May 2020, Vol. 247, No. 5
Editor's Notebook
Editor's Notebook: Paradox Pipeline Living Up to Its Name
EDITOR'S NOTEBOOK
By Michael Reed, Editor-in-Chief
Paradox (per·ă·doks) noun
a seemingly absurd, foolish or self-contradictory statement or proposition that when investigated or explained may prove to be well founded or true.
Well, if nothing else, the Paradox pipeline has at least turned out to be aptly named, though no one involved with the 21-mile (34-km) natural gas conduit, including regulators, is smiling.
Connecting to a major interstate pipeline, the 16-inch (406-mm) Paradox went into operation in 2008, passing undetected by the Blue Hills plant, which processes gas from 18 oil wells in a heavily visited vacation destination to the north of the eastern Utah city of Moab.
The pipeline remained more or less “out of sight, out of mind” until a November 2016 inspection by the Utah Division of Public Utilities (UDPU) exposed 13 areas of noncompliance under federally mandated operational plans and practices. The alleged violations ranged from insufficient emergency plans to inadequate public awareness programs.
In short, the violations, which eventually led to the pipeline being deactivated in January 2020, had little to do with safety and a lot to do with paperwork, at least according to the interpretation given by executives at Pacific Energy & Mining, who operated the pipeline at the time the violations became known.
“It is a gathering system in operation since 2008, and it is not supposed to be regulated,” company President Tarik Ahmad told the Utah Deseret News in 2018. “In 2013, they came to us and said they want to regulate. What changed? Did they have a vision?”
Well, I would not exactly call it a vision – or if it was, it was not a very pleasant one.
Cut to early 2020 and you will find millions of cubic feet of gas being torched each week, the result of the UDPU’s January ruling to deactivate the pipeline.
In fairness, alternative plans were considered. For example, prior to the decision to deactivate, the Board of Oil, Gas and Mining thought about asking producer Wesco Operating to cut back on production at its wells, but concluded, rightly, such a move would likely damage the reservoir, while stranding large volumes of oil and gas underground.
In other words, it was determined one flare at the plant site was preferable to flaring at each of the 18 wells separately.
“Wesco has done nothing to inherit this problem,” Board Chairman Ruland Gill said at the hearing, in explaining why the company will be allowed to continue flaring as long as the Paradox is out of service. Still, the upshot of this is Wesco has been left to pay royalties on as much as 300,000 cf/d (8,495 cm/d) of gas it is forced to burn because the only available pipeline had been deemed “hazardous.”
Pacific Energy is now bankrupt, and the state of Utah is considering placing the pipeline in receivership, perhaps allowing it to return online under an operator with a better history of recordkeeping and safety monitoring.
This is not, in my mind, a case of a fledgling company being caught off guard by regulators run amok as Pacific Energy seemed to theorize in 2018 – nearly two years after the violations were uncovered. For that argument to hold water, some attempt at remedying the situation would have been required.
According to the state of Utah, days before the deactivation, Pacific Energy still had not addressed any of the violations. In fact, neither had the company that took over operations of the pipeline, the fittingly named Dead Horse Oil Co.
Hopefully, the Paradox pipeline can be upgraded and returned to operation under new ownership soon. Until then, anyone wondering what has caused public perception of the industry to decline so much in recent years only has to look as far as the night skies of northern Utah for a grim reminder.
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