wave lagged correlations as the tool to determine causality, explained growth in gross national product?
The upshot of the research was that one inanimate factor and one animate factor (independent or causal variables) explained almost all growth in national GNP (dependent variable).
The inanimate correlate of growth in GNP is energy consumption per capita. The greater the energy consumption per capita, the greater the growth in GNP. The animate factor is education per capita. The higher the education of the population, the greater the growth in GNP. Energy consumption per capita is a far more powerful predictor than education. Put the two primary correlates together, and you explain almost all of the growth in GNP for a given country.
The United States and the other nations of the world are currently wallowing in one of the most severe economic recessions since World War II. To emerge from that recession, we will almost certainly have to invest large amounts of capital in energy and education.
Despite conservation efforts, the existing energy infrastructure of the United States just can't keep up with our ever-increasing thirst for energy. By 2030, Americans will require an estimated 131.2 quadrillion BTUs of energy - up 33 percent from 2005.
While it’s difficult to invest in education, with few available opportunities, investing in energy is easy. A multitude of investment opportunities exist.
One opportunity promising better than average returns is to invest in pipeline limited partnerships, or in the mutual funds that invest in the LPs. In a future article, I'll explore why investing in the mutual funds is less complicated from a tax standpoint than investing directly in the LPs.
The advantage of investing in LPs is that they offer consistently higher, more secure yields than most other investments.
In the past, the average yield of LPs has ranged anywhere from 7-10 percent, and currently it hovers well above eight percent.
One of the LPs in which the editor is currently investing, while it has above-average risk, is currently yielding 53 percent in dividends – and that does not include the capital gains likely to be realized as pension funds start reinvesting in LPs offering high yields, driving up the unit price.
That's not to say LPs are immune to market implosions like the one that began last year - they aren't. Mutual funds that were heavily invested in LPs, in order to meet cash calls from investors, often sold off the LPs to get the cash they needed to meet those calls. That drove down the unit prices of the LPs, and kicked up the yield.
In addition to having their prices driven down by cash call selling, the LP prices are depressed because they rely on new capital investments to keep growing. That requires loans and new stock issues – things that dried up in the current tight recessionary economy.
But historically, the LPs have outperformed other asset classes, such as stocks. Between 1998 and 2007, LPs beat the S&P 500 average seven out of 10 years.
The upshot of the research was that one inanimate factor and one animate factor (independent or causal variables) explained almost all growth in national GNP (dependent variable).
The inanimate correlate of growth in GNP is energy consumption per capita. The greater the energy consumption per capita, the greater the growth in GNP. The animate factor is education per capita. The higher the education of the population, the greater the growth in GNP. Energy consumption per capita is a far more powerful predictor than education. Put the two primary correlates together, and you explain almost all of the growth in GNP for a given country.
The United States and the other nations of the world are currently wallowing in one of the most severe economic recessions since World War II. To emerge from that recession, we will almost certainly have to invest large amounts of capital in energy and education.
Despite conservation efforts, the existing energy infrastructure of the United States just can't keep up with our ever-increasing thirst for energy. By 2030, Americans will require an estimated 131.2 quadrillion BTUs of energy - up 33 percent from 2005.
While it’s difficult to invest in education, with few available opportunities, investing in energy is easy. A multitude of investment opportunities exist.
One opportunity promising better than average returns is to invest in pipeline limited partnerships, or in the mutual funds that invest in the LPs. In a future article, I'll explore why investing in the mutual funds is less complicated from a tax standpoint than investing directly in the LPs.
The advantage of investing in LPs is that they offer consistently higher, more secure yields than most other investments.
In the past, the average yield of LPs has ranged anywhere from 7-10 percent, and currently it hovers well above eight percent.
One of the LPs in which the editor is currently investing, while it has above-average risk, is currently yielding 53 percent in dividends – and that does not include the capital gains likely to be realized as pension funds start reinvesting in LPs offering high yields, driving up the unit price.
That's not to say LPs are immune to market implosions like the one that began last year - they aren't. Mutual funds that were heavily invested in LPs, in order to meet cash calls from investors, often sold off the LPs to get the cash they needed to meet those calls. That drove down the unit prices of the LPs, and kicked up the yield.
In addition to having their prices driven down by cash call selling, the LP prices are depressed because they rely on new capital investments to keep growing. That requires loans and new stock issues – things that dried up in the current tight recessionary economy.
But historically, the LPs have outperformed other asset classes, such as stocks. Between 1998 and 2007, LPs beat the S&P 500 average seven out of 10 years.
Making money in pipeline LPs (Part 3): tax consequences
Because LPs are partnerships and not corporations, their income is pass-through, which means it's not subject to "double taxation" from corporate income tax. Therefore, more cash is available for unit holder distributions (which, by law, must consist of the company's entire cash flow after operational, maintenance and debt expenditures are met).
What's more, due to the way limited partnerships work, as much as 90 percent of those taxes are deferred until the unit is sold - a nice perk for investors thinking long term.
But LPs also have their tax drawbacks. For institutional investors, they're an administrative headache, and even individual investors may run into some paperwork-related problems. Dividends paid by LPs held in IRA’s are taxable, unlike common stock dividends paid into the IRAs. In some cases, even state taxes on dividends paid to LP unit holders may be taxed. Holding LPs in an IRA or other tax-deferred account could potentially set off an obscure tax known as the unrelated business taxable income, which is why some funds, such as endowments, avoid MLPs altogether.
What's more, due to the way limited partnerships work, as much as 90 percent of those taxes are deferred until the unit is sold - a nice perk for investors thinking long term.
But LPs also have their tax drawbacks. For institutional investors, they're an administrative headache, and even individual investors may run into some paperwork-related problems. Dividends paid by LPs held in IRA’s are taxable, unlike common stock dividends paid into the IRAs. In some cases, even state taxes on dividends paid to LP unit holders may be taxed. Holding LPs in an IRA or other tax-deferred account could potentially set off an obscure tax known as the unrelated business taxable income, which is why some funds, such as endowments, avoid MLPs altogether.
Making money in pipeline LPs (Part 4): Capital losses
Like almost all other asset classes, LP unit prices nose-dived in 2008. The Alerian MLP Index, the sector's benchmark, lost 41.5 percent of its value last year, and as of March 2, 2009, it was 48 percent below its peak.
In part, MLPs suffered so greatly because of the credit squeeze. Since MLPs pay out most of their profits in unit holder distributions, they must rely heavily on loans to finance any growth initiatives. When lenders pulled back, the companies ran into cash shortages.
Mutual and pension funds that were heavily invested in the LPs, when they faced cash calls from clients who wanted to get out of the tanking stock market, sold off many of the LPs in order to raise cash to meet cash call demands, That helped to drive down their prices.
In addition, hedge funds that had loaded up on LPs in good times, dumped them as the market tanked. Due to the administrative and tax obstacles mentioned above, institutional investors were largely prevented from scooping them up.
But LP fundamentals remain strong.
In part, MLPs suffered so greatly because of the credit squeeze. Since MLPs pay out most of their profits in unit holder distributions, they must rely heavily on loans to finance any growth initiatives. When lenders pulled back, the companies ran into cash shortages.
Mutual and pension funds that were heavily invested in the LPs, when they faced cash calls from clients who wanted to get out of the tanking stock market, sold off many of the LPs in order to raise cash to meet cash call demands, That helped to drive down their prices.
In addition, hedge funds that had loaded up on LPs in good times, dumped them as the market tanked. Due to the administrative and tax obstacles mentioned above, institutional investors were largely prevented from scooping them up.
But LP fundamentals remain strong.
Making money in pipeline LPs (Part 5): accessing LPs
Investors can access MLPs in many ways.
Those looking for broad exposure can check out the Alerian BearLinx MLP Select Index ETN (NYSE: BSR), which tracks the Alerian MLP Index, or play a number of closed-end funds investing solely in MLPs, such as:
Kayne Anderson MLP Investment Company (NYSE: KYN)
Tortoise Energy Infrastructure Corporation (NYSE: TYG)
Fiduciary/Claymore MLP Opportunity Fund (NYSE: FMO)
Energy Income and Growth Fund (NYSE: FEN)
Tortoise Energy Capital Corporation (NYSE: TYY)
Those looking for broad exposure can check out the Alerian BearLinx MLP Select Index ETN (NYSE: BSR), which tracks the Alerian MLP Index, or play a number of closed-end funds investing solely in MLPs, such as:
Kayne Anderson MLP Investment Company (NYSE: KYN)
Tortoise Energy Infrastructure Corporation (NYSE: TYG)
Fiduciary/Claymore MLP Opportunity Fund (NYSE: FMO)
Energy Income and Growth Fund (NYSE: FEN)
Tortoise Energy Capital Corporation (NYSE: TYY)
Making money in pipeline LPs (Part 6): investing directly in LPs
Individuals can invest in the pipeline LPs directly, although they should first discuss the tax consequences with their CPA or tax advisor. In general, larger LPs that have steadily increased their distribution payouts are safer bets than smaller ones or exploration/production companies, which are more dependent on commodity prices than other MLPs. Some players include the following.
Kinder Morgan Energy Partners (NYSE: KMP), the largest transporter of natural gas in Texas, the Midwest and the Rockies; and North America's biggest carbon dioxide supplier. LMP is one of the two partners in the huge Rockies Express gas pipeline project now being constructed.
TEPPCO Partners (NYSE: TPP), which runs a range of U.S. natural resource businesses, including pipelines, gathering systems, marine transports and storage.
NuStar Energy (NYSE: NS), which runs 8,500 miles of pipeline, 85 terminal facilities, four crude oil storage tanks and two asphalt refineries.
Enterprise Products Partners LP (EPD) is a $25 billion in revenues company and a leading integrated provider of natural gas, natural gas liquids, processing, transporting and storage services via 32,000 miles of pipeline. The $1.86 dividend, which has been raised in each of the last dozen years, yields a nice 9.9 percent and might be raised again this year to $1.95. In 2008, EPD’s Offshore Pipeline and Services segments posted weak numbers, a result of hurricane damage to these properties. EPD’s Petrochemical Services division also posted weak profits due to lower volumes and reduced demand for fuel. However, EPD’s NGL pipelines and onshore natural gas pipelines posted a dramatic rise in income, higher margins and increased marketing volumes recently. EPD is trading 14 points down from its 12-month high and two points above its 12-month low. Its 10-year dividend growth rate is about nine percent. A significant portion of the dividend income (about 80 percent) is considered return of capital and not taxable.
Energy Transfer Partners LP (NYSE: ETP) is a $10 billion revenue master limited partnership that gathers, processes, stores and transports products via its 16,000-mile pipeline primarily to users in Texas. EPD also owns Heritage Propane, the third largest marketer in the U.S. with 1.1 million customers in 40 states. The $3.58 dividend, about 80 percent return of capital, provides a current yield of 10.5 percent and has been raised every year since EPT came public at a split-adjusted $15 in 2004. Most analysts expect solid gains in 2009, 2010 and 2011 from earnings as well as attractive dividend increases in each of those years. Meanwhile, three major building programs should come online late this year, which should ensure continued growth in revenues, earnings and dividends. EPS is down 30 points from its 12-month high and trades eight points above its 12-month low. Dividend growth since coming public five years ago is 21 percent.
Plains All American Pipeline LP (NYSE: PAA) is a $32 billion master limited partnership with a $3.57 dividend yielding 9.6 percent. PAA’s dividend growth rate since coming public in 1999 at $20 is a good 9.7 percent. PAA owns 15,000 miles of pipeline and leases another 5,000 through which it stores, ships and markets crude oil, refined products and liquid petroleum gas. Several recent ventures should double PAA’s daily crude capacity to three million barrels a day and its recent acquisition of Pacific Energy Ltd. should add about $70 million to earnings by 2010 or 2011.
Kinder Morgan Energy Partners (NYSE: KMP), the largest transporter of natural gas in Texas, the Midwest and the Rockies; and North America's biggest carbon dioxide supplier. LMP is one of the two partners in the huge Rockies Express gas pipeline project now being constructed.
TEPPCO Partners (NYSE: TPP), which runs a range of U.S. natural resource businesses, including pipelines, gathering systems, marine transports and storage.
NuStar Energy (NYSE: NS), which runs 8,500 miles of pipeline, 85 terminal facilities, four crude oil storage tanks and two asphalt refineries.
Enterprise Products Partners LP (EPD) is a $25 billion in revenues company and a leading integrated provider of natural gas, natural gas liquids, processing, transporting and storage services via 32,000 miles of pipeline. The $1.86 dividend, which has been raised in each of the last dozen years, yields a nice 9.9 percent and might be raised again this year to $1.95. In 2008, EPD’s Offshore Pipeline and Services segments posted weak numbers, a result of hurricane damage to these properties. EPD’s Petrochemical Services division also posted weak profits due to lower volumes and reduced demand for fuel. However, EPD’s NGL pipelines and onshore natural gas pipelines posted a dramatic rise in income, higher margins and increased marketing volumes recently. EPD is trading 14 points down from its 12-month high and two points above its 12-month low. Its 10-year dividend growth rate is about nine percent. A significant portion of the dividend income (about 80 percent) is considered return of capital and not taxable.
Energy Transfer Partners LP (NYSE: ETP) is a $10 billion revenue master limited partnership that gathers, processes, stores and transports products via its 16,000-mile pipeline primarily to users in Texas. EPD also owns Heritage Propane, the third largest marketer in the U.S. with 1.1 million customers in 40 states. The $3.58 dividend, about 80 percent return of capital, provides a current yield of 10.5 percent and has been raised every year since EPT came public at a split-adjusted $15 in 2004. Most analysts expect solid gains in 2009, 2010 and 2011 from earnings as well as attractive dividend increases in each of those years. Meanwhile, three major building programs should come online late this year, which should ensure continued growth in revenues, earnings and dividends. EPS is down 30 points from its 12-month high and trades eight points above its 12-month low. Dividend growth since coming public five years ago is 21 percent.
Plains All American Pipeline LP (NYSE: PAA) is a $32 billion master limited partnership with a $3.57 dividend yielding 9.6 percent. PAA’s dividend growth rate since coming public in 1999 at $20 is a good 9.7 percent. PAA owns 15,000 miles of pipeline and leases another 5,000 through which it stores, ships and markets crude oil, refined products and liquid petroleum gas. Several recent ventures should double PAA’s daily crude capacity to three million barrels a day and its recent acquisition of Pacific Energy Ltd. should add about $70 million to earnings by 2010 or 2011.
Friday, March 20, 2009
Enbridge pipeline hits snag crossing Indian reservation
DULUTH, Minn. - Along a 1,000-mile Enbridge Energy pipeline proposed to move Canadian crude oil to a tank farm in Superior, Wis., one 13-mile stretch through the Fond du Lac Indian reservation has proven the most difficult to plot.
Enbridge and Fond du Lac officials have been unable to negotiate a settlement on the crossing in recent months, leading Enbridge to propose a 21-mile detour around the reservation.
On March 19, the Minnesota Public Utilities Commission denied Enbridge that detour, at least for the time being.
PUC commissioners, meeting in St. Paul, agreed to delay final action on the pipeline route until a deal is reached or until an ongoing federal Environmental Impact Statement is completed by the U.S. State Department, probably in May.
The pipeline detour around the reservation was opposed by environmental groups, the Fond du Lac Band and the Minnesota Department of Natural Resources. They said the best route would run through the reservation - alongside an existing Enbridge pipeline - to have less impact on the environment.
Sara Van Norman is acting as attorney for the Fond du Lac band on the issue.
Lorraine Grymala, community affairs manager for Enbridge, said the PUC decision won’t necessarily delay the pipeline project if a final decision comes quickly.
“We’re disappointed. But this could still work out assuming the commission can take quick action when the federal EIS is approved,’’ Grymala said.
Enbridge and the Fond du Lac officials have failed to find an agreeable price for a 20-year easement to cross the reservation. Short of that deal, Enbridge would need an act of Congress to cross the property without Fond du Lac approval, PUC staff said. While the PUC can use eminent domain to run pipelines across other lands, the state does not have that right on tribal land.
Enbridge and Fond du Lac officials have been unable to negotiate a settlement on the crossing in recent months, leading Enbridge to propose a 21-mile detour around the reservation.
On March 19, the Minnesota Public Utilities Commission denied Enbridge that detour, at least for the time being.
PUC commissioners, meeting in St. Paul, agreed to delay final action on the pipeline route until a deal is reached or until an ongoing federal Environmental Impact Statement is completed by the U.S. State Department, probably in May.
The pipeline detour around the reservation was opposed by environmental groups, the Fond du Lac Band and the Minnesota Department of Natural Resources. They said the best route would run through the reservation - alongside an existing Enbridge pipeline - to have less impact on the environment.
Sara Van Norman is acting as attorney for the Fond du Lac band on the issue.
Lorraine Grymala, community affairs manager for Enbridge, said the PUC decision won’t necessarily delay the pipeline project if a final decision comes quickly.
“We’re disappointed. But this could still work out assuming the commission can take quick action when the federal EIS is approved,’’ Grymala said.
Enbridge and the Fond du Lac officials have failed to find an agreeable price for a 20-year easement to cross the reservation. Short of that deal, Enbridge would need an act of Congress to cross the property without Fond du Lac approval, PUC staff said. While the PUC can use eminent domain to run pipelines across other lands, the state does not have that right on tribal land.
Thursday, March 19, 2009
Willbros to build three pump stations for Enbridge in Canada
CALGARY, Alta. - Willbros Group Inc. said on 16 March that its upstream segment has been awarded new projects from Enbridge Pipelines Inc. with respect to the continuing build-out of crude oil transportation systems from the oil sands in Alberta, Canada.
Under the contract, Willbros Canada will construct three additional pump stations on the Alberta Clipper pipeline system: one in Hardisty, Alta., and two in Saskatchewan province.
The projects have already started and are expected to be completed in the third quarter of 2009, Willbros Group said.
Under the contract, Willbros Canada will construct three additional pump stations on the Alberta Clipper pipeline system: one in Hardisty, Alta., and two in Saskatchewan province.
The projects have already started and are expected to be completed in the third quarter of 2009, Willbros Group said.
Wednesday, March 18, 2009
TransCanada files plans for second oil pipeline through South Dakota
PIERRE - TransCanada Keystone Pipeline company has applied to the state Public Utilities Commission for a permit to construct its second crude-oil pipeline through South Dakota, this time through the sparsely populated ranch country west of the Missouri River.
The Calgary-based company’s construction timetable calls for work to begin in South Dakota in 2011 and service to begin in 2012, with a peak construction work force of up to 1,400 people during the months of May through August of 2011.
The company is looking at the potential for expanding and developing recreation-vehicle parks to help handle lodging for the construction workforce.
The PUC will need to hold a formal hearing on the permit and establish a process to take public comments and allow for other parties to intervene, similar to the hearing held in December 2007 on TransCanada’s first pipeline through South Dakota.
State regulators likely will start discussing the timetable and related steps for the permitting process at the PUC’s next meeting March 24.
The Calgary-based company’s construction timetable calls for work to begin in South Dakota in 2011 and service to begin in 2012, with a peak construction work force of up to 1,400 people during the months of May through August of 2011.
The company is looking at the potential for expanding and developing recreation-vehicle parks to help handle lodging for the construction workforce.
The PUC will need to hold a formal hearing on the permit and establish a process to take public comments and allow for other parties to intervene, similar to the hearing held in December 2007 on TransCanada’s first pipeline through South Dakota.
State regulators likely will start discussing the timetable and related steps for the permitting process at the PUC’s next meeting March 24.
Magellan, Poet considering U.S. ethanol pipeline joint venture
TULSA, Okla. - Magellan Midstream Partners said on March 16 that it has signed a joint agreement with Poet, the largest U.S. ethanol producer, to study building a dedicated pipeline to carry the biofuel from the U.S. Midwest into the Northeast.
The proposed $3.5 billion pipeline system would gather ethanol from distilleries in Iowa, South Dakota, Minnesota, Illinois, Indiana and Ohio to serve terminals in major Northeastern markets.
Amid U.S. mandates calling for greater amounts of ethanol to be blended into the gasoline pool through 2022, companies are boosting efforts to see if shipping ethanol through pipelines can be a less expensive, safer alternative to sending it on trucks and trains.
Kinder Morgan Energy Partners LP, one of the largest energy pipeline companies in North America, has been sending batches of ethanol through a 105-mile petroleum products pipeline in Florida.
Magellan, which owns and operates a major oil products pipeline in the Midwest, had originally announced in February 2008 it would work with Buckeye Partners LP to jointly study a large alternative fuel pipeline project. Buckeye recently decided to discontinue its role in that project.
Poet, which produces more than 1.5 billion gallons of ethanol a year from 26 plants across the Midwest, and Magellan said federal legislation revising the U.S. Department of Energy's loan guarantee program is critical for the project, which would span 1,700 miles, to move forward.
The proposed $3.5 billion pipeline system would gather ethanol from distilleries in Iowa, South Dakota, Minnesota, Illinois, Indiana and Ohio to serve terminals in major Northeastern markets.
Amid U.S. mandates calling for greater amounts of ethanol to be blended into the gasoline pool through 2022, companies are boosting efforts to see if shipping ethanol through pipelines can be a less expensive, safer alternative to sending it on trucks and trains.
Kinder Morgan Energy Partners LP, one of the largest energy pipeline companies in North America, has been sending batches of ethanol through a 105-mile petroleum products pipeline in Florida.
Magellan, which owns and operates a major oil products pipeline in the Midwest, had originally announced in February 2008 it would work with Buckeye Partners LP to jointly study a large alternative fuel pipeline project. Buckeye recently decided to discontinue its role in that project.
Poet, which produces more than 1.5 billion gallons of ethanol a year from 26 plants across the Midwest, and Magellan said federal legislation revising the U.S. Department of Energy's loan guarantee program is critical for the project, which would span 1,700 miles, to move forward.
Tuesday, March 17, 2009
Valero agrees to recall propane gas
WASHINGTON, D.C. - The U.S. Consumer Product Safety Commission announced on March 12 that Valero Marketing & Supply Co. has voluntarily agreed to recall tanks of propane gas sold in five states.
The recall affects retailers in Alabama, Arkansas, California, Mississippi and Tennessee.
Valero manufactured 919,000 barrels of propane gas from January to October 2008 that contains an odorant that helps alert consumers to a gas leak. However, the propane Valero manufactured and sold might not have the recommended level of odorant. Failure to detect leaking gas can present a fire, explosion
or thermal burn hazard to consumers, according to the Consumer
Product Safety Commission.
There have been no incidents or injuries reported as a result of the sale of propane. However, consumers who may have bought the propane are asked to call the Consumer Product Safety Commission's hotline at 1-800-638-2772 or Valero's recall hotline at 1-866-940-8235.
The recall affects retailers in Alabama, Arkansas, California, Mississippi and Tennessee.
Valero manufactured 919,000 barrels of propane gas from January to October 2008 that contains an odorant that helps alert consumers to a gas leak. However, the propane Valero manufactured and sold might not have the recommended level of odorant. Failure to detect leaking gas can present a fire, explosion
or thermal burn hazard to consumers, according to the Consumer
Product Safety Commission.
There have been no incidents or injuries reported as a result of the sale of propane. However, consumers who may have bought the propane are asked to call the Consumer Product Safety Commission's hotline at 1-800-638-2772 or Valero's recall hotline at 1-866-940-8235.
Monday, March 16, 2009
Company hits gas line in Tennessee, then calls for permission to dig
BRISTOL, Tenn. - The company responsible for a March 10 natural gas leak in downtown Bristol called in a dig request after the fact, a state official said on March 11.
Even though failing to acquire a permit before digging is a misdemeanor, it remains unclear if any charges will be filed against McCall Commercial Fencing, based in Johnson City.
McCall called the Tennessee Regulatory Agency on March 10, about 30 minutes after one of its workers hit an underground gas line, said Bill Turner, executive director of Tennessee One-Call, the state group tasked with monitoring underground utilities.
"They called in ... 2:30 eastern time," Turner said in a phone interview with a local newspaper. "It was not an emergency call, it was just a normal dig request."
About 2 p.m., a half-hour earlier, the workers had hit the line while drilling fence post holes in a parking lot behind a downtown pottery business.
In Tennessee, failure to call before digging is a Class B misdemeanor punishable by up to 48 hours in jail, a $2,500 fine, or both.
Atmos Energy, the Dallas, Texas,-based company that owns the underground gas line, could bill the fence company for the cost of natural gas lost as well as for capping the leak. "They're still calculating the total cost," Atmos Energy spokesman Joel Amos said.
Bristol Tennessee City Manager Jeff Broughton said the city will not seek to recover the cost of police and fire department manpower needed to clear sections of downtown Tuesday. "We don't typically act on something like that," Broughton said.
The accident sent gas shooting upward into the air and prompted emergency officials to evacuate businesses in the immediate area, re-route traffic and shut down that section of State and Shelby streets. Fire officials called it a very dangerous situation.
It isn't unusual for businesses to call after the fact, Turner said. "It's not legal, but sometimes these contractors roll the dice, do the work and then – if they hit something – call in. The law says you're supposed to give three working days notice."
State agencies have no authority to prosecute, however. "That's up to the local authorities," Turner said. "We're having problems getting localities to prosecute, because they've got murderers and rapists to deal with."
Larry Borum, chief gas pipeline safety officer for the Tennessee Regulatory Authority, which sets the rates and service standards of privately owned utilities, said third-party damage is the leading cause of problems with underground utilities nationwide.
"This contractor won't face the TRA, but we're working to get some legislation passed that would change that," Borum said in a phone interview. "Tennessee's damage loss prevention law has little or no enforcement." (Source: David McGee and Michael Owens, Bristol Herald Courier, March 12, 2009)
Even though failing to acquire a permit before digging is a misdemeanor, it remains unclear if any charges will be filed against McCall Commercial Fencing, based in Johnson City.
McCall called the Tennessee Regulatory Agency on March 10, about 30 minutes after one of its workers hit an underground gas line, said Bill Turner, executive director of Tennessee One-Call, the state group tasked with monitoring underground utilities.
"They called in ... 2:30 eastern time," Turner said in a phone interview with a local newspaper. "It was not an emergency call, it was just a normal dig request."
About 2 p.m., a half-hour earlier, the workers had hit the line while drilling fence post holes in a parking lot behind a downtown pottery business.
In Tennessee, failure to call before digging is a Class B misdemeanor punishable by up to 48 hours in jail, a $2,500 fine, or both.
Atmos Energy, the Dallas, Texas,-based company that owns the underground gas line, could bill the fence company for the cost of natural gas lost as well as for capping the leak. "They're still calculating the total cost," Atmos Energy spokesman Joel Amos said.
Bristol Tennessee City Manager Jeff Broughton said the city will not seek to recover the cost of police and fire department manpower needed to clear sections of downtown Tuesday. "We don't typically act on something like that," Broughton said.
The accident sent gas shooting upward into the air and prompted emergency officials to evacuate businesses in the immediate area, re-route traffic and shut down that section of State and Shelby streets. Fire officials called it a very dangerous situation.
It isn't unusual for businesses to call after the fact, Turner said. "It's not legal, but sometimes these contractors roll the dice, do the work and then – if they hit something – call in. The law says you're supposed to give three working days notice."
State agencies have no authority to prosecute, however. "That's up to the local authorities," Turner said. "We're having problems getting localities to prosecute, because they've got murderers and rapists to deal with."
Larry Borum, chief gas pipeline safety officer for the Tennessee Regulatory Authority, which sets the rates and service standards of privately owned utilities, said third-party damage is the leading cause of problems with underground utilities nationwide.
"This contractor won't face the TRA, but we're working to get some legislation passed that would change that," Borum said in a phone interview. "Tennessee's damage loss prevention law has little or no enforcement." (Source: David McGee and Michael Owens, Bristol Herald Courier, March 12, 2009)
Friday, March 13, 2009
ConocoPhillips says Denali gas pipeline to be in service by 2019
ANCHORAGE - ConocoPhillips and BP Plc plan to bring their proposed natural gas pipeline in Alaska into service by 2019, a ConocoPhillips executive said during the company's analyst meeting on March 11.
The Denali pipeline, estimated to cost $30 billion, is expected to begin accepting bids for gas transportation in 2010, said Ryan Lance, the company's president of exploration and production for Europe, Asia, Africa and the Middle East. The companies had previously said the pipeline could begin transporting gas as soon as 2018.
The 2,000-mile pipeline proposed by BP and ConocoPhillips would bring two billion cubic feet of gas a day, or six to eight percent of total U.S. daily consumption, from Alaska's North Slope to Alberta, Canada. The companies may also build a 1,500-mile pipeline extension from Alberta to Chicago.
Alaska officials are reviewing a competing proposal from TransCanada Corp. backed by Gov. Sarah Palin, who during the 2008 presidential race implied that she had already arranged for the gas pipeline to be built.
Only one pipeline is likely to be built, if any, and it may well be Denali rather than the TransCanada proposal backed by Palin.
The Denali pipeline, estimated to cost $30 billion, is expected to begin accepting bids for gas transportation in 2010, said Ryan Lance, the company's president of exploration and production for Europe, Asia, Africa and the Middle East. The companies had previously said the pipeline could begin transporting gas as soon as 2018.
The 2,000-mile pipeline proposed by BP and ConocoPhillips would bring two billion cubic feet of gas a day, or six to eight percent of total U.S. daily consumption, from Alaska's North Slope to Alberta, Canada. The companies may also build a 1,500-mile pipeline extension from Alberta to Chicago.
Alaska officials are reviewing a competing proposal from TransCanada Corp. backed by Gov. Sarah Palin, who during the 2008 presidential race implied that she had already arranged for the gas pipeline to be built.
Only one pipeline is likely to be built, if any, and it may well be Denali rather than the TransCanada proposal backed by Palin.
Nustar poised to benefit from higher pipeline tariffs, asphalt production
Effective July 1, NuStar Energy LP’s tariffs increase by about 7.5 percent. The tariffs reset automatically based on inflation-indexed increases.
NuStar also stands to benefit from another source. About one quarter of its operating earnings come from its two asphalt refineries.
Like all refining operations, NuStar's margins in asphalt vary from quarter to quarter. There are several potential positives for the asphalt markets. On the supply front, several companies that used to produce asphalt have stopped doing so. The reason is that most refiners have set up their operations to maximize production of light products such as gasoline and diesel fuels. These companies have installed special equipment that allows them to turn heavy residual products like asphalt into lighter, higher-value products.
As a result, U.S. asphalt production in 2008 was off 10 percent and imports were down nearly 50 percent against 2007 levels. This leaves less competition for NuStar's dedicated asphalt refineries.
NuStar also stands to benefit from another source. About one quarter of its operating earnings come from its two asphalt refineries.
Like all refining operations, NuStar's margins in asphalt vary from quarter to quarter. There are several potential positives for the asphalt markets. On the supply front, several companies that used to produce asphalt have stopped doing so. The reason is that most refiners have set up their operations to maximize production of light products such as gasoline and diesel fuels. These companies have installed special equipment that allows them to turn heavy residual products like asphalt into lighter, higher-value products.
As a result, U.S. asphalt production in 2008 was off 10 percent and imports were down nearly 50 percent against 2007 levels. This leaves less competition for NuStar's dedicated asphalt refineries.
Wednesday, March 11, 2009
KBR hid danger of hexavalent chromium from U.S. soldiers protecting it in Iraq
PORTLAND, Ore. - In addition to gouging the U.S. government, KBR can now take credit for widespread cancers prevalent in U.S. troops assigned to provide security for its employees while it went about its lucrative mission of restoring Iraq’s oil industry.
Dust coated the combat boots and caked the skin of soldiers assigned to protect KBR Halliburton employees and contractors restoring oil flow in Iraq in 2003. Dust puffed from the soldiers' uniforms as they crowded into vans at the end of the day and shared tents at night.
When the dust blew onto Spc. Larry Roberta's ready-to-eat meal, he rinsed the chicken patty with his canteen water and ate it.
Six months later, doctors discovered the flap into Roberta's stomach had disintegrated. Six years later, the Marine and former police officer can no longer walk to the mailbox or work.
Another Oregon soldier, Sgt. Nicholas Thomas, died of complications of leukemia at age 21. Three others have reported lung problems to headquarters. Five more told The Oregonian they suffer chronic coughs, rashes and immune system disorders.
The Oregon National Guard soldiers who went to Iraq faced exposure to hexavalent chromium, which greatly increased their risk of contracting cancer and other diseases. It was in the orange and yellow dust spread over half of the Qarmat Ali water treatment plant by fleeing Saddam supporters.
Scientists call the carcinogen a Trojan horse because the damage may not be immediately obvious. Over time, people can develop different cancers, breathing problems, stomach ulcers or damage to the digestive tract.
Ninety-three Oregon soldiers may still not know that they have been exposed to hexavalent chromium. The Oregon Guard sent registered letters notifying them March 6, six years after their deployment.
Officials say they didn't learn of the problem themselves until November 2008, when the Army, spurred by lawsuits in Indiana and Texas and a subsequent Senate investigation, alerted the Oregon Guard. The suits claim KBR ignored both a United Nations report and its own employees' warnings about the danger.
The Oregon Guard has sent 286 letters to soldiers of the 1st Battalion, 162nd Infantry Division, about possible exposure. Fewer than 20 have responded to the Department of Veterans Affairs or the Guard.
The 1/162 was broken up in an Army reorganization in 2006. Fewer than half of the soldiers who were deployed are still in the Guard. Forty letters have been returned unopened. The Portland Veterans Administration’s chief environmental-agent doctor has seen only four soldiers.
Larry and Michelle Roberta of Aumsville received the Guard's letter Feb. 26 notifying them of his possible exposure. They set the letter aside. Roberta has known since July 2003 when an Army medic recorded exposure to hexavalent chromium at the water plant.
"We knew he was exposed since the very beginning," says Michelle Roberta, 38. "I sent a very healthy man over there. He did not come back."
The 1/162 arrived at its base of operations in Kuwait on April 18, 2003, and within weeks, the soldiers were assigned to escort and protect KBR contractors on a mission called "Restore Iraqi Oil."
Houston-based Kellogg, Brown & Root Services, then a subsidiary of Halliburton, which was headed by Dick Cheney before he became U.S. vice president in the George W. Bush administration, won the contract to get the oil flowing in Iraq. Repairing the water treatment plant, which maintained pressure in nearby oil wells, was a top priority.
Soldiers, officers and the undersecretary of the Army's manager for the project say that Oregon platoons rotated from Kuwait into Iraq in three- to four-day intervals from April 2003 until June 2003. Oregon soldiers met KBR workers at a rest stop on the main highway into Iraq, then accompanied them in the contractors' SUVs to pipelines, oil fields or the water treatment plant.
Just weeks after the Indiana Guard replaced the Oregonians, a new KBR safety officer arrived at the water treatment plant at Qarmat Ali. Ed Blacke was shocked by the widespread orange and yellow dust piled feet deep in places. The powder, he learned, was a corrosion fighter that contained hexavalent chromium. Soon he had sinus, throat and breathing problems, and found that 60 percent of the soldiers and staff at Qarmat Ali had identical symptoms. KBR managers told him it was "a nonissue."
Blacke described the sequence of events to a Senate committee in June 2008.
According to a subsequent Senate query, KBR did not test the site until August 2003 or notify the Army until September 2003. The Indiana Guard learned of the contamination when KBR managers showed up in protective suits. KBR closed the plant shortly after. (Source: Julie Sullivan, The Oregonian, March 7, 2009)
Dust coated the combat boots and caked the skin of soldiers assigned to protect KBR Halliburton employees and contractors restoring oil flow in Iraq in 2003. Dust puffed from the soldiers' uniforms as they crowded into vans at the end of the day and shared tents at night.
When the dust blew onto Spc. Larry Roberta's ready-to-eat meal, he rinsed the chicken patty with his canteen water and ate it.
Six months later, doctors discovered the flap into Roberta's stomach had disintegrated. Six years later, the Marine and former police officer can no longer walk to the mailbox or work.
Another Oregon soldier, Sgt. Nicholas Thomas, died of complications of leukemia at age 21. Three others have reported lung problems to headquarters. Five more told The Oregonian they suffer chronic coughs, rashes and immune system disorders.
The Oregon National Guard soldiers who went to Iraq faced exposure to hexavalent chromium, which greatly increased their risk of contracting cancer and other diseases. It was in the orange and yellow dust spread over half of the Qarmat Ali water treatment plant by fleeing Saddam supporters.
Scientists call the carcinogen a Trojan horse because the damage may not be immediately obvious. Over time, people can develop different cancers, breathing problems, stomach ulcers or damage to the digestive tract.
Ninety-three Oregon soldiers may still not know that they have been exposed to hexavalent chromium. The Oregon Guard sent registered letters notifying them March 6, six years after their deployment.
Officials say they didn't learn of the problem themselves until November 2008, when the Army, spurred by lawsuits in Indiana and Texas and a subsequent Senate investigation, alerted the Oregon Guard. The suits claim KBR ignored both a United Nations report and its own employees' warnings about the danger.
The Oregon Guard has sent 286 letters to soldiers of the 1st Battalion, 162nd Infantry Division, about possible exposure. Fewer than 20 have responded to the Department of Veterans Affairs or the Guard.
The 1/162 was broken up in an Army reorganization in 2006. Fewer than half of the soldiers who were deployed are still in the Guard. Forty letters have been returned unopened. The Portland Veterans Administration’s chief environmental-agent doctor has seen only four soldiers.
Larry and Michelle Roberta of Aumsville received the Guard's letter Feb. 26 notifying them of his possible exposure. They set the letter aside. Roberta has known since July 2003 when an Army medic recorded exposure to hexavalent chromium at the water plant.
"We knew he was exposed since the very beginning," says Michelle Roberta, 38. "I sent a very healthy man over there. He did not come back."
The 1/162 arrived at its base of operations in Kuwait on April 18, 2003, and within weeks, the soldiers were assigned to escort and protect KBR contractors on a mission called "Restore Iraqi Oil."
Houston-based Kellogg, Brown & Root Services, then a subsidiary of Halliburton, which was headed by Dick Cheney before he became U.S. vice president in the George W. Bush administration, won the contract to get the oil flowing in Iraq. Repairing the water treatment plant, which maintained pressure in nearby oil wells, was a top priority.
Soldiers, officers and the undersecretary of the Army's manager for the project say that Oregon platoons rotated from Kuwait into Iraq in three- to four-day intervals from April 2003 until June 2003. Oregon soldiers met KBR workers at a rest stop on the main highway into Iraq, then accompanied them in the contractors' SUVs to pipelines, oil fields or the water treatment plant.
Just weeks after the Indiana Guard replaced the Oregonians, a new KBR safety officer arrived at the water treatment plant at Qarmat Ali. Ed Blacke was shocked by the widespread orange and yellow dust piled feet deep in places. The powder, he learned, was a corrosion fighter that contained hexavalent chromium. Soon he had sinus, throat and breathing problems, and found that 60 percent of the soldiers and staff at Qarmat Ali had identical symptoms. KBR managers told him it was "a nonissue."
Blacke described the sequence of events to a Senate committee in June 2008.
According to a subsequent Senate query, KBR did not test the site until August 2003 or notify the Army until September 2003. The Indiana Guard learned of the contamination when KBR managers showed up in protective suits. KBR closed the plant shortly after. (Source: Julie Sullivan, The Oregonian, March 7, 2009)
Tuesday, March 10, 2009
Enbridge projects creation of 2,000 pipeline jobs this summer and next
SUPERIOR, Wis. - Two oil pipeline projects expected to get under way this summer in Illinois, Wisconsin and Minnesota will put about 2,000 construction workers on the job.
Although some regulatory approval is still needed, it is expected to come in time for the summer construction season.
The Enbridge Energy Pipeline projects are dubbed "Alberta Clipper" and "Southern Lights," but Plumbers and Steamfitters Business Agent Jeff Deveau calls them "a ray of sunshine.” Thirty percent of his Duluth-Superior union members are out of work.
"Locally here we've got 115 guys off right now and this job will help some of these guys from losing their homes, get health insurance again," he said.
Deveau says the recession is delaying or cancelling projects that otherwise would put his people to work.
Most of the 2,000 construction jobs will come in Wisconsin and Minnesota. Two of the three main contractors, Precision Pipeline of Eau Claire and Michel's Construction of Brownsville, are based in Wisconsin.
Although some regulatory approval is still needed, it is expected to come in time for the summer construction season.
The Enbridge Energy Pipeline projects are dubbed "Alberta Clipper" and "Southern Lights," but Plumbers and Steamfitters Business Agent Jeff Deveau calls them "a ray of sunshine.” Thirty percent of his Duluth-Superior union members are out of work.
"Locally here we've got 115 guys off right now and this job will help some of these guys from losing their homes, get health insurance again," he said.
Deveau says the recession is delaying or cancelling projects that otherwise would put his people to work.
Most of the 2,000 construction jobs will come in Wisconsin and Minnesota. Two of the three main contractors, Precision Pipeline of Eau Claire and Michel's Construction of Brownsville, are based in Wisconsin.
Monday, March 9, 2009
Pipeline malfunction blamed for diesel problem on Cenex system
MINOT, N.D. - A chemical malfunction in a local oil pipeline has sidelined a lot of truckers.
Cenex Harvest States says it happened along its pipeline at the Minot terminal.
An additive that is supposed to disappear before it goes to diesel fuel pumps is showing up in the fuel. That it has led to engine problems and forced some truckers to change their fuel filters almost daily.
CHS says as soon as it discovered the problem, workers took steps to correct it.
It’s also reimbursing retailers and customers.
While the fuel problems are isolated to diesel drawn from the Minot terminal, CHS estimates about 12 tanker loads of the bad diesel fuel went out to service stations.
"We were able to trace it back to our fuel distribution terminal in Minot which is one of the outlets for our pipeline that comes from our refinery in Laurel, Montana. We discovered the problem wasn’t with our fuel, it was with an additive product that is used to move the fuel smoothly down the pipeline and it is supposed to remove itself by the time it gets to the terminal and has been pumped and loaded out to customers," says CHS spokesperson Lani Jordan.
That’s a reference to what pipeliners commonly cause “slickum,” a polymer that makes fuel in pipelines more slippery so that they have less friction with pipeline walls.
Cenex Harvest States says it happened along its pipeline at the Minot terminal.
An additive that is supposed to disappear before it goes to diesel fuel pumps is showing up in the fuel. That it has led to engine problems and forced some truckers to change their fuel filters almost daily.
CHS says as soon as it discovered the problem, workers took steps to correct it.
It’s also reimbursing retailers and customers.
While the fuel problems are isolated to diesel drawn from the Minot terminal, CHS estimates about 12 tanker loads of the bad diesel fuel went out to service stations.
"We were able to trace it back to our fuel distribution terminal in Minot which is one of the outlets for our pipeline that comes from our refinery in Laurel, Montana. We discovered the problem wasn’t with our fuel, it was with an additive product that is used to move the fuel smoothly down the pipeline and it is supposed to remove itself by the time it gets to the terminal and has been pumped and loaded out to customers," says CHS spokesperson Lani Jordan.
That’s a reference to what pipeliners commonly cause “slickum,” a polymer that makes fuel in pipelines more slippery so that they have less friction with pipeline walls.
Friday, March 6, 2009
CenterPoint unit to transport natural gas for Chesapeake
HOUSTON - A subsidiary of CenterPoint Energy Inc. has agreed to transport natural gas for a subsidiary of Chesapeake Energy Corp.
CenterPoint Energy Gas Transmission Co., the interstate natural gas pipeline subsidiary of Houston-based CenterPoint Energy, will move the Haynesville shale natural gas production of Chesapeake Energy Marketing Inc., a subsidiary of Oklahoma City-based Chesapeake Energy.
The companies entered into two separate agreements to move gas to CenterPoint Energy Gas' Perryville Hub in northern Louisiana and from there to Carthage, Texas. CenterPoint owns and operates a 1.6 billion cubic feet per day pipeline between the two areas.
A 27-month backhaul agreement provides for gas volumes to ramp up to 500 million cubic feet per day of firm transportation capacity, with initial gas flows beginning April 1.
CenterPoint Energy Gas Transmission Co., the interstate natural gas pipeline subsidiary of Houston-based CenterPoint Energy, will move the Haynesville shale natural gas production of Chesapeake Energy Marketing Inc., a subsidiary of Oklahoma City-based Chesapeake Energy.
The companies entered into two separate agreements to move gas to CenterPoint Energy Gas' Perryville Hub in northern Louisiana and from there to Carthage, Texas. CenterPoint owns and operates a 1.6 billion cubic feet per day pipeline between the two areas.
A 27-month backhaul agreement provides for gas volumes to ramp up to 500 million cubic feet per day of firm transportation capacity, with initial gas flows beginning April 1.
Thursday, March 5, 2009
Magellan strikes sour note with plan to “simplify” capital structure
TULSA, Okla. – Stock in Magellan Midstream Partners, L.P. (NYSE: MMP) nosedived following a March 2 announcement that it had reached an agreement with Magellan Midstream Holdings, L.P. (NYSE: MGG) on March to “simplify” their capital structure by transforming the incentive distribution rights and approximately two percent economic interest of MMP's general partner into MMP common units.
Unitholders will receive 0.6325 MMP common units in exchange for each MGG common unit they own at closing, representing a 25 percent premium to the March 2 closing price of MGG's common units. The “simplification” will result in MGG being dissolved and in MMP owning its general partner, which will no longer have an economic interest in MMP.
Unitholders will receive 0.6325 MMP common units in exchange for each MGG common unit they own at closing, representing a 25 percent premium to the March 2 closing price of MGG's common units. The “simplification” will result in MGG being dissolved and in MMP owning its general partner, which will no longer have an economic interest in MMP.
Wednesday, March 4, 2009
GE to invest $150 million in partnership with ATP in Gulf of Mexico
HOUSTON and STAMFORD, Conn. - GE Energy Financial Services, a unit of GE, has agreed to invest $150 million in a partnership with Houston-based ATP Oil & Gas Corp. which will own and operate a floating oil and gas production unit in deepwater Gulf of Mexico.
Subject to completion of customary closing conditions, GE Energy Financial Services will invest $150 million for a 49 percent limited partnership stake, its first investment in a floating oil and gas production facility.
ATP Oil & Gas will hold the remaining 51 percent stake and will serve as managing partner.
Subject to completion of customary closing conditions, GE Energy Financial Services will invest $150 million for a 49 percent limited partnership stake, its first investment in a floating oil and gas production facility.
ATP Oil & Gas will hold the remaining 51 percent stake and will serve as managing partner.
Tuesday, March 3, 2009
Spectra Energy caves in, gives up on Islander East Pipeline
HARTFORD, Conn. - Houston-based Spectra Energy Corp. and Westborough, Mass.-based National Grid USA are withdrawing their appeal to the U.S. Commerce Department to overturn Connecticut regulators' denial of environmental permits for the Islander East project, Spectra spokeswoman Toni Beck said on Feb. 26.
Spectra and National Grid had proposed a nearly 50-mile pipeline, which included a 23-mile section in Long Island Sound from Branford, Conn., through the Thimble Islands to Wading River, N.Y., on Long Island's north shore. They submitted their first application to federal officials in 2001.
The companies had appealed the permit rejections all the way to the U.S. Supreme Court, but justices declined to hear the case in December.
Connecticut officials claimed a final victory on Feb. 25 in their extended battle against the proposed Islander East pipeline after the project's developer withdrew its last appeal.
Spectra and National Grid had proposed a nearly 50-mile pipeline, which included a 23-mile section in Long Island Sound from Branford, Conn., through the Thimble Islands to Wading River, N.Y., on Long Island's north shore. They submitted their first application to federal officials in 2001.
The companies had appealed the permit rejections all the way to the U.S. Supreme Court, but justices declined to hear the case in December.
Connecticut officials claimed a final victory on Feb. 25 in their extended battle against the proposed Islander East pipeline after the project's developer withdrew its last appeal.
Monday, March 2, 2009
Alaska chides BP for mistakes leading to pipe blast on North Slope
ANCHORAGE - The Alaskan state government's Petroleum Systems Integrity Office has criticized maintenance procedures at BP PLC's Prudhoe Bay oil field that led to a potentially life-threatening gas pipeline explosion last year.
"The portion of the pipeline that ruptured went 10 years between (corrosion) inspections," said a letter from PSIO coordinator Allison Iversen to BP Exploration Alaska Senior Vice President Tony Brock dated Feb. 20. It is vital that BP, "implement a process to track and close out missed corrosion inspections...in time to prevent a similar incident," Iversen said.
She gave BP until May 15 to take all necessary corrective action.
Iversen also said she was "deeply concerned with the timeliness and depth of the incident investigation related to this event." The pipe ruptured on Sept. 29, 2008, but BP's review summary was not submitted until Jan. 13.
The letter was posted on the PSIO Web site.
"The portion of the pipeline that ruptured went 10 years between (corrosion) inspections," said a letter from PSIO coordinator Allison Iversen to BP Exploration Alaska Senior Vice President Tony Brock dated Feb. 20. It is vital that BP, "implement a process to track and close out missed corrosion inspections...in time to prevent a similar incident," Iversen said.
She gave BP until May 15 to take all necessary corrective action.
Iversen also said she was "deeply concerned with the timeliness and depth of the incident investigation related to this event." The pipe ruptured on Sept. 29, 2008, but BP's review summary was not submitted until Jan. 13.
The letter was posted on the PSIO Web site.
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