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Fri July 11, 2014
INSIDE ENERGY: Booming Oil And Gas Production Taxes Pipeline Network
In the first quarter of 2014, the United States surpassed both Russia and Saudi Arabia as the world’s largest oil producer. It already hit that mark for natural gas late last year. All of that oil and gas has to be transported from the fields where it’s drilled to refineries and processing plants, and most of that is done by pipeline, but the nation’s pipeline infrastructure isn’t currently up to the task.
Rancher Bob Kayser lives just east of Douglas, Wyoming, one of the many places in the West where oil production has ramped up in recent years. The Oregon Trail crosses his property, which turns out to be more than just a fun historical fun.
"This was the easiest way for the settlers to come across," Kayser says, "and it’s also the easiest way for the power lines and pipelines.'
Kayser has four pipelines on his property, while some of his neighbors have as many as ten. Pipelines have some distinct benefits -- they carry natural gas away from oil wells, which reduces flaring, a source of harmful air emissions, they get truck traffic off the roads and they're typically safer than other ways of moving oil and gas. But because pipeline companies have the right of eminent domain, they can go pretty much wherever they want.
"When they put that pipeline in, you’re then prohibited from using the surface for anything but agricultural operations," Kayser says. "If I want to put up a machine shed, I have to maintain a distance from the pipeline. So I lose the right to use my surface, and I get a small, one-time payment."
That's at the forefront of Kayser's mind as a new natural gas processing plant is being built across the street to deal with a glut of gas coming out of nearby oil wells. At least one of the pipelines from that facility could could cross his property. Even if it doesn't, there will likely be others.
More than a half a million miles of new pipeline will be built in the United States by 2035, according to a new study by the Interstate Natural Gas Association of America. That’s 22 trips around the Earth and then some. A sizeable chunk will be built across the Rocky Mountain West.
"North Dakota, in 2012 put over 2400 miles of new pipe into service," says Justin Kringstad, with the North Dakota Pipeline Authority. "That’s the distance from Los Angeles to New York City, in one year’s time frame, all taking place within the state of North Dakota."
This year, three major crude oil pipeline projects will start moving oil out of the Bakken, the major shale play in North Dakota and Eastern Montana. Looking ahead to 2016, another three are planned, with a combined capacity of the embattled Keystone XL pipeline.
'That pace of 2400 miles per year, it’s definitely not slowing down," Kringstad says.
It’s a similar story across the country. On a recent trip to Pennsylvania, I toured part of Washington County, where a lot of new gas development is happening in the Marcellus shale. Everywhere there were big tracts of newly-deforested land where pipelines had been laid.
And the estimate of a half million miles more pipeline might be low. Kringstad says his first attempt to predict Bakken oil production, back in 2008, was so, so wrong.
"It’s almost laughable that we had such low expectations," Kringstad says.
The uncertainty is common across most shale plays -- from the Bakken to the Marcellus to the Niobrara in Wyoming and Colorado -- and that complicates the task of estimating how much pipeline will need to be built. Wyoming Pipeline Authority director Brian Jeffries says he has a pretty good handle on how much new pipeline will be needed for natural gas and natural gas liquids in the next decade, but "crude oil, man, I couldn’t call that one for you."
That said, Jeffries says for the most part, the new pipelines will hardly be noticed by the general public. By way of example, he explains that in single half mile of I-25 between Cheyenne and the Colorado state line, "there's roughly 3.5 billion cubic feet a day of gas going through there, which is about one twentieth of the US daily average consumption. They go up and over the bluff where that buffalo silhouette sits. And nobody notices them."
That is, until something goes wrong, which is entirely possible. Right now, each federal inspector is responsible for almost enough pipeline to circle the earth. In short, they’re overworked. With the addition of hundreds of thousands of extra miles, it not clear how they’ll be able to keep up.
This piece is part of a series on pipelines. We'll have more in coming weeks.
Natural Resources & Energy
Natural Resources & Energy