December 2020, Vol. 247, No. 12
Features
A Year Like No Other: Top 10 Midstream Stories of 2020
By Pipeline & Gas Journal Staff
In this year-ending issue of P&GJ, we take a look back at the long, difficult year that was 2020.
It was a volatile 12 months by just about any measure, and that was certainly reflected in much of what transpired in the energy industry in general and midstream in particular. A year that started with high hopes for new pipeline projects, by April de-evolved to a point at which, for the first time ever, oil futures plunged below zero amid the coronavirus concerns.
Our list of Top 10 stories was compiled from our website readership numbers throughout the year, along with staff suggestions. COVID-19 is not listed as one of our top stories, though it certainly figured heavily in many of those listed.
- U.S. Supreme Court Sides with Atlantic Coast Pipeline
(June 15) – In a victory for the midstream sector that would not come to fruition, the U.S. Supreme Court decided that the federal government has the authority to allow the proposed $7.5 billion Atlantic Coast natural gas pipeline to cross under the Appalachian Trail in rural Virginia.
The 7-2 ruling was a victory for Dominion Energy, which appealed a lower court ruling that halted construction of the 600-mile (965-km) pipeline, which would run from West Virginia to North Carolina.
The ruling, at the time, also affected the proposed 300-mile (480-km) Mountain Valley Pipeline, which was set to run from West Virginia to southern Virginia, crossing the trail in the Jefferson National Forest. The pipeline was nearly complete, but construction was halted as a result of the ruling in the Atlantic Coast pipeline case before the crossing under the trail was completed.
“Today’s decision is an affirmation for the Atlantic Coast Pipeline and communities across our region that are depending on it for jobs, economic growth and clean energy. We look forward to resolving the remaining project permits,” Dominion said in a statement.
More recently: Dominion Energy and Duke Energy said in July that “recent developments have created an unacceptable layer of uncertainty and anticipated delays” for the project designed to cross West Virginia and Virginia into North Carolina.
The companies said that separate court rulings created too much permitting uncertainty to go forward with projects that involve wetlands and streams.
- U.S. Court Orders Dakota Access Pipeline Shut, Emptied
(July 6) – In a legal setback for the industry, a U.S. District Court ordered Energy Transfer to shut down and empty its 570,000-bpd Dakota Access pipeline (DAPL) within 30 days.
DAPL, the largest pipeline from the North Dakota shale fields, transports oil to the Midwest and Gulf Coast refineries. Native American tribes and environmental groups have long protested the line’s construction.
In its ruling, the court found that the U.S. Army Corps of Engineers violated the National Environmental Policy Act (NEPA) when it granted an easement to Energy Transfer to construct and operate a segment of the pipeline running beneath Lake Oahe, because they failed to produce an adequate environmental impact statement (EIS) despite a requirement for it, the court said.
“Given the seriousness of the Corps’ NEPA error, the impossibility of a simple fix, the fact that Dakota Access did assume much of its economic risk knowingly, and the potential harm each day the pipeline operates, the Court is forced to conclude that the flow of oil must cease,” the U.S. District Court for the District of Columbia said in the ruling.
The ruling came a week after Energy Transfer’s move to prevent contracted shippers on the line from canceling transportation contracts on a proposed expansion of the line.
More recently: The U.S. Court of Appeals for the D.C. Circuit, the following month, stayed the lower court injunction ordering the shutdown. Since then, DAPL cleared a final regulatory barrier to nearly double its capacity on Oct. 14, after Illinois, the last hold-out state on the pipeline’s route, approved its expansion.
- CenterPoint Energy Sells Miller Pipeline, Minnesota Limited
(Feb. 12) – CenterPoint Energy announced the sale of Miller Pipeline and Minnesota Limited to PowerTeam Services for $850 million in cash.
The companies, which represented CenterPoint’s Infrastructure Services business segment, are among the premier natural gas distribution and transmission pipeline contractors in the United States, providing services to customers in 35 states.
“PowerTeam’s combination with Miller Pipeline and Minnesota Limited creates a powerful platform with nationwide scale,” said Brian Palmer, chief executive officer of PowerTeam, who serves as the chief executive officer of the combined company.
In 2019, both Miller Pipeline and Minnesota Limited were acquired by CenterPoint Energy in the CenterPoint Energy-Vector Corporation merger.
Miller Pipeline is based in Indianapolis and employs more than 3,500 people. Minnesota Limited is headquartered in Big Lake, Minn., with peak employment of more than 1,400 employees.
Scott Prochazka, president and chief executive officer of CenterPoint Energy, said, “With PowerTeam, we believe we have found the right company to continue growing the businesses of Miller Pipeline and Minnesota Limited and position them for long-term success.”
More recently: The sale closed in the second quarter of 2020.
- TC Energy Resumes Work on Keystone XL Pipeline
(Jan. 15) – Canadian pipeline company TC Energy said it would start pre-construction work in February for its Keystone XL oil pipeline.
TC said in a filing with the U.S. District Court in Montana that it would begin mobilizing heavy construction equipment in Montana, South Dakota and Nebraska, and aim to begin building a 1.2-mile (1.93-km) segment spanning the U.S.-Canada border in April.
Work on the border-crossing segment was subject to receiving federal approvals, including a right-of-way and temporary use permit, TC said.
The $8 billion Keystone XL project is designed to carry 830,000 bpd of oil sands crude from Alberta to the U.S. Midwest and then on to the Gulf Coast. It had been delayed for more than a decade by opposition from landowners, environmental groups and tribes, and after former U.S. President Barack Obama rejected the project.
TC said it plans to start building pumping stations along the pipeline route in June. Work on a pipeline segment in Nebraska would also start in June, followed by the start of construction of segments in Montana and South Dakota in August.
TC Energy said the schedule hinged on starting to mobilize equipment in February, with the company expecting to continue construction into 2021.
In June, TC Energy awarded Michels Canada with a contract to construct 162 miles (260 km) of the Keystone XL project in Alberta, Canada.
Michels Canada planned to hire about 1,000 workers each year over the two-year construction period, with special emphasis placed on hiring locally and giving priority to qualified local and indigenous businesses.
Construction has been scheduled to begin this summer near Oyen, Alberta, and finish near Hardisty, Alberta, in the spring of 2022.
More recently: In September, TC Energy agreed to allow an alliance of Canadian indigenous communities to pursue a stake in the pipeline project. In October, a federal district court denied legal challenges to the Trump administration’s 2019 approval of Keystone XL.
- OneokSuspends Expansion Projects Amid Oil Price Collapse
(March 12) – Oneok suspended some key expansion projects as oil prices continued to drop amid fears of a slowing global economy due to the coronavirus.
Suspended projects include the 100,000-bpd additional expansion of the West Texas LPG pipeline in the Permian Basin, the 200-MMcf/d expansion of the Demicks Lake natural gas processing facility and the Demicks Lake III project, along with related infrastructure in the Williston Basin.
Additionally, Oneok said, the scope of the Elk Creek Pipeline expansion will be reduced, with the ability to add pump stations incrementally to meet customer needs as necessary.
The suspension of these projects is part of a larger decrease in the company’s 2020 growth capital guidance due to the current commodity price environment.
“Given the significant inventory of flared natural gas in the Williston Basin and fully contracted growth in the Permian Basin, and factoring in the current commodity price environment and assumed rig reductions, we expect our 2020 results to be within our previously announced guidance ranges,” said Terry K. Spencer, Oneok president and CEO.
- Saudi Aramco Launched Biggest Shale Gas Development Outside U.S.
(Feb. 25) – Saudi Aramco launched the biggest shale gas development outside of the U.S. in an effort to boost domestic gas supply and end the burning of oil at its power generation plants, CEO Amin Nasser told Reuters.
Saudi Arabia fought a price war aimed at putting the U.S. shale industry out of business just six years ago, which ultimately failed and has since adopted many techniques developed in U.S. fields for its $110 billion Jafurah shale gas field project.
If Aramco hits its targets for development of the field, Saudi Arabia will become the world’s third-largest gas producer by 2030. Nasser said Aramco had developed fracking using seawater, which will remove the obstacle that a lack of water supply represents to fracking in the desert.
“A new shale revolution is taking place (in Saudi Arabia), it’s commercial and we are using seawater” in the fracking process, Nasser said in an interview with Reuters.
“A lot of people said it doesn’t work outside the U.S. ... because fracking uses a lot of water and we are not rich with water. But we are using seawater.”
- Texas Eastern Gas Pipeline Explodes in Kentucky
(May 5) – Enbridge responded to an explosion on Line 10 of its Texas Eastern Transmission (Tetco) system in Fleming County, Ky., and said it shut in a section of the pipeline and secured the area. No injuries were reported.
The incident reportedly impacted more than 1 Bcf of daily north-to-south capacity on the system, sending natural gas futures higher after gaining on falling production and higher anticipated demand due to predicted cold weather.
Enbridge said it notified county, state and federal agencies and officials and reportedly notified customers of a force majeure event resulting in an unplanned outage.
Genscape analyst Josh Garcia said in a note to clients that the blast occurred north of its Owingsville Compressor and “just upstream” of where an Enbridge pipeline explosion occurred in 2019.
“As a result, north-to-south capacity through Owingsville will be reduced from 1.33 Bcf/d to zero beginning on gas day May 5 and will last for the immediate future,” Garcia wrote, adding that the damage to “one of its main export lines … will force reroutes in the region and possibly cause shut-ins.”
Reuters reported U.S. natural gas futures jumped to a 16-week high on the pipeline shutdown, forecasts for cooler weather and slower output as shale drillers hit by collapsing crude prices shut oil wells that also produce a lot of gas. Futures had already risen to a 15-week high.
- OPEC Approves Historic Cuts Amid Coronavirus Pandemic
(April 12) – OPEC and allies including Russia agreed to cut oil output by about 10% of global supply to support oil prices amid the coronavirus pandemic. At the time, sources said effective cuts could amount to 20%.
The group, known as OPEC+, agreed to reduce output by 9.7 MMbpd for May-June, after four days of talks and following pressure from U.S. President Donald Trump to ease the price decline.
It was the biggest oil output cut ever recorded – more than four times the cuts approved during the 2008 financial crisis. The countries planned to gradually decrease curbs on production in place for two years, until April 2022.
OPEC+ said it wanted producers outside the group, such as the United States, Canada, Brazil and Norway, to cut an additional 5% (5 MMbpd).
Trump had threatened OPEC leader Saudi Arabia with oil tariffs and other measures if it did not fix the market’s oversupply problem as low prices have put the U.S. oil industry, the world’s largest, in severe distress.
Canada and Norway had signaled willingness to cut and the United States, where legislation makes it difficult to act in tandem with cartels, said its output would fall steeply by itself this year due to low prices.
More recently: Russia announced in late October that OPEC+ could extend its 7.7 MMbpd of production cuts into next year. OPEC+ had planned to relax cuts by 2 MMbpd in January, though demand remained a big question.
- U.S. Delays Pipeline Approvals After Environmental Ruling
(April 24) – The U.S. Army Corps of Engineers suspended a nationwide program used to approve oil and gas pipelines, power lines and other utility work, spurred by a court ruling that industry representatives warn could slow or halt numerous infrastructure projects over environmental concerns.
The directive from Army Corps headquarters came after a federal court threw out a blanket permit that companies and public utilities have used for decades to build projects across streams and wetlands.
At the time, officials put on hold about 360 pending notifications to entities approving their use of the permit.
Pipeline and electric utility industry representatives said the effects could be widespread if the suspension lasts, affecting both construction and maintenance on potentially thousands of projects. That includes major pipelines like TC Energy’s Keystone XL crude oil line and the Mountain Valley natural gas pipeline.
The Army Corps has broad jurisdiction over U.S. waterways. It uses the blanket permit to approve qualifying pipelines and other utility projects after only minimal environmental review. That’s a longstanding sore point for environmentalists who say it amounts to a loophole in water protection laws and ignores the cumulative harm caused by thousands of stream and wetlands crossings.
Since the blanket permit, known as Nationwide Permit 12, was renewed in March 2017, it has been used more than 37,000 times, an Army Corps spokesman said. To qualify, projects must not cause the loss of more than a half-acre of water or wetlands.
The April 15 court ruling in Montana was in a lawsuit before U.S. District Judge Brian Morris involving the disputed Keystone XL oil pipeline from Canada. Work began earlier in the month on the 1,200-mile (1,930-km) line stretching from Alberta to Nebraska.
The judge did not limit his findings to Keystone, so the ruling was interpreted to apply to any project using Nationwide Permit 12. The Montana case was cited last week in a lawsuit over a 430-mile (692-km) natural gas pipeline in central Texas.
More recently: The U.S. Federal Energy Regulatory Commission (FERC) gave Mountain Valley permission in late October to resume some construction on its $5.4 billion project, but litigation persists. In July, the Supreme Court reinstated Permit 12 but excluded Keystone XL, which continues to fight legal battles as well.
- U.S. Crude Stockpile Jumps by Record 19 Million Barrels
(April 15) – U.S. crude oil stockpiles rose by 19 million barrels during the week, the biggest one-week increase in history, according to the U.S. Energy Information Administration (EIA), amid falling demand and pandemic shutdowns.
“Even though we knew it was going to be bad, it’s worse than people thought,” said an analyst at Price Futures Group in Chicago, at the time. “You look at gasoline demand and it’s pathetic. If you were going to write a nightmare report about petroleum, this is it.”
Worldwide fuel demand dropped by roughly 30% as businesses have shuttered and residents avoid public gatherings and travel due to the pandemic.
Refiners responded by cutting crude purchases and processing as they operated at 69% of capacity nationwide, according to Reuters, the lowest level since September 2008. Meanwhile, storage began to fill.
Honorable mentions: South Dakota Board Approves Keystone XL Water Permits (Jan. 21), Ameren Illinois Plans $64 Million Pipeline Upgrades (February), Trans Adriatic Pipeline Enters Initial Testing Phase (June), Enterprise Abandons Texas Pipeline Project as Oil Prices Remain Weak (September), Shell Exits Lake Charles LNG Project; Energy Transfer to Take Over (February) and Work Completed on World’s Longest Hydraulically Inserted Pipe (July)
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