Approvals For TransCanada Tar Sand Pipeline Gets Sticky; Plus PMHSA Low-Stress Tug-Of-War And FERC Posting Edict

Despite criticism of his company’s proposed, nearly 2000-mile pipeline, Robert Jones, vice president, Keystone Pipelines, TransCanada Corporation, says he is very confident that the U.S. State Department will approve construction of the Keystone XL pipeline which would take tar sand from Hardisty, Alberta, through six U.S. states, picking up conventional oil along the way, and depositing the tar and oil at Gulf Coast refineries. The Environmental Protection Agency (EPA) and Rep. Henry Waxman (D-CA), influential chairman of the House Energy and Commerce Committee, have raised questions about the proposed pipeline.

In response in part to those concerns and others by landowners, TransCanada withdrew in August an application it had submitted to Pipeline Hazardous Materials and Safety Administration (PHMSA) asking to be able to operate XL at a higher operating pressure. The decision to pull that application came after a number of House and Senate members raised questions about TransCanada’s plans to use thinner steel in the pipeline if the application to operate at 80 percent of maximum pressure instead of 72 percent was granted by PHMSA. Jones explains TransCanada pulled the application because the company was not doing a good enough job communicating that the permit would have resulted in a safer pipeline.

The withdrawal of the “special permit” application from PHMSA came a few weeks after the EPA in July said that a State Department draft environmental impact statement (EIS) was “inadequate.” Among the concerns is the potential for harm to the Ogallala Aquifer, which provides drinking water for almost 80 percent of Nebraskans. Waxman’s objections related to greenhouse gas emissions. In a letter to Secretary of State Hillary Clinton, Waxman said, “Extracting tar sands bitumen and upgrading it to synthetic crude oil produces roughly three times greater greenhouse gas emissions than producing conventional oil on a per unit basis. Tar sands development also has devastating effects on boreal forests and wetlands, wildlife habitat, migratory bird species, water quality and air quality. Yet the draft EIS for the Keystone XL decision fails to consider the primary environmental concern associated with the project.”

Jones says he expects a final EIS from the State Department by the end of this year, and construction approval soon after. The State Department must approve construction because the pipeline crosses the Canadian-U.S. border. He points out that the Bush administration approved the Alberta Clipper and the Obama administration approved the Keystone pipeline, the only two tar sands pipelines in the U.S. He adds that approval of Keystone XL would help assure U.S. energy security because the alternative to bringing tar sands from Alberta to Gulf Coast refineries is bringing foreign oil from places such as Saudi Arabia. On the issue of greenhouse gas emissions, Jones states that when emissions from transporting Saudi oil are figured in, GHG emissions on tar sands are only 5-15 percent per barrel more. He notes that Keystone XL will also carry conventional oil from the Bakken basin in Montana and North Dakota, where there are currently pipeline bottlenecks.

The U.S. Geological Survey estimated mean undiscovered volumes of 3.65 billion barrels of oil, 1.85 trillion cubic feet of associated/dissolved natural gas, and 148 million barrels of natural gas liquids in the Bakken Shale Formation of the Williston Basin Province located in Montana and North Dakota. In late August, Enbridge Inc. said it will spend about $550 million to expand its pipelines serving oil producers in the Bakken and Three Forks formations in North Dakota, Saskatchewan, Montana and Manitoba.

PHMSA Low-Stress Pipeline Proposal
Regulation of liquids pipelines is also a current issue with regard to offshore in the Gulf of Mexico, Pacific and Atlantic Oceans. That is one of the issues at the heart of the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposed regulation of low-stress, liquids pipelines not covered in its 2008 final rule. That applied only to rural higher-risk, larger-diameter onshore pipelines that are located in or within one-half mile of an unusually sensitive area (USA) and operate at stress levels greater than 20 percent of specified minimum yield strength.

The remaining low-stress liquid lines would be covered by the proposed rule issued on June 22, 2010. It would extend pipeline safety rules to smaller-diameter rural low-stress pipelines located in or within one-half mile of a USA and all rural low-stress pipelines of any diameter located outside the one-half mile USA buffer except for those that cross navigable waterways (which are already regulated). PHMSA estimates that 803 miles of rural low-stress pipelines were regulated by the 2008 final rule. This second phase rule would cover an addition 1,384 miles.

Peter T. Lidiak, director, pipeline, American Petroleum Institute, objects to PHMSA’s intention to subject offshore pipelines currently regulated by the U.S. Coast Guard to PHMSA regulation. These are pipelines, for example, running from marine facilities such as a terminal at a refinery to bulk storage facilities. The issue here is not that there are a lot of miles at issue. Lidiak says instead the concern is that it makes no sense for two different agencies to oversee the same pipeline, especially here where the Coast Guard does a good job of oversight.

Deborah Hersman, chairman of the National Transportation Safety Board (NTSB), says additional offshore lines besides those regulated by the Coast Guard should also be subject to PHMSA regulation. Those include offshore gathering lines currently regulated by the Minerals Management Service, an agency which has come under fire because of the BP disaster.

Final Edict On Interstate Posting
The FERC settled the last two remaining issues stemming from its gas posting policy established in Order 720 in 2008. Both interstates and intrastates had contested some elements of that policy, and its refinement, issued as Order 720A in January 2010. The intrastate issues were multiple and incredibly complex. They were contested by the American Gas Association and Atmos Energy Corporation, the country’s largest natural gas-only distributor.

The Interstate Natural Gas Association of America (INGAA) only had two problems with 720A, which were resolved, in a split decision on July 30, which INGAA General Counsel Joan Dreskin calls “Solomonic.” Transmission pipelines will have to provide no-notice transportation information based on its best estimate before 11:30 a.m. central time three days after the day of gas flow and make one update to each posted figure as necessary within 10 business days after the month in which the posted service was performed. INGAA had tried to convince FERC not to require any no-notice information after three days, so it lost that argument. But Dreskin says the fact that companies will have to provide only a single update is a plus.

Orders 720/720A stem from new authority Congress gave the Commission in the 2005 Energy Policy Act so that it could better police natural gas pricing.

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