February 2010 Vol. 237 No. 2

In The News

February Newsreel: Gas Growth Supports NE Renewables; Pace, Ridge Global Ally; Crosstex Acquires Intracoastal

Growth In Gas Use To Support Northwest Renewable Energy Development, Reduce Emissions; Pace, Ridge Global Ally On Energy, Industrial Markets; Crosstex Energy Acquires Intracoastal Pipeline From Chevron; EGPI Firecreek Acquiring Sierra Pipeline Natural Gas Gathering System; Energy Transfer Names New Directors; MarkWest Energy Partners Sells JV Interest In Starfish Pipeline Company;

Plains Acquires Additional Capline Pipeline Interest, Tankage At Patoka; Denbury Completes Sale Of Barnett Shale Properties; Chesapeake Announces $2.25 Billion Barnett Shale JV with Total E&P USA; GE Oil & Gas, Al Shaheen Energy Services Sign Partnership Agreements; Caiman Energy Extends Midstream Presence In Marcellus; BP May Face Violation After Latest Alaskan Spill; Gas South Honored For Excellence In Workplace Flexibility; Magnum Gas Storage Application Accepted By FERC; Explorer Pipeline Names New President To Replace Felt; North Dakota Mulls Feasibility Of Spur; El Paso, Navajos Reach Accord On Pipeline Pay
Atlas Pipeline Partners Names New President/CEO

Growth In Gas Use To Support Northwest Renewable Energy Development, Reduce Emissions
Natural gas will play an increasingly important role in helping the Pacific Northwest region develop renewable energy resources and reduce greenhouse gas emissions, according to the 2010 Northwest Gas Outlook from the Northwest Gas Association.

The Gas Outlook is an annual study of the use and potential availability of natural gas in the Northwest through October 2019 and is a consensus view of the gas market developed by industry participants serving the region.

Demand for natural gas across the region (Idaho, Oregon, Washington and British Columbia) will grow by an average of 1% through 2019. Climate change policies enacted by state and provincial legislatures across the region will drive some of that growth.

Natural gas supplies are also growing as the production areas upon which the Northwest depends are large and prolific. Improvements in technologies have made huge natural gas reserves across North America available for development which were previously inaccessible. In 2009, the Potential Gas Committee increased its estimate of natural gas reserves available for production by almost 40%, the largest increase in the 44-year history of the organization.

The network of gas pipelines and storage sites linking the region’s consumers to natural gas supplies is sufficient to serve regional needs. System expansions are market driven and have historically occurred appropriately with regard to type, size and timing. A number of projects are under development to enhance reliability and ensure the region has access to the supplies it needs to serve growing demand.

A copy of the 2010 Northwest Gas Outlook can be viewed and/or downloaded at www.nwga.org.

Pace, Ridge Global Ally On Energy, Industrial Markets
Pace Global Energy Services and Ridge Global have created a strategic alliance to offer joint services to the energy and industrial markets. Pace, an energy consulting firm, and Ridge Global, an international security firm led by former U.S. Secretary of Homeland Security Tom Ridge, will offer services including comprehensive risk management support, strategic security planning for energy infrastructure, and energy asset due diligence.

Crosstex Energy Acquires Intracoastal Pipeline From Chevron
Crosstex Energy, L.P. of Dallas has acquired the Intracoastal Pipeline, a 60-mile natural gas liquids (NGL) pipeline, from Chevron Midstream Pipelines, a subsidiary of Chevron Corporation, for $10 million. The Intracoastal Pipeline, which extends from Patterson to Henry in southern Louisiana, connects to Crosstex’s Pelican processing plant and accesses other third-party processing plants in the region. NGLs produced at Crosstex’s Pelican plant flow through the Intracoastal Pipeline to Crosstex’s Cajun-Sibon NGL pipeline.

EGPI Firecreek Acquiring Sierra Pipeline Natural Gas Gathering System
EGPI Firecreek, Inc. of Scottsdale, AZ will acquire the Sierra Pipeline Gathering System and the Sierra Pipeline Company. Sierra Gathering was previously owned by Koch Corp. and includes 2,076 miles of pipeline and gathering systems located primarily in Oklahoma, Kansas and Indiana.

The pipeline was originally created to transport oil and has more than 28,000 wells within close proximity for utilization, production and transportation. The pipelines also are capable of developing, gathering and transporting natural gas. EGPI said it will aggressively analyze, explore and exploit all potential revenue streams for the pipeline.

The estimated value of the assets is about $16 million but a 2009 appraisal estimates overall potential value exceeding $150 million once the property is utilized to its production capabilities.

Energy Transfer Names New Directors
Dallas-based Energy Transfer Equity, L.P. announced that Dan L. Duncan, Ralph S. Cunningham, and Marshall S. (Mackie) McCrea were appointed as directors of the general partner of ETE. McCrea was also appointed to the board of directors of Energy Transfer Partners, LLC, its general partner.

Duncan is chairman of EPE Holdings, LLC, the general partner of Enterprise GP Holdings L.P. and Cunningham is president/CEO of EPE Holdings, LLC. EPE owns general and limited partner interests in two publicly traded partnerships: Enterprise Products Partners, L.P. and ETE.

MarkWest Energy Partners Sells JV Interest In Starfish Pipeline Company
Denver-based Energy Partners, L.P. has sold its 50% limited liability company interest in Starfish Pipeline Company, LLC to Enbridge Offshore (Gas Transmission) L.L.C.

“The sale of the Starfish assets is part of our ongoing strategy to continue developing our position in the onshore resource plays,” said Frank Semple, Chairman, President and CEO. “We are the largest gatherer in the Woodford Shale, the largest gatherer and processor in the Marcellus Shale, and we have a growing presence in the Granite Wash and Haynesville Shale. The proceeds will be used to further develop infrastructure to serve our producer customers in these rapidly expanding areas.”

Plains Acquires Additional Capline Pipeline Interest, Tankage At Patoka
Houston-based Plains All American Pipeline, L.P. announced that through a series of transactions it has acquired an additional interest in the Capline Pipeline system and associated tankage for $64 million. These assets were acquired either directly or indirectly from Chevron, Marathon Oil Corp. and Shell Pipeline Company LP.

The assets acquired include a 21% undivided interest in Capline and a 100% interest in 720,000 barrels of tankage at Patoka, IL. PAA is now the largest owner in Capline with an aggregate interest of 43%. The partnership acquired its initial 22% interest in Capline in 2004.

Capline is a 633-mile, 40-inch mainline crude oil pipeline originating in St. James, LA and terminating in Patoka. It is a primary route for shipping crude oil and condensate to the Midwest, accessing 3 million bpd of refining capacity in PADD II. It is connected to PAA’s St. James and Patoka terminal facilities, which upon completion of expansions, will have capacities of 7 million barrels and 4 million barrels, respectively.

Denbury Completes Sale Of Barnett Shale Properties
Denbury Resources Inc. closed the sale of its remaining 40% working interest in Barnett Shale properties to Talon Oil & Gas LLC for $210 million. Denbury is the largest oil and natural gas operator in Mississippi.

Chesapeake Announces $2.25 Billion Barnett Shale JV with Total E&P USA
Chesapeake Energy Corporation announced the execution of an agreement for a $2.25 billion joint venture with Total E&P USA, Inc., a wholly owned subsidiary of Total S.A. Total will acquire a 25% interest in Chesapeake’s upstream Barnett Shale assets and will pay $800 million in cash at closing and an additional $1.45 billion by funding 60% of Chesapeake’s share of drilling and completion expenditures until the $1.45 billion obligation has been funded, which Chesapeake expects to occur by year-end 2012.

GE Oil & Gas, Al Shaheen Energy Services Sign Partnership Agreements
GE Oil & Gas and Al Shaheen Energy Services, a wholly owned subsidiary of Qatar Petroleum, have signed two partnership agreements, consolidating PII Pipeline Solutions’ presence in Qatar and the Middle East, and establishing a JV for aftermarket services of Turbomachinery equipment in Qatar.

Under the first agreement, Al Shaheen Energy Services becomes a 50% strategic JV partner in GE Oil & Gas’ PII Pipeline Solutions business. GE Oil & Gas will maintain operational control of the business. The company name will be PII Pipeline Solutions (an Al Shaheen/GE Oil & Gas Company). Its logo, inspection tool names, services and software will remain the same. Together, GE and Al Shaheen will establish a dedicated Integrity and Inspection center in Qatar to support pipeline solutions in the Middle East.

GE Oil & Gas and Al Shaheen also signed a 50/50 joint venture agreement to perform aftermarket services for the GE Oil & Gas installed fleet in Qatar. The Al Shaheen/GE Services Company, which includes GE’s existing Services Center facilities in Qatar, will provide an enlarged range of turbine, compressor and related auxiliary equipment services.

Caiman Energy Extends Midstream Presence In Marcellus
Dallas-based Caiman Energy, LLC has signed agreements with Chief Oil & Gas, LLC and its partners to provide midstream gathering services for 267,000 of Chief’s lease acreage position located in nine counties within southwestern Pennsylvania, West Virginia, and Maryland of the Marcellus Shale. As part of this arrangement, Caiman bought several interstate taps in the area of the dedication and rights-of-way from Chief.

Caiman works in northwestern West Virginia installing gathering facilities including natural gas liquids extraction for multiple area producers and looks to the Chief partnership as a natural extension of their services in the Marcellus. Jack Lafield, President/CEO of Caiman Energy, noted Chief’s extensive acreage position, along with Caiman’s dedications in West Virginia, provides Caiman with over 340,000 acres of gathering exposure in the largest shale play in the U.S.

BP May Face Violation After Latest Alaskan Spill
The Anchorage Daily News reported Dec. 20 that as cleanup continued on one of the biggest oil spills ever on Alaska’s North Slope, criminal and civil investigations were under way into the circumstances of the pipeline’s rupture.

The criminal investigatory arm of the U.S. Environmental Protection Agency joined with the FBI and other agencies to determine why the pipeline cracked open in late November, officials said. An estimated 46,000 gallons of crude oil and water poured from a 2-foot-long gash onto the snowy tundra, the News reported.

BP Exploration (Alaska) Inc. operates most of the North Slope’s oil fields on behalf of itself and other oil companies and it operated the 18-inch flow line that ruptured. The state Department of Environmental Conservation is conducting a civil investigation to determine what happened and if BP violated any state rules or laws.

Gas South Honored For Excellence In Workplace Flexibility
Atlanta-based Gas South has received an Alfred P. Sloan Award for Business Excellence in Workplace Flexibility.

“One of the primary reasons we have been able to grow so quickly with a relatively small work force of 50 is we recognize that flexible workplace policies enhance productivity while building employee morale and loyalty,” said Kevin Greiner, CEO of Gas South. “From my perspective, workplace flexibility is more than just a practical way to help our employees maintain a positive work-life balance; it provides a competitive advantage for our business.”

Greiner said the size of Gas South’s workforce not only encourages flexibility, but often necessitates it. Employees are offered opportunities to learn new skills and other facets of the company so that they can rotate into different job functions as needed. The company offers flexible work hours – recently implementing a 9/1 work week schedule (nine nine-hour days with the tenth day off every two weeks) – and allows employees to telework on an as-needed basis. Gas South employees also are encouraged to join community service organizations and integrate those activities into their company work.

Magnum Gas Storage Application Accepted By FERC
Magnum Gas Storage, LLC, reported that the Federal Energy Regulatory Commission (FERC) accepted its application to construct and operate a high-deliverability, multi-cycle salt cavern natural gas storage facility in central Utah. The proposed project is the first large-scale, underground natural gas storage facility to be developed in the western U.S. It is designed as a fully integrated project that will increase efficiency, reliability and competitiveness of energy markets throughout the West.  

When completed, the facility will consist of four salt caverns with a combined total working gas storage capacity of 42 Bcf. The project will be capable of injecting up to 0.3 Bcf/d and withdrawing up to 0.5 Bcf/d and of cycling its inventory from nine to 12 times annually. The project also includes a 61.5-mile, 36-inch header pipeline that will extend to points of interconnection with Kern River Gas Transmission Co. and Questar Pipeline Co. near Goshen, UT. Magnum plans to initially develop two salt caverns at the site through solution mining, each with working gas capacity of 10.5 Bcf. The first salt cavern is expected to be available for natural gas storage service beginning in early 2012.

According to Rob Webster, Managing Director, this “Gulf Style” salt cavern project offers new options to electricity and natural gas producers. “The marketplace is increasingly being driven by the intermittent fuel supply of natural gas-fired electric generation. Storing energy allows producers to lower risks and optimize resources by balancing fluctuations of consumer supply and demand.” 

Webster said a storage facility in central Utah will enhance existing natural gas infrastructure by providing seasonal storage and short-term cycling and balancing services to interstate pipelines, natural gas producers, gas-fired electric generators, LDCs and gas marketers. The development of a high-deliverability energy storage facility in the Rockies will also provide the necessary infrastructure for the expansion of renewable resource development in the region, he said. 

Explorer Pipeline Names New President To Replace Felt
Explorer Pipeline announced that Rod Sands was named president/CEO effective Jan. 16. He succeeded Tim Felt who recently accepted a position at Colonial Pipeline as president/CEO in Atlanta.

“We are very pleased that Rod has agreed to return to Explorer Pipeline as its president and CEO,” said Dave Murphy, chairman. “Rod has extensive pipeline experience spanning 39 years and his past leadership has contributed to Explorer’s success.”

Sands retired from Explorer Pipeline as its chief operating officer in October 2005. He received his bachelor’s of science in civil engineering from the University of Missouri. Following a successful career with Explorer, he has been active both as a pipeline consultant and in volunteer organizations.

Explorer Pipeline is headquartered in Tulsa, OK and has approximately 180 employees. It transports refined petroleum products through a 1900-mile pipeline system extending from Port Arthur, Texas to the upper Midwest and serving major markets, including Houston, Dallas, Tulsa, St. Louis and Chicago.

North Dakota Mulls Feasibility Of Spur
The North Dakota Industrial Commission wants to know whether it would be feasible to move oil from western part of the state into TransCanada’s pipelines and has awarded an $89,750 study to the Kadrmas, Lee & Jackson engineering company.

State Mineral Resources Director Lynn Helms said TransCanada is interested in hauling North Dakota crude, but is not interested in building a spur to the state’s oil patch for any of its pipelines in the region. Helms said the study will look at whether it would be cost-effective to build a spur to one of the pipelines, in the hopes that a private company would then build it.

El Paso, Navajos Reach Accord On Pipeline Pay
A years-long fight between the Navajo Nation and El Paso Natural Gas Co. over a pipeline right of way easement was settled last month with a deal that will pay the tribe about $350 million over 20 years. According to the Associated Press, that is more than 10 times what the previous lease brought in for the tribe, which expired in 2005.

El Paso, which operates 900 miles of pipeline on the reservation, will pay the tribe $18 million a year for the lease that expires in 2025. The previous lease signed in the mid-1980s was valued at $29 million. The parties apparently reached a middle ground between El Paso’s previous offer of about $200 million for the 20-year deal and the $440 million the tribe argued the lease was worth.

Under the renewal, El Paso will contribute $50,000 a year to a scholarship fund for Navajo students. The company won an option to operate an additional 300 miles of pipeline and acquire up to 20 acres for facilities. The pipeline delivers gas from Texas, New Mexico and Oklahoma to western markets.

Atlas Pipeline Partners Names New President/CEO
Atlas Pipeline Partners, L.P. has appointed Eugene N. Dubay as President/CEO, replacing Michael Staines and Edward Cohen, respectively. Staines, who will continue to serve as a director of the partnership and who is an executive vice president of Atlas America, Inc., the parent company of the partnership’s general partner, will now focus on opportunities in Appalachia, particularly with respect to the Marcellus Shale. Cohen will remain chairman of the partnership’s board and CEO of Atlas America, Inc.

Dubay will also serve as president/CEO of Atlas Pipeline Mid-Continent, LLC, the partnership’s Tulsa, OK-subsidiary that conducts pipeline and processing activities, particularly in Oklahoma and Texas. He succeeds Robert Firth, who will focus on strategic planning and opportunities as president/COO of Atlas Pipeline Holdings GP, LLC, the general partner of Atlas Pipeline Holdings, LP.

Dubay was COO of Continental Energy Systems (successor to SEMCO Energy) beginning in 2003. Earlier, he held executive-level positions at ONEOK, Inc and Southern Union Co. He has more than 20 years experience in midstream assets and utilities operations, strategic acquisitions, regulatory affairs and finance.