November 2015, Vol. 242, No. 11


In the News: California Tightens Responses to Future Energy Spills

Just months after a pipeline rupture dumped 20,000 gallons of oil into the ocean on Oct. 8 near Santa Barbara, CA, Gov. Jerry Brown signed a package of bills aimed at preventing and better responding to future spills. Brown said he signed the bills “in order to more fully protect our inland and coastal communities and environments from the harm of oil spills.”

The Los Angeles Times reported that the state fire marshal now must annually inspect all intrastate pipelines under its jurisdiction by approving SB 295. The May 19 spill at Refugio State Beach involved a section of corroded pipeline that was being inspected every other year. Over 100,000 gallons spilled, with one-fifth of it reaching the ocean.

Brown also approved a bill, AB 864, requiring oil pipelines in environmentally sensitive areas be fitted with remote leak detectors and automatic shut-off valves.

A third bill, SB 414, seeks to speed response to spills by enlisting commercial fisherman and other boat operators to help contain leaks in their area. They would be outfitted with containment gear.

“The devastating effects from the oil spill this year in Santa Barbara County impacted birds, mammals and other marine life and caused the closure of beaches and fishing resulting in economic losses,” Brown wrote in a signing message.
“Our coastline and surrounding environments contribute to the great and unique landscape of California. These bills improve planning for and prevention of oil spills and our response when spills occur.”

The measures were introduced by Sen. Hannah-Beth Jackson and Assemblyman Das Williams, both Democrats from Santa Barbara. “The Refugio Oil Spill gave us a prime and devastating example of a defective pipeline that was not equipped with leak detection technology and automatic shut-off valves,” Williams said.

The leak detectors and shut-off valves must be used in replacement pipelines in ecologically sensitive areas in the coastal zone starting Jan. 1, 2018. Existing pipelines must be retrofitted by Jan. 1, 2020, with plans submitted by July 1, 2018.
There was no official opposition to the bills, according to an analyst for the Legislature. The Western States Petroleum Association, whose members include pipeline operators, was neutral on the bills.

3 Workers Killed At Williams Gas Plant Explosion in Louisiana

An explosion at a Louisiana natural gas facility on Oct. 8 left three workers dead and two seriously injured, police said. The explosion happened about 11 a.m. at a facility owned by the Transcontinental Gas Pipeline Co., a subsidiary of major natural gas supplier Williams Partners, authorities said. The facility is located on a small highway near the oil and gas city of Houma.

The workers killed and injured were contractors doing maintenance work when the explosion occurred, Williams Partners said in a statement. The names of the victims and the company or companies they worked for were not released immediately. Williams Partners said its 13 workers at the facility were unharmed.

In the statement, Williams Partners said the facility was shut down and no gas was flowing through its pipeline at the time of the explosion. The company said service to its customers had not been interrupted. The bodies of the three workers were found following the explosion, said state police Trooper Evan Harrell. Black smoke billowed from the facility hours after the explosion. Officials said the smoke posed no health risks, and no evacuations were ordered.

The company said the maintenance work involved a “slug catcher,” a tank designed to separate liquids and impurities from the natural gas stream.

Willbros Group Sells Professional Services Business for $130 Million

Willbros Group, Inc. announced Oct. 6 a deal to sell its Professional Services segment to TRC Companies, Inc. for $130 million cash. The agreement is binding and the sale is expected to close before the end of November. Willbros will retain $43 million of the net proceeds to maintain its current liquidity and working capital. The balance of the proceeds, net of closing and transaction expenses, will be used to reduce the company’s term loan debt.

“This transaction clearly enables us to present a much improved balance sheet to meet the expectations of our customers and investors. We set out a year ago to improve our capital structure and our operating efficiency,” said John T. McNabb, II, chairman and CEO. “We have restructured our Oil & Gas segment with a new management team and a focus on our areas of strength and competency. We have resized our corporate and segment G&A expenses and have significantly reduced our long term debt, optimizing our capital structure.

“Our three segments are qualified both operationally and financially for the markets we address, and we can now focus on building backlog and delivering net income. With the overall transformation of Willbros, we are confident that we can achieve stable, predictable and improved performance in 2016.

“Our next milestone events will be completion of the sale of our Professional Services segment and a smaller non-strategic business unit, and we are confident that we will complete both transactions in the near-term. With these sales completed, since the end of 2014 the company will have reduced its term loan debt from $270 million to less than $100 million.”

Dominion Transmission Setting Up Midstream Operation

Dominion Transmission Inc. (DTI) plans to contribute all its gathering and processing facilities to a new, affiliated midstream company, Dominion Gathering & Processing Inc. Dominion Resources Inc. pipeline company, also known as DTI, will no longer provide any gathering or products extraction services.

DTI told the Federal Energy Regulatory Commission (FERC) the rise of shale gas, especially the Marcellus and Utica formations, has changed the look of midstream services in the Appalachian region. Its gathering systems in Appalachia were developed decades ago by predecessor companies in support of a bundled merchant function.

Dominion calculated total net book value of the facilities as of April 1, 2016, the intended transfer date, will be about $434 million. DTI will remain one of the nation’s largest interstate natural gas pipeline and storage companies.

Study: No Fracking Bonanza for California’s Monterey Shale

A U.S. Geological Survey report last month downgraded the fracking potential of California’s vast Monterey Shale oil deposits. The study is the latest to lower a 2011 federal energy estimate that billed the Monterey Shale as a game-changer for U.S. oil, with what was then estimated at 13.7 billion bbls of recoverable oil overall.

Instead, the USGS’s new study said, the most oil-rich portion of the giant shale formation holds just 21 MMbbls of oil that can be recovered by intensive methods, such as hydraulic fracturing. The report looked only at the San Joaquin Basin, one of four basins that make up the 1,750-square-mile Monterey Shale formation. Upcoming USGS reports will estimate the recoverable petroleum in the other three basins.

Mountain Valley Pipeline to Service Virginia via Partnership with Roanoke Gas

Mountain Valley Pipeline, LLC and RGC Midstream, LLC will deliver natural gas to several Virginia communities along the proposed Mountain Valley Pipeline (MVP) route.
RGC Midstream, LLC, a subsidiary of RGC Resources, I
nc. will acquire a 1% ownership interest in Mountain Valley which is a joint venture between EQT Midstream Partners, LP, majority owner and operator of the proposed pipeline; and affiliates of NextEra Energy, Inc. WGL Holdings, Inc. and Vega Energy Partners, Ltd. Roanoke Gas Co. will become a shipper on the pipeline to expand its southwest Virginia customer base.

With its connection to EQT Midstream Partners’ existing Equitrans system in West Virginia, MVP addresses infrastructure constraints associated with the development of natural gas from the Marcellus and Utica shale plays, while offering critical supply diversity to meet the demand for natural gas across the mid-Atlantic and Southeast.

The MVP is a 300-mile long, 42-inch pipeline with an estimated total cost of $3-3.5 billion. Mountain Valley Pipeline, LLC expects to file a certificate application with FERC shortly and is targeting a full in-service in late 2018.

GE Moving Gas Engine Plant from Waukesha to Canada

GE Power & Water will stop manufacturing gas engines in Waukesha, WI and will open a new facility to build engines in Canada that will also have back-up capacity to manufacture diesel engine components for GE Transportation.

GE employs 350 at its manufacturing facility in Waukesha, building gas engines for compression, mechanical drive and power generation applications. GE notified employees in Waukesha and over 400 U.S. suppliers of its plans.

GE said it plans to build a US$265 million state-of-the-art “Brilliant Factory” in Canada that will optimize efficiency and streamline production using data, analytics and software. The factory is expected to be completed in 20 months and will be a flexible production facility that can expand over time and support manufacturing requirements for other GE businesses.

GE said it will build its facility in Canada in order to access additional support from the country’s export credit agency, Export Development Canada (EDC). The authorization for the U.S. export credit agency – the Export-Import Bank – lapsed July 1.

Gulfport Energy in Utica Shale Midstream JV in Ohio with Rice Energy

Gulfport Energy Corp. announced an agreement with Rice Midstream Holdings, LLC, a wholly owned subsidiary of Rice Energy Inc., to form a midstream joint venture to develop natural gas gathering and water services assets to support Gulfport’s dry gas Utica Shale development in eastern Belmont County and Monroe County, OH. The JV will be supported by long-term, fee-based service agreements with Gulfport.

Gulfport will own 25% of the JV and Rice will own the remaining 75%. Rice will be responsible for constructing and operating the JV’s assets:

• A dry gas gathering system with capacity to gather over 1.8 MMdth/d of natural gas consisting of 165 miles of high- and low-pressure, 12- to 30-inch gathering pipelines with multiple interconnections to interstate pipelines, including Rockies Express, ET Rover, TETCO and Dominion East Ohio.
• 50,000 hp of compression for gathering and delivery into downstream interstate pipelines.
• A fresh water distribution system to deliver fresh water to pads for completion activities

Pension Plan Board Eyes $1 Billion Investment in Western Canada Midstream

Canada Pension Plan Investment Board will provide $1 billion in funding for midstream acquisitions in Western Canada that will be identified and evaluated by Calgary-based Wolf Infrastructure Inc. The focus will be on processing facilities, gathering systems, pipelines, storage facilities and terminals used by oil, gas and liquids producers.

“As a long-term investor, we see midstream as an attractive sector given the significant investment required in Western Canada to support growth in natural gas and natural gas liquids production in new areas,” said Avik Dey, CPPIB’s managing director for natural resources.

Crimson Pipeline Acquiring Chevron Assets

Long Beach, CA-based Crimson Pipeline L.P. will expand to central and northern California upon completion of acquisition of Chevron Pipe Line Company’s (CPL) KLM Pipeline and ancillary assets and Western San Joaquin Laterals (WSJ).

Larry Alexander, president and CEO of Crimson, said, “This acquisition from Chevron Pipe Line Co. complements our existing operations and will enhance Crimson’s capacity to safely transport crude oil throughout California.”

The KLM Pipeline transports crude oil from California’s prolific San Joaquin Valley to San Francisco Bay area refiners, including Tesoro Golden Eagle Refinery, Valero Benicia Refinery and Shell Martinez Refinery. The KLM Pipeline system includes 295 miles with a capacity of 90,000 bpd.

With this acquisition, Crimson’s California pipeline network will traverse about 1,000 miles across northern, central and southern California. Once operations can begin, the acquisition will expand Crimson’s transportation capacity in California from 160,000 to 250,000 bpd.

Now North Dakota Has Too Much Housing

After struggling to house thousands of migrant roughnecks during the boom, North Dakota faces a new real estate crisis: The frenzied drilling that made it No. 1 in personal-income growth and job creation for five consecutive years hasn’t lasted long enough to support the oil-fueled building explosion, according to Bloomberg.

Civic leaders and developers say many new units were already in the pipeline, and they anticipate another influx of workers when oil prices rise again. But for now, hundreds of dwellings approved during the heady days are rising, skeletons of wood and cement surrounded by rolling grasslands, with too few residents who can afford them.
“We are overbuilt,” said Dan Kalil, a commissioner in Williams County in the heart of the Bakken. “I am concerned about having hundreds of $200-a-month apartments in the future.”

Laborers descended on the state, many landing in temporary settlements of recreational vehicles, shacks and even chicken coops. But with oil prices less than half of their peak, North Dakota’s white-hot economy is slowing. The average occupancy rate of new units in Williston was 65% in August, even as 1,347 apartments are under construction or have been approved there.

Louisiana Company Proposes LNG Export Project

Baton Rouge-based G2 LNG announced Oct. 5 that it plans to construct an $11 billion LNG export facility on the ship channel in Cameron Parish. If built, it would be one of the largest capital investments in Louisiana history.

Before construction can begin, the company needs full export approval from the Department of Energy. It also needs an environmental review and approval from FERC. The company says the facility would be able to export 14 million metric tons of LNG a year. G2 LNG, which formed in June 2014, hopes to get federal approval and begin construction by mid-2017. G2 LNG joins a couple dozen companies proposing U.S. LNG export projects on all three coasts.

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