Significant change in market needed to save Alaska natural gas pipeline

WASHINGTON - The U.S. natural gas market is going to have to change dramatically for pipeline developers to salvage their plan to ship gas from Alaska to the Lower-48 states, a key federal official said on Jan. 10 at the Platts Energy Podium.

"It is going to take a big turnaround in the market, no doubt about it," Larry Persily, federal coordinator of Alaska Natural Gas Transportation Projects, said at the event in Washington, D.C.

TransCanada and ExxonMobil have been working with state and federal officials on plans to build a $40 billion, 48-inch-diameter pipeline from the North Slope to the Canadian border, where Canadian pipelines would carry gas to the Lower-48.

However, shale gas development has dampened U.S. demand for the gas, and North Slope producers BP, ConocoPhillips and ExxonMobil met with Alaska Governor Sean Parnell before the conference to discuss alternatives to the project, including a pipeline to a new liquefied natural gas (LNG) export project.

After the meeting, BP CEO Bob Dudley and ConocoPhillips CEO Jim Mulva said the LNG project seemed to be a better way to get the gas to market, casting growing doubts on the viability of the pipeline.

Persily acknowledged that the pipeline's future hinges on the producers. "It is going to take concurrence of the three producers. They are the ones that control the vast majority of the leased acreage, the production coming out of there. They are the ones that are going to have to sign 20-year firm shipping commitments on the pipeline worth more than $100 billion."

Persily said he thought the project had a 50-50 chance of being constructed by 2020. "I haven't given up on the project. ... What it would take is the companies believing the market is there at a sufficient price."

He also noted that there are key benefits to building the pipeline instead of the LNG project. The Alaska Natural Gas Pipeline Act provides federal loan guarantees for the pipeline, and $21 billion worth of guarantees are currently authorized, he said. The law also allows for accelerated depreciation for the pipeline and an enhanced oil recovery investment tax credit for the gas treatment plant, which together are worth more than $1 billion in tax savings, he added.

Atlas Pipeline Partners, L.P. announces long-term agreement with XTO Energy

PHILADELPHIA, Pa. - Atlas Pipeline Partners, L.P. announced on Dec. 1 that it has entered into a long-term, fee-based agreement with XTO Energy Inc., a subsidiary of ExxonMobil, to provide natural gas gathering and processing services for up to an incremental 60 million cubic feet per day (mmcfd) from the Woodford Shale region of Oklahoma to its Velma processing facility in Velma, Okla.

Under the agreement, APL will provide gathering and processing services for XTO production in the liquids-rich area within the Woodford Shale. The agreement also supports APL's previously announced expansion of its Velma system.

"We are pleased to enter into this long-term agreement with XTO with respect to production in the area around our Velma facility. Activities in the area have increased over the past year and we are adding capacity to address the needs of our producer customers. We are excited to work with them on their development plans and are pleased to be adding de-risked cash flows to the business through this arrangement," stated Eugene N. Dubay, chief executive officer of APL.

"This agreement will help provide XTO Energy the necessary infrastructure to operate effectively in the Woodford Shale and access markets beyond the region," said Terry Schultz, senior vice president of marketing, XTO Energy.

Oil from ExxonMobil's Silvertip spill found on 58 percent of Yellowstone River shoreline

NEW YORK - The failed Exxon Mobil Silvertip pipeline that spilled up to 50,000 gallons of oil into the Yellowstone River has coated 58 percent of the Yellowstone River's shoreline, according to Businessweek.com.

The tally released on July 26 by Montana Department of Environmental Quality director Richard Opper offers one the first clear gauges of the scope of the spill after weeks of high water slowed access to fouled areas.

Just over 40 percent of shoreline inspected to date had light to very light oil. Seventeen percent had moderate oil. Just one percent was heavily contaminated.

The state says the July 1 spill, which came amid flooding from mountain snowmelt, dumped up to 1,200 barrels of oil (50,400 gallons) into the Yellowstone near Laurel, Mont.

PHMSA's Quarterman says probe of Exxon pipeline leak may take months

WASHINGTON - The U.S. House Subcommittee on Railroads, Pipelines and Hazardous Materials, chaired by Rep. Bill Shuster (R-Pa.), held a hearing on July 14 to focus on the July 1 release of crude oil from the Exxon Mobil Silvertip Pipeline in Yellowstone County, Mont.

It will take several months to investigate the cause of the leak, the U.S. pipeline safety regulator told Congress on July 14.

"We will also ensure that the Silvertip pipeline is free of safety and environmental risks before Exxon Mobil is granted permission to restart the line," Cynthia Quarterman, head of the Pipeline and Hazardous Materials Safety Administration (PHMSA), told lawmakers at a House hearing on the leak.

Quarterman said the Yellowstone River was still too high to examine the pipe that leaked, and it "may take weeks if not months" before the pipeline can be brought up from the river bed.

She added that PHMSA has routinely inspected the pipeline for years. "As recently as June 6-10, 2011, PHMSA personnel performed an integrity management field inspection on the Silvertip pipeline," she said. It reviewed Exxon Mobil's 2009 internal inspection data for the line and found no violations. It did find, however, an anomaly at the river crossing that was below required repair conditions under federal pipeline safety regulations, she said.

ExxonMobil Pipeline Co. exceeded burial requirements for its Silvertip crude oil pipeline in Montana before it ruptured Quarterman said. PHMSA requires at least four feet of cover when a pipeline crosses a river that is 100 or more feet wide. When ExxonMobil performed a depth-of-cover survey in December 2010, it found five feet of cover in the riverbed and 12 feet of cover on the crossing's south side, she said.

On July 13, Exxon said it had begun preliminary work to replace the pipeline segment that ruptured and spilled an estimated 1,000 barrels of oil into the Yellowstone River in Montana on July 1.

Exxon says PHMSA's Silvertip Pipeline restart plan could take weeks

HOUSTON, Texas - Exxon Mobil Corp. said on July 6 it could take weeks to set up a plan to restart its Montana pipeline that leaked crude into the Yellowstone River on July 1.

"The restoration of the line is not the primary focus. It's not something that is going to happen in the next day or week or couple of weeks," said Gary Pruessing, president of Exxon Mobil Pipeline Co.

The pipeline delivers oil to Exxon's 60,000 barrel-a-day Billings refinery, which is adjacent to the Yellowstone River. The facility processes crude oil from Wyoming and Alberta into gasoline and ultra-low-sulfur diesel.

PHMSA orders ExxonMobil to improve safety at ruptured Montana pipeline

WASHINGTON, D.C. - Federal authorities have ordered ExxonMobil to make safety improvements to a ruptured pipeline in Montana that caused 750 to 1,000 barrels of crude oil to gush into the Yellowstone River.

The cause of the pipeline break is still under investigation, authorities said.

The U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a corrective action order to ExxonMobil Pipeline Co. that will require new safety measures along the Silvertip hazardous liquid pipeline, the federal agency said on July 5.

The order will require ExxonMobil to re-bury the pipeline underneath the river bed to protect it from external damage, the federal agency said in a statement. The oil company will also have to conduct a risk assessment on the pipeline where it crosses any waterway. Exxon will then need to submit a restart plan before operation can resume, officials said.

"The safety of our nation's pipelines is a priority and the investigation into this incident is ongoing," U.S. Transportation Secretary Ray LaHood said in a statement. "It is our responsibility to ensure pipelines are safely delivering energy to U.S. households and businesses, and when companies are not living up to our safety standards, we will take action. We will continue to work with the EPA, while ensuring that those responsible are held accountable."

The Silvertip Pipeline is a 12-inch pipeline about 69 miles long that carries crude oil from the Silvertip station in Elk Basin, Wy., to an ExxonMobil Refinery in Billings, Mont., federal officials said.