Friday, May 28, 2010

Obama extends ban on deepwater well drilling to six months

WASHINGTON - Escalating his administration's response to the disastrous Gulf oil spill, President Obama on May 27 announced a new six-month moratorium on deepwater oil drilling permits while a presidential commission investigates the Deepwater Horizon accident.
Obama on May 22 appointed a presidential commission to conduct a wide-ranging, six-month investigation of the causes of the ongoing oil spill in the U.S. Gulf. He traveled to the Gulf Coast on May 28, his second visit to Louisiana since the accident.
BP PLC’s latest effort to cap the blowout, an attempt begun on May 26 to plug the mile-deep well with heavy drilling mud, a tactic never before tried at such depths, was still under way as Obama left Louisiana on May 28.
The “top kill” maneuver's success would prove enormously welcome to the Gulf region if successful, and also to the White House, Congress, federal agencies and other institutions that share responsibility for oversight, regulation and what went wrong.
As Obama left the state, no announcement was forthcoming from BP regarding the success of the “top kill” attempt. An announcement on the success or failure was not expected until at least the morning of May 30.
Under the new ban, controversial lease sales off the coast of Alaska will be delayed pending the results of the new commission's investigation, and lease sales planned in the Western Gulf and off the coast of Virginia will be canceled, an aide to the president said on May 27.
Shell Oil was poised to begin exploratory drilling this summer on Arctic leases as far as 140 miles offshore.
Those steps, along with new oversight and safety standards also to be announced, are the results of a 30-day safety review of offshore drilling already conducted by Interior Secretary Ken Salazar at Obama's direction. Salazar briefed Obama on that inquiry’s conclusions on May 26 in the Oval Office.
The new announcements could be an early sign of a fundamental shift in the administration's policies on offshore drilling, which Obama promoted and hoped to expand prior to the April 20 explosion and ultimate destruction of the Deepwater Horizon drilling rig. The accident killed 11 people and unleashed a gusher of crude that has begun to wash up on land and cripple seabirds.
While the new regulatory oversight steps are being taken before the exact causes of the accident have been determined, congressional investigators have released details suggesting BP ignored warning signs of instability in the exploratory well they were attempting to cap when the explosion occurred.
At the Capitol on May 27, lawmakers grilled various officials at five separate congressional hearings. Topics included the Gulf spill's environmental damage, the administration's response and the impact of the catastrophe on small businesses.
On May 26, Salazar told the House Natural Resources Committee that lax oversight of oil companies dates to the administration of Republican President George W. Bush.
"Essentially whatever it is they wanted is what they got," Salazar said.
GOP Rep. Doug Lamborn of Colorado asked when Obama's team would stop blaming problems on an administration that left office 16 months ago. Salazar replied that the federal Minerals Management Service, while heavily criticized lately, is still not "the candy store of the industry, which you and others were a part of."

Thursday, May 27, 2010

FPL Group shareholders approve name change to NextEra

JUNO BEACH, Fla. - The shareholders of FPL Group, Inc. (NYSE: FPL) on May 21 voted to change the name of the company to NextEra Energy, Inc.
The company announced the proposed name change on March 19.
During the company's annual meeting, the proposal was approved by more than 95 percent of the shareholders who cast a vote. Following the shareholder vote, the name of the company was formally changed from FPL Group, Inc. to NextEra Energy, Inc.
"NextEra Energy, Inc., is a strong and fitting name for this innovative, competitive, forward-thinking energy company," Chairman and CEO Lew Hay said.
The company plans to change its New York Stock Exchange ticker symbol from FPL to NEE in late June. The company will not change the name of its utility subsidiary, Florida Power & Light Co.
At the annual meeting, the board of directors declared a regular quarterly common stock dividend of 50 cents per share. The dividend is payable June 15 to shareholders of record on June 4.

Wednesday, May 26, 2010

Oklahoma indies like TransCanada decision to build southern end of Keystone XL first

TULSA – The change of plans by TransCanada to construct the southern leg of the Keystone XL pipeline before the northern portion is being seen as a “win-win” by Oklahoma oil producers
TransCanada has chosen to build the segment of the crude oil pipeline from the Cushing hub to the Gulf Coast refining region before it constructs the system's northern leg, an industry executive announced May 12.
The change in plans will provide more takeaway capacity to the Cushing interchange to help U.S. producers compete with the Canadian oil sands production that ultimately will flow south, officials said.
The 4,100-mile Keystone XL pipeline will eventually deliver heavy crude from the oil sands near Hardisty, Alta., to Cushing and then to the Gulf Coast.
TransCanada announced a week earlier that it had revised its plan, choosing to first build Keystone's southern leg from Cushing to Port Arthur, Texas. The Keystone XL extension project awaits regulatory approval by the U.S. State Department.
The Domestic Energy Producers Alliance (DEPA) of Oklahoma City has opposed the Keystone project, arguing that a glut of heavy oil into the Cushing hub would depress the market for U.S producers. The Cushing interchange is a pricing point for crude oil on the New York Mercantile Exchange.
However, DEPA Chairman Harold Hamm on May 12 chenged tack and praised the TransCanada move as a "win-win-win decision" for independent producers, TransCanada and consumers. Hamm is the CEO of Continental Resources Inc. of Enid.

Tuesday, May 25, 2010

Lawsuit against BP filed in Alaska

JUNEAU - BP stockholders have filed a lawsuit in Alaska against top BP executives claiming that "gross mismanagement" has tarnished the company's reputation and hurt its value.
The lawsuit, filed in Superior Court in Anchorage on May 20, alleges the BP officials did not take the necessary steps to ensure compliance with safety rules and environmental safeguards. It cites cases including April's oil rig explosion in the Gulf of Mexico and concerns that U.S. lawmakers raised earlier this year about BP operations on Alaska's North Slope.
The lawsuit seeks unspecified damages, and appointment of an "independent corporate monitor" to implement safety and environmental
compliance measures.
Named defendants include BP Chief Executive Tony Hayward and members of BP's board of directors.
The state of Alaska is currently suing BP for $1 billion over a crude oil spill on the North Slope.

Monday, May 24, 2010

OSHA fines three companies for fatal pipeline explosion in Mississippi

JACKSON, Miss. - The Occupational Safety and Health Administration (OSHA) has levied fines totaling $108,000 against three companies in connection with a pipeline explosion that killed one man and injured three others in 2009 in Smith County, Mississippi.
The explosion occurred on July 15 along Smith County Road 99 near Sylvarena, Miss.
Workers were using nitrogen to pressure-test the pipeline. During the tests, something caused the line to explode, officials said. OSHA said the lid on the separator where the pipes attached flew off, throwing portions of the massive pipe into the air.
James Lee Candler, 40, of Sulphur, La., was killed during the explosion.
OSHA fined Mustang Engineering $65,000; Grand Bluff Construction Co., of Beckville, Texas, $38,500; and Priority Energy Services of Chicago. $4,9000.

Friday, May 21, 2010

FERC denies Yukon Pacific request for more time to build LNG plant

JUNEAU, Alaska - Federal regulators have denied a request by Yukon Pacific Co. to give the company more time to build a liquefied natural gas plant in south-central Alaska.
The denial by the Federal Energy Regulatory Commission (FERC) creates new questions about an option to liquefy natural gas from the North Slope for shipment by sea, which is part of a proposal to build a “bullet” pipeline to bring Alaska's gas to Valdez for liquefaction and then export by sea to domestic or overseas markets.
FERC, in its denial letter, said environmental and regulatory standards have changed since the company obtained permission to build in 1995, and those need to be addressed.
Permission had been extended repeatedly. But the letter from Jeff C. Wright, director of the office of energy projects, said the company's ability to build and run an export terminal for liquefied natural gas near Valdez will no longer be valid after May 15.

Thursday, May 20, 2010

‘60 Minutes’ whistleblower sues to shut down BP’s ‘Atlantis’ Rig

HOUSTON - A whistleblower who appeared on the May 16 telecast of “CBS 60 Minutes” contending that the BP Atlantis platform in the U.S. Gulf of Mexico is a disaster waiting to happen filed a lawsuit on May 17 aimed at shutting the rig down.
The suit seeks to force the federal government to halt operations at Atlantis, alleging that BP never reviewed critical engineering designs for the operation and is therefore risking another catastrophic accident that could dwarf the company's Deepwater Horizon spill.
The allegations about unsafe conditions on BP's Atlantis platform were first made in 2009, but they were laid out in fresh detail in the lawsuit filed in U.S. District Court in Houston against Interior Secretary Ken Salazar and the Minerals Management Service, the agency responsible for regulating offshore drilling in the Gulf.
The whistleblower is Kenneth Abbott, a former project control supervisor contracted by BP who gave an interview to "60 Minutes.”
In a conversation last week with the ProPublica Web site, Abbott alleged that BP failed to review thousands of final design documents for systems and equipment on the Atlantis platform - meaning BP management never confirmed the systems were built as they were intended– and didn't properly file the documentation that functions as an instruction manual for rig workers to shut down operations in the case of a blowout or other emergency.
Abbott alleges that when he warned BP about the dangers presented by the missing documentation, the company ignored his concerns and instead emphasized saving money.
"There were hundreds, if not thousands, of drawings that hadn't been approved and to send drawings (to the rig) that hadn't been approved could result in catastrophic operator errors," Abbott told ProPublica.

Wednesday, May 19, 2010

Kinder Morgan, Copano form pipeline joint venture

HOUSTON - Kinder Morgan Energy Partners, L.P. (NYSE: KMP) and Copano Energy, L.L.C. (Nasdaq: CPNO) on May 14 announced that they have entered into formal agreements for Eagle Ford Gathering LLC, a 50/50 joint venture to provide gathering, transportation and processing services to natural gas producers in the Eagle Ford Shale resource play in South Texas. The companies previously announced a letter of intent for the joint venture on Nov. 13, 2009.
"This project builds on the long-standing partnership between Copano and Kinder Morgan to capitalize on the strong and growing demand in South Texas," said Bruce Northcutt, Copano Energy's president and chief executive officer. "This new joint venture will provide producers in the western Eagle Ford Shale a new, fully integrated midstream alternative for their gathering, transportation, processing and fractionation needs, including access to multiple residue gas markets."
"Kinder Morgan is happy to be expanding its commercial alliance with Copano and looks forward to providing producers a timely solution for their growing Eagle Ford gas volumes through the new joint venture," said Duane Kokinda, president of Kinder Morgan's Texas Intrastate Gas Pipelines.
Due to the high level of interest expressed by producers, Kinder Morgan and Copano have each increased their committed capacity from 150,000 to 375,000 MMBtu per day to Eagle Ford Gathering for transportation on Kinder Morgan's Laredo-to-Katy pipeline and processing at Copano's Houston Central processing plant. Additionally, the joint venture expects the first phase of construction to significantly extend beyond the original 22 miles previously announced.
In connection with the execution of the joint venture agreements, Copano and Kinder Morgan also amended and extended their existing straddle processing agreement and transportation agreement through the end of 2024. Representatives of Eagle Ford Gathering have been in negotiations with multiple producers regarding potential contracts for gathering, transportation and processing services. Copano will serve as operator and managing member of Eagle Ford Gathering.

Tuesday, May 18, 2010

Legal experts say criminal charges likely in Gulf oil spill

WASHINGTON - Federal investigators are likely to file criminal charges against at least one of the companies involved in the Gulf of Mexico spill, raising the prospects of significantly higher penalties than a current $75 million cap on civil liability, legal experts say.
An inquiry by the Homeland Security and Interior Departments into how the spill occurred is still in its early stages and authorities have not confirmed whether a criminal investigation has been launched.
But environmental law experts say it's just a matter of time until the Justice Department steps in - if it hasn't already - to initiate a criminal inquiry and take punitive action.
"There is no question there'll be an enforcement action," said David M. Uhlmann, who headed the Justice Department's environmental crimes section for seven years during the Clinton and Bush administrations. "And, it's very likely that there will be at least some criminal charges brought."
While Sen. Lisa Murkowski (R-Alaska) successfully led the opposition from oil producing states, at least for now blocking an administration-backed proposal to lift the current $75 million cap on liability under the Oil Pollution Act of 1990 to $10 billion, there's no cap on criminal penalties. In fact, prosecutors in such cases can seek twice the cost of environmental and economic damages resulting from the spill.

Monday, May 17, 2010

Enterprise, Duncan Energy expanding Eagle Ford facilities

HOUSTON - Enterprise Products Partners L.P. (NYSE: EPD) and Duncan Energy Partners L.P. (NYSE: DEP) on May 12 announced an expansion initiative at their jointly-owned Shoup and Armstrong facilities in South Texas, which provide natural gas processing and natural gas liquids (NGLs) fractionation services.
The upgrades are part of a comprehensive plan to expand the partnerships' midstream infrastructure in South Texas to handle increasing natural gas production from the growing Eagle Ford Shale play.
"This project further demonstrates the value of our existing assets in South Texas, which serve as the foundation for our strategy of focusing on the efficient and creative use of capital to generate attractive returns from increasing activity and higher demand for midstream services in the Eagle Ford Shale," said Michael A. Creel, Enterprise president and chief executive officer. "These expansions will not only give us the flexibility to accommodate more volumes, but should also position us to capture additional value from the various physical qualities of the natural gas, particularly the high NGL content, that are characteristic of Eagle Ford Shale production."
At the Shoup facility, located in Nueces County, Texas, the focus is on modifying existing fractionation equipment, which would increase its capacity to 77,000 b/d. The work is expected to be completed in the second quarter of 2010.
Incremental volumes of NGLs to fill the additional capacity are expected to be supplied by six existing Enterprise natural gas plants currently feeding the Shoup facility. Production from these plants is expected to increase significantly over the next six months as the quantity and quality of the gas supplies increase.

Friday, May 14, 2010

Interior to split Minerals Management Service into two agencies

WASHINGTON - The U.S. Interior Department announced on May 11 its intent to split the Minerals Management Service into two divisions, one
focusing on gathering royalties from oil and gas companies and another focused on safety inspections.
Interior Secretary Ken Salazar made the announcement at 1 p.m. EDT.
The reorganization comes amid the vast Gulf Coast oil spill that has called into question the efficacy of the government's regulation.
The tiny agency currently plays dual roles, focusing on collecting money as well as on ensuring the safety of oil rigs. Some former employees have
said that amounts to a conflict-of-interest, as employees must focus on keeping oil revenue flowing while also focusing on safety.
A Wall Street Journal examination of the MMS's track record last week found several instances of the agency identifying potential safety problems
and then either not requiring follow-up or relying on the industry to craft a solution. In some cases, the industry didn't do its part.
The Journal also found that the safety record of U.S. offshore drilling compares unfavorably, in terms of deaths and serious accidents, to other
major oil-producing countries. Over the past five years, an offshore oil worker in the U.S. was four times more likely to be killed than a worker in European waters, and 23 percent more likely to sustain an injury, according to International Association of Drilling Contractors data, which
is adjusted for man-hours worked.
The U.K., home to one of the largest offshore-drilling industries in the world, has already adopted a regulatory structure similar to the one that the Obama administration is moving toward. In 1998, after a fire aboard a North Sea platform killed 167 people, the U.K. separated its offshore safety-oversight agency from the revenue-gathering side.

Thursday, May 13, 2010

Minnesota stiffens gas pipeline rules following sewer line blast

MINNEAPOLIS, Minn. - State safety officials on May 10 issued new requirements, effective immediately, for documenting the safe installation of gas lines.
The requirements from the Department of Public Safety Office of Pipeline Safety were sent to all 57 gas distribution operators in Minnesota three months after a contractor hit an Xcel Energy pipeline and caused a blast that destroyed a house in St. Paul, Minn.
Pipeline safety director Jerry Rosendahl said on May 10 that Minnesota is the first state to issue such requirements.
Operators who ignore the rules are subject to citations and fines, Rosendahl said.
The requirements are intended to prevent "cross-boring," where underground gas pipelines intersect and puncture privately owned sewer pipes.
On Feb. 1, a roto-rooter contractor punctured a natural gas pipeline that had been inadvertently installed through a sewer service lateral.
The gas escaped into a home and ignited, causing an explosion and fire that destroyed the home.

Tuesday, May 11, 2010

Energy Transfer Equity acquiring Regency Energy Partners GP

Regency Energy Partners LP (Nasdaq: RGNC) announced on May 11 that Energy Transfer Equity, L.P. (NYSE: ETE) will acquire the general partner interest in Regency Energy Partners LP from an affiliate of GE Energy Financial Services, a unit of GE. In addition, Regency will acquire a 49.9 percent ownership interest in the Midcontinent Express Pipeline from Energy Transfer Equity, L.P.
ETE will acquire a 100 percent interest in Regency's general partner from an affiliate of GE Energy Financial Services for ETE preferred units with a value of approximately $300 million. Affiliates of GE Energy Financial Services will retain their 24.7 million limited partner units and will be Regency's second largest unitholder, holding 21 percent of Regency's common units after giving effect to the transaction.
In addition, GE Energy Financial Services will have the right to name two board members to the Regency board of directors and one board member to the ETE board of directors.
ETE will own the general partner of both Energy Transfer Partners, L.P. (NYSE: ETP) and Regency. Regency and Energy Transfer Partners (ETP) will operate as separate entities, both with publicly traded limited partner units.
"Energy Transfer Equity is an experienced midstream leader with a strong track record of supporting its limited partnership, assisting ETP in obtaining investment grade status and growing its distributable cash flow," said Byron Kelley, chairman, president and chief executive officer of Regency. "Once the transaction closes, we look forward to calling upon ETE's expertise and extensive knowledge while continuing to focus on implementing the strategic growth objectives we have set for Regency."
Regency also announced on May 11 that it has entered into a definitive agreement to purchase a 49.9 percent interest in the Midcontinent Express Pipeline from ETE. Regency will fund the transaction through the issuance of approximately 26.27 million Regency limited partner units to ETE. ETE will hold 22 percent of Regency's common units after giving effect to the transaction.

Monday, May 10, 2010

NorthernStar suspends Bradwood Landing LNG terminal in Oregon

PORTLAND, Ore. - NorthernStar Natural Gas Inc. said on May 4 that it is suspending efforts to develop a liquefied natural gas import terminal at
Bradwood Landing on the Columbia River, 25 miles east of Astoria.
The announcement ends a six-year effort that consumed as much as $100
million of investors' capital and countless hours of regulatory work while sparking a firestorm of public opposition from property owners and environmentalists.
The Houston-based energy development company sent out a one-page news release on May 4 quoting NorthernStar President Paul Soanes saying extended delays in state and federal permitting and the difficult investment environment "have forced us to suspend development."
The company characterized its move as a "suspension" of the project, not a termination.
Mike Carrier, natural resources policy director for Gov. Ted Kulongoski, said the company told him on May 4 that another developer could conceivably resurrect the project. But Carrier said the company told him its financial backer, a private equity fund that has put $100 million into the company's LNG proposals in Oregon and California, was pulling the plug.
NorthernStar began development work nearly six years ago at an abandoned mill site on the lower Columbia River. At the time, gas prices were high and importing the commodity to the United States from abroad seemed like a lucrative opportunity.
Bradwood's suspension also has implications for a controversial 200-mile pipeline that Northwest Natural Gas Co. and TransCanada Corp. were planning to build to connect the LNG terminal with an interstate pipeline in central Oregon near Maupin.

Friday, May 7, 2010

Sinking price of Canadian oilsands crude threatens bitumen production, pipeline

The cost of oil from Alberta’s tar sands is trading near the cheapest relative to the New York benchmark in 17 months as refineries in the Midwest shut for maintenance and pipeline costs escalate.
Western Canada Select traded at a discount of $14.65 to West Texas Intermediate on April 30, near the $18 gap on April 15 that was the widest since November 2008.
Enbridge Inc. has won approval for a 33 percent tariff increase to move oil via its pipeline to the Midwest, where the U.S. Energy Department said more than twice as much refinery capacity than usual is offline for maintenance.
The higher tolls will hurt Suncor Energy Inc. and Alberta’s oil sands producers, which will be forced to offer discounts to the refiners to remain competitive with oil available from the U.S. Gulf Coast.

Thursday, May 6, 2010

BP has fought safety measures for deepwater oil rigs since Clinton days

WASHINGTON - BP, the company that chartered the Deepwater Horizon oil rig that caught fire and sank in the Gulf of Mexico in April, spent years battling federal regulators over how many layers of safeguards were needed to prevent a rig accident of the type that destroyed the Deepwater Horizon.
One area of immediate concern, industry experts said, was the lack of a remote system that would have allowed workers to clamp shut Deepwater Horizon's wellhead so it would not continue to gush oil.
The well drilled by the rig was still spilling 210,000 gallons of oil a day into the Gulf of Mexico on May 4.
In a letter sent as late as 2009 to the U.S. Department of the Interior, BP objected to what it called "extensive, prescriptive regulations" proposed in new rules to toughen safety standards. "We believe industry's current safety and environmental statistics demonstrate that the voluntary programs continue to be very successful."
While BP's arguments against safeguards date to the Clinton administration, BP won the greatest concessions during the Bush administration.
The agency said operators were expected to have multiple layers of protection to prevent a spill.
But according to aides to Sen. Bill Nelson, a Florida Democrat who has followed offshore drilling issues for years, the industry aggressively lobbied against an additional layer of protection known as an "acoustic system," saying it was too costly. In a March 2003 report, the agency reversed course, and said that layer of protection was no longer needed.

Wednesday, May 5, 2010

Mid-America in 1,970-bbl. Kansas gasoline leak

SOLOMON, Kansas – A farmer here noticed a distinct odor of gasoline as he stepped out of his house on the afternoon of April 23.
Prochaska drove onto Buffalo Road about five miles northwest of Solomon and noticed gasoline coming out of the ground about 400 yards east of his farm home.
Fuel from a ruptured eight-inch Mid-America mainline was gushing into the waterway, headed for the Solomon River.
Rory Tillett, director of Ottawa County Emergency Management, estimated
1,970 barrels - 82,740 gallons - spilled from the line. "It ran open for an hour and a half before it was shut down," Tillett said.
Prochaska called 911 to report the leak. Dispatchers took the call at 5:07 p.m., Tillett said.
The Prochaskas - Tom and Patty - were among 10 people evacuated from their homes that night.
Officials with Mid-America Pipeline, owned by Enterprise Products of Houston, rushed to the scene, along with emergency workers from
Bennington and Salina.
The leak was stopped on the evening of April 23, said Alan Siemer, Enterprise Products' central region operations manager.
While the flow of fuel was stopped, fixing the leak has been
troublesome, Tillett said, because of muddy conditions. Another pipeline
carrying anhydrous ammonia - owned by Magellan Pipeline - runs
parallel to the ruptured line.

Tuesday, May 4, 2010

Waxman asks Halliburton to explain cementing of fatal BP well in Gulf

WASHINGTON – The initial inquiries into the cause of the fatal explosion and fire that sank the Transocean Deepwater Horizon rig in April, killing 11 and injuring 17, are centering on the cementing of the well by Halliburton 20 hours before the fatal explosion that ultimately sank the rig.
Cementing must be done in such a way that gaps do not open between the outside of the well pipe and the inside of the hole drilled into the sea floor. If cement is not poured properly, oil and natural gas can escape - the cause of more than a dozen previous well blowouts in the Gulf.
House Energy and Commerce Chairman Henry Waxman on April 30 sent a letter to Halliburton, the company responsible for pouring the cement seal, asking company executives to brief committee investigators on conditions at the rig, and preserve all documents relating to their work on the sea floor.
Elmer Danenberger, an expert on offshore drilling who retired from the U.S. Department of the Interior in January, told ABC News he is worried that "lack of attention" during the pouring of the cement could be to blame.
"With these cementing operations it's just a matter of not being attentive enough," he said. "What you want is a closed system. You want the cemented pipe totally sealing the well bore. If you don't have that, you have problems."

BP fought backup safety measures for deepwater oil rigs

WASHINGTON - BP, the company that chartered the oil rig that caught fire and sank in the Gulf of Mexico in April, spent years battling federal regulators over how many layers of safeguards weree needed to prevent a rig accident of the type that destroyed the Deepwater Horizon.
One area of immediate concern, industry experts said, was the lack of a remote system that would have allowed workers to clamp shut Deepwater Horizon's wellhead so it would not continue to gush oil.
The well drilled by the rig was still spilling 210,000 gallons of oil a day into the Gulf of Mexico on May 4.
In a letter sent as late as 2009 to the U.S. Department of the Interior, BP objected to what it called "extensive, prescriptive regulations" proposed in new rules to toughen safety standards. "We believe industry's current safety and environmental statistics demonstrate that the voluntary programs continue to be very successful."
While BP's arguments against safeguards date to the Clinton administration, BP won the greatest concessions during the Bush administration.

Three U.S. refineries latest to sue to get out of Keystone contracts

CALGARY, Alta. - Three small U.S. oil refineries are suing TransCanada to get out of their contracts to ship oil on the Keystone pipeline. They say that cost overruns on the Keystone pipeline have gone over budget by 145 percent in Canada and 92 percent in the U.S.
Canadian crude producers have already sought to be released from such contracts.
The U.S. refineries are suing TransCanada Corp. in hopes of breaking contracts to ship oil on Keystone, a new pipeline they say has been beset with cost overruns.
The refineries, owned by Sinclair Oil Corp., National Cooperative Refinery Association and Coffeyville Resources Refining & Marketing LLC, together committed to ship 95,000 b/d on the $5-billion line, which would deliver Canadian crude near their locations in the central United States.
Now the refineries want out. In three separate but nearly identical statements of claim, which a TransCanada spokesman has called “without merit,” the refiners argue that Keystone was so expensive to build, it will no longer be a cheaper option than shipping on pipelines run by competitor Enbridge Inc.
The refiners accuse TransCanada of misleading them when they signed shipping contracts in the summer of 2007. TransCanada nearly doubled its construction estimates in October, 2007, from US$2.8-billion to $5.2-billion.
As a result, the three refiners are demanding to be released from their shipping contracts, which together would account for about 12.5 percent of Keystone’s capacity.
If they fail in court, the refiners want US$950-million in damages, plus interest and expenses.

Monday, May 3, 2010

TransCanada launches open season for proposed Alaska gas pipeline

TransCanada on April 30 began taking bids for space on its proposed natural gas pipeline from the North Slope.
The open season is the 90-day period in which a pipeline owner takes bids on space in the proposed line. Depending on the bids and the conditions placed upon them, the project might or might not proceed.
The Alaska Pipeline Project, as TransCanada has dubbed its proposal, was developed in accordance with the process outlined in the state’s Alaska Gasline Inducement Act (AGIA). That means the proposal complies with a variety of state-imposed requirements, in exchange for state assistance with the preconstruction planning and design costs and certain incentives.
The bids, if they come, will come from gas owners, and that primarily means the three major North Slope petroleum producers.
Exxon Mobil, the primary leaseholder at the North Slope’s largest undeveloped gas field, Point Thomson, is working with TransCanada. The two firms together have proposed two alternatives - a 1,700-mile line to Alberta, Canada, or an 800-mile bullet line to Valdez.