Trans-Alaska Pipeline to shut down again for bypass tie-in

ANCHORAGE, Alaska - Following an oil leak that was discovered at Pump Station 1 at Prudhoe Bay on Jan. 8, the trans Alaska pipeline system (TAPS) was restarted at reduced pressure on Jan. 11.

At noon on Jan. 12, the oil flow through the TAPS line was running at 400,000 b/d. Producers were supplying anywhere from 330,000 to 350,000 b/d (roughly half the typical flow from North Slope production), and the remaining crude was coming from Pump Station 1 storage tanks.

Prior to the leak, TAPS was transporting 630,000 b/d from Alaska's North Slope. That is down considerably from the two million b/d the line transported at peak.

The amount of leaking oil worsened when the pipeline was restarted. More than 2,300 gallons of oil flowed into an 800-gallon containment tank between 8 p.m. Jan. 11 and 4 p.m. Jan. 12, and vacuum trucks were continuously removing it, said Stefani Bell of Alyeska Pipeline Co. The amount is about half of what has leaked from the broken pipe so far.

Personnel were able to keep the overflow to just an inch deep in the five-foot tank.

Crews are performing various tasks to mitigate risks associated with having the pipeline shut during the cold Alaskan winter.

Two pipeline cleaning pigs, likely to have posed a problem had they been left in the cold line, have been located within the system, and are expected to be extracted mid-day on Jan. 13.

Additionally, personnel are working to prevent the buildup of wax and ice in the pipeline by restoring the oil flow.

About 100 people are working in Fairbanks to fabricate 157 feet of steel pipeline, 24 inches in diameter, that will be transported by aircraft to Prudhoe Bay in nine separate pieces, Alyeska said on Jan. 10. The new pipe will be reassembled and installed underground to replace the section of damaged pipe that is a critical feeder of oil into the system's Pump Station 1, the first of a series of stations with mechanical pumps that propel the oil through the pipeline.

The pipeline will again be shut down on Jan. 14 to prepare for the tie-in of the pipeline bypass.

AOPL report shows pipeline share of U.S. petroleum transport rose in 2008

WASHINGTON, D.C. - Oil pipelines had an increasing share of petroleum transportation in the U.S. during 2008, according to annualized data from the Association of Oil Pipe Lines.

"Pipelines accounted for 71 percent of all petroleum transportation in 2008, up from 66.8 percent in 2007 and 54 percent in 1990," said Andrew J. Black, president of AOPL.

U.S. crude oil and product pipelines continued to increase their share of total U.S. petroleum transportation in 2008, the Association of Oil Pipe Lines said on Jan. 4.

AOPL’s report covers four major petroleum transportation modes - pipelines, motor carriers, water carriers and railroads - and two major petroleum categories: oil and petroleum products.

For 2008, AOPL said, total ton-miles for all transportation modes grew by 5.6 percent from 2007.

Pipelines transported 12.9 more crude and products in 2008 (629.9 billion ton-miles) than in 2007, while motor carriers transported 0.03 percent less (35.1 billion ton-miles), water carriers moved 10.3 percent less (194 billion ton-miles) and railroads moved 13.5 percent less (23 billion ton-miles), according to the report.

It said that in 2008, pipelines were the largest conveyers of crude (83 percent, up from about 53 percent in 1990) and of petroleum products (62 percent, up from 56 percent in 1990). (Source: Association of Oil Pipe Lines, Jan. 4, 2011)

MarkWest Energy agrees to buy EQT natural gas assets for $230 million

MarkWest Energy will pay EQT Corp. $230 million for Kentucky property.

The acquisition includes an associated natural gas liquids pipeline and a 100 million cubic feet per day cryogenic processing plant.

EQT Corporation and MarkWest Energy Partners said on Jan. 2 that MarkWest had agreed to acquire EQT's natural gas processing complex in Langley, Ky., for $230 million.

MarkWest said it will expand the cryogenic processing capacity immediately following the close of the acquisition, which is expected by the end of the first quarter.

Upon the close of the transaction, EQT will execute a long-term agreement with MarkWest to provide processing services for its Kentucky Huron/Berea shale gas, including natural gas liquids transportation, fractionation, and marketing services through 2022.

MarkWest Energy agrees to buy EQT natural gas assets for $230 million

Markwest Energy will pay EQT Corp. $230 million for Kentucky property.

The acquisition includes an associated natural gas liquids pipeline and a 100 million cubic feet per day cryogenic processing plant.

EQT Corporation and MarkWest Energy Partners said on Jan. 2 that MarkWest had agreed to acquire EQT's natural gas processing complex in Langley, Ky., for $230 million.

MarkWest said it will expand the cryogenic processing capacity immediately following the close of the acquisition, which is expected by the end of the first quarter.

Upon the close of the transaction, EQT will execute a long-term agreement with MarkWest to provide processing services for its Kentucky Huron/Berea shale gas, including natural gas liquids transportation, fractionation, and marketing services through 2022.

Plains, PAA to acquire Mississippi gas storage facility for $750 million

DALLAS, Texas - Plains All American Pipeline LP (PAA) and its natural-gas unit PAA Natural Gas Storage LP (PNG) have agreed to acquire SG Resources Mississippi LLC's salt-cavern natural-gas storage facility for about $750 million.

PAA went public in April 2010.

The facility, called Southern Pines, went into operation in 2008 and has three caverns in operation, with a fourth under way. The facility ties into eight major natural-gas pipelines. The facility is fully contracted for the coming storage season, with an estimated 85percent and 70 percent of capacity booked for the following two seasons.

As a result of the acquisition, PAA expects to raise its annual distribution for the February payment to $1.38 a unit and end next year at $1.45 a unit- an increase of 7.4 percent from its current rate of $1.35 a unit.

PAA has arranged $800 million in financing, including $600 million of equity.

Plains All American will provide $338 million of equity, including a two percent general partner contribution. Plains also will provide $200 million in debt financing to PAA Natural Gas.

Companies point fingers at one another over Kleen Energy blast

MIDDLETOWN, Conn. - The owners of the Middletown electric power plant where an explosion killed six people in 2010 say a Texas engineering company's faulty pipeline design led to the disaster, records from a federal lawsuit show.
It is among the claims made in documents submitted in response to the suit, filed in August by a New Jersey man injured in the February explosion. In those documents, companies involved in the construction of the plant and the process of cleaning its pipes lay blame on each other and on companies not previously cited by the federal government for safety violations.
The plant owner, Kleen Energy, contends that Texas company WorleyParsons "designed the main gas fuel supply line in such a way that it could not be properly cleaned with natural gas in order to meet the turbine manufacturer's specifications.''
WorleyParsons' engineering design created "the potentially dangerous condition that ultimately led to the explosion," Kleen energy charges.
The blast happened as natural gas was being forced through pipes to clean out debris.
Kleen Energy also blames Bluewater Energy Solutions, claiming that the Atlanta-based company hired by O&G Industries, the general contractor as well as part owner of the plant, to oversee the "gas blows" failed to properly supervise the operation, failed to protect workers and allowed the natural gas to escape and eventually explode.
The federal Occupational Safety and Health Administration issued a total of $16.6 million in fines against O&G Industries, Keystone Construction and Maintenance Services, a major subcontractor, as well as against Bluewater.
The federal investigation found 119 violations and concluded the companies cut corners to reach construction deadlines quicker, failed to prepare workers for the dangerous gas-blow procedure and created the deadly conditions that led to the massive explosion.

Energy Pipeline News reports 2010 portfolio gains of 28.92% – 74.75%

Energy Pipeline News reports that its three energy pipeline limited partnership portfolios in 2010 once again outperformed the stock market.

The typical equity fund in the United States in 2010 returned just short of 19 percent in 2010, while the Standard and Poor’s 500-stock index rose 12.8 percent.

By comparison, Energy Pipeline News Portfolios 1 and 2 (tax sheltered, unleveraged) returned 28.92 percent and 29.11 percent respectively in 2010. Portfolio 3 (unsheltered, leveraged) returned 74.75 percent in 2010.

The Energy Pipeline News portfolios invest almost exclusively in energy pipeline limited partnerships such as Kinder Morgan Energy Partners LP (NYSE: KMP) and Copano Energy Partners LP (Nasdaq CPNO). Return is based on both dividends received common unit trades.

Energy pipeline limited partnerships have in general outperformed the Standard & Poor’s 500 Index, which posted total returns of just 4 percent since the beginning of 2000.

Pipeline limited partnerships are regarded as cash cows because they return a higher per-unit payout than typical high-dividend stocks. However, there are tax consequences to investing in them – especially if the investments are made outside of tax shelters such as 401(k) investment retirement accounts (IRAs).

Energy Pipeline News provides comprehensive coverage of the energy pipeline business, with special emphasis on pipeline master limited partnerships as investment vehicles. Visit http://www.energypipelinenews for further information.