Energy Transfer offers $5.7 billion for Southern Union, tops Williams bid by small amount

Energy Transfer Equity LP (ETE) after the close of the market on July 19 agreed to buy Southern Union Co. (SUG) for about $5.7 billion, its second effort to outbid Williams Cos. and complete the biggest purchase of a pipeline operator this year.

The proposal values SUG at about $44.25 a share, redeemable in cash or stock, according to a statement from Dallas-based Energy Transfer and Southern Union. It's a 57 percent premium over Southern Union’s closing price on June 15, the day before the companies first announced the takeover.

"Our ability to be creative with our structure has improved the tax efficiency, therefore allowing us to increase our price," Energy Transfer Chairman Kelcy Warren said in the statement.

Williams and Energy Transfer are vying for Houston-based Southern Union's 15,000 miles of natural-gas pipelines, which can connect new fields in Texas and Oklahoma to markets in the U.S. Midwest and Florida.

Southern Union rose above the Energy Transfer offer price, gaining $1.01, or 2.3 percent, to $44.34 at 4:05 p.m. on July 19 in New York Stock Exchange composite trading. Energy Transfer fell 50 cents, or 1.1 percent, to $43.53. Williams rose 60 cents, or two percent, to $30.64.

The ETE offer just barely trumps the Williams offer, Standard & Poor's said in a statement.

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.

U.S. House Natural Resources Committee passes oil and gas bill

WASHINGTON - On July 13, the House Natural Resources Committee approved H.R. 2150, the National Petroleum Reserve Alaska Access Act, by a bipartisan vote of 28 to 14.

As part of House Republicans' American Energy Initiative, the legislation, if passed and signed into law, will create new jobs, support current energy jobs in Alaska, and help lower energy costs by ensuring NPR-A resources are developed and transported in a timely and efficient manner.

"The passage of this bill signifies the bipartisan support for increased American energy production and recognition that the NPR-A should be used as intended - as a petroleum reserve to provide energy to the American people," said Chairman Doc Hastings (WA-04). "Alaska has tremendous energy resources that are being kept under lock-and-key because of the Obama Administration’s policies."

The National Petroleum Reserve Alaska Access Act

• Affirms that the NPR-A is explicitly designated for the purpose of providing oil and natural gas resources to the United States.
• Requires that annual lease sales be held in the NPR-A in areas with the most oil and natural gas resources.
• Sets firm timelines for infrastructure permits to be approved to ensure that bureaucratic delays do not prevent oil and natural gas resources from being transported out of the NPR-A. It establishes a 60 day timeframe to approve infrastructure permits for leases where the Secretary has already issued a permit to drill and a six-month timeframe to approve infrastructure permits for all other existing and future Federal leases.
• Requires the Secretary of the Interior to prepare a right-of-way plan detailing how existing and future leases will be within 25 miles of an approved road or pipeline.
• Requires an updated comprehensive assessment, in consultation with the State of Alaska and the American Association of Petroleum Geologists, of all oil and natural gas resources in the NPR-A.

Williams Partners LP gets approval to expand Transco pipeline

TULSA, Okla. - Natural gas distributor Williams Partners L.P. has received regulatory approval to expand a pipeline to the Mid-Atlantic region of the U.S.

The company said on July 11 that the Federal Energy Regulatory Commission has approved expanding the pipeline to serve customers in Virginia and Maryland.

The expansion will add about 142,000 dekatherms of incremental firm natural gas capacity to Williams Partners' 10,000-mile Transco pipeline system. A dekatherm is a measurement of how much heat can be generated from natural gas. The Transco pipeline has a total capacity of 9.6 million decatherms per day, and carries gas throughout the northeastern and southeastern United States.

The project will connect with East Tennessee Natural Gas to provide fuel for power generation and local distribution customers, a Williams news release stated.

The company said it plans to have the expansion completed by November 2012.

The project will cost about $55 million and add about three miles of new pipeline and include the upgrade of compressor facilities in Virginia.

Williams Cos. Inc. is the general partner and holds the controlling interest in Williams Partners. Williams Partners has a Zacks #4 Rank (short-term Sell),

Potential Keystone XL leaks grossly underestimated, study finds

A study released on June 11 suggests that the worst-case spill scenarios contemplated by TransCanada, the company behind a proposed 2,000-mile pipeline linking oil deposits in Canada to the American Gulf Coast, are grossly underestimated - and that hundreds of rivers, streams and aquifers are vulnerable to toxic oil contamination.

The analysis, conducted by a professor of civil engineering at the University of Nebraska-Lincoln at the request of the environmental group Friends of the Earth, examined methods used by TransCanada to calculate spill scenarios for an existing leg of the pipeline system, known as Keystone, and determined that the company made "flawed and inappropriate assumptions about the frequency and severity of expected spills from its pipelines."

Among other things, the analysis concludes that while TransCanada has estimated that the proposed Keystone XL expansion pipeline would experience 11 significant spills of more than 50 barrels, or 2,100 gallons, of crude oil over a 50-year lifespan, "a more realistic assessment is 91 significant spills."

The analysis also suggests that TransCanada tweaked its spill factor calculations to produce an estimate of one major spill on the 1,673 miles of pipeline about every five years. But an examination of government data on spill rates for similar pipelines, according to the study, suggests that Keystone would experience "a more likely average of almost two major spills per year."

In just one year of operation, the existing leg of the pipeline has had one significant spill and 11 smaller spills.

The study also concluded that the amount of time it would take to shut down the proposed pipeline should a leak occur at or near a river crossing - among the most environmentally sensitive points along any pipeline - could be as much as 10 times greater than that assumed by TransCanada.

Keystone XL would cross nearly 2,000 rivers in six states.