{"id":4083,"date":"2016-11-11T18:23:00","date_gmt":"2016-11-12T02:23:00","guid":{"rendered":"http:\/\/probable-carton.flywheelsites.com\/?p=4083"},"modified":"2017-04-11T13:10:10","modified_gmt":"2017-04-11T20:10:10","slug":"aging-pipelines-raise-concerns","status":"publish","type":"post","link":"https:\/\/stillwaterassociates.com\/aging-pipelines-raise-concerns\/","title":{"rendered":"Aging Pipelines Raise Concerns"},"content":{"rendered":"

November 2, 2016<\/p>\n

Alison Sider and Nicole Friedman, The Wall Street Journal<\/a><\/p>\n

More than 60% of U.S. fuel pipelines were built before 1970, according to federal figures. Recent disruptions on
\nColonial Pipeline Co.\u2019s fuel artery running up the East Coast show why some energy observers worry that this is a
\nproblem.<\/p>\n

The pipeline, which began operating fully in 1964, was partially shut down for nearly two weeks in September. Fuel
\nprices spiked throughout the Southeast, rising more than 20 cents a gallon in places like Atlanta.<\/p>\n

Motorists this week began to worry again after the company\u2019s main gasoline pipeline, which supplies about a third of
\nthe gas consumed on the East Coast, was shut down. It was struck by construction equipment Monday, killing one
\nperson and injuring several others.<\/p>\n

The company has said the 5,500-mile pipeline, which runs from Houston to New Jersey and serves 13 states, could
\nrestart as soon as Saturday, though as of Wednesday afternoon the pipeline was still on fire. Gasoline futures fell
\n2.4%, to $1.4479 a gallon, on the New York Mercantile Exchange Wednesday after rising as much as 15% following the Colonial explosion.<\/p>\n

Colonial isn\u2019t the only major pipeline constructed decades ago. That includes a 3,000-mile fuel pipeline that first
\nopened in 1956 and serves California, Texas and five other states. Another system that now carries fuel more than
\n1,800 miles from the Gulf Coast to the Chicago area opened in 1971.<\/p>\n

Building pipelines has become harder amid opposition from landowners and environmental groups concerned about
\npipeline safety and stemming fossil-fuel development. Kinder Morgan Inc. had plans to build a new fuel pipeline from South Carolina to Jacksonville, Fla., by 2017. But it shelved the project after running into opposition, including
\nlegislation in Georgia aimed at keeping it from being built.<\/p>\n

Carl Weimer, executive director of the advocacy group Pipeline Safety Trust, said fuel pipeline systems can operate
\nsafely for decades if they are well maintained. But after 40 or 50 years, problems like corrosion increase. \u201cClearly,
\noperators don\u2019t have a complete handle on how to operate these older pipelines,\u201d Mr. Weimer said, referring to
\nmaintenance issues that get harder as systems age.<\/p>\n

Companies, industry groups and even regulators have said that with advances in pipeline monitoring and repair
\ntechniques, as well as regular maintenance and inspection, pipelines can last a long time.<\/p>\n

Colonial\u2019s pipeline carries more than 100 million gallons of fuel a day. Its role as a critical link between refiners on
\nthe Gulf Coast and consumers up and down the Atlantic Coast means that any problem on the pipeline can have an
\noutsize impact on fuel supplies and prices at the pump.<\/p>\n

Most other regions that rely on pipelines to deliver fuel from far-flung refiners are located near a second system that
\ncould deliver fuel as a fallback.<\/p>\n

\u201cIf a pipeline from Los Angeles to Las Vegas goes down, there\u2019s some capability to supply Las Vegas from Salt Lake
\nCity,\u201d said David Hackett<\/a>, president of consulting firm Stillwater Associates.<\/p>\n

Colonial Pipeline has spent more than $95 million on an upgrade that has allowed the pipeline to carry more than
\n200,000 additional barrels a day since 2011. But the company would need to expand its capacity by another
\n300,000 to 500,000 barrels a day to meet demand, Chief Financial Officer Dave Doudna said in a 2015 interview. He said that would require a new pipeline, which would cost more than a billion dollars and face large regulatory
\nhurdles.<\/p>\n

\u201cThe permitting process takes a long time, the cost to build is expensive. And what you end up finding is that
\ncustomers aren\u2019t willing, or have not been willing to commit, for a period of 10 to 15 years,\u201d he said. \u201cI would say a
\nlot of it is the regulatory environment we\u2019re living in today.\u201d<\/p>\n

Finding customers to underwrite the cost of a big investment like a pipeline is a challenge for the infrastructure
\nindustry broadly, said Rob Thummel, portfolio manager for energy-focused asset manager Tortoise Capital Advisors.<\/p>\n

In places like the Northeast, which can also take in fuel from overseas or waterborne shipments from the Gulf Coast
\nin a pinch, customers aren\u2019t always willing to lock in long-term contracts. Some customers worry that demand will
\nchange in the coming years or imports could become more attractive.<\/p>\n

\u201cIt\u2019s not just, \u2018Build it and they will come,\u2019 \u201d he said. \u201cYou need a committed partner who is committed to pay the toll,
\nnot just for a year or two, but at least 10 years.\u201d<\/p>\n

By contrast, more than 20,000 miles of new crude-oil pipelines have been built in the past decade, and natural-gas
\npipeline infrastructure has expanded as well, as production from U.S. shale formations increased rapidly, though
\nthese projects are also facing opposition.<\/p>\n

But the pipes that carry gasoline, diesel and other fuels haven\u2019t experienced the same growth, because fuel demand
\nisn\u2019t rising everywhere and because some run through more populated areas than where crude is drilled and face
\nmore public resistance.<\/p>\n","protected":false},"excerpt":{"rendered":"November 2, 2016 Alison Sider and Nicole Friedman, The Wall Street Journal More than 60% of U.S. fuel pipelines were built before 1970, according to federal figures. Recent disruptions on Colonial Pipeline Co.\u2019s fuel artery running up the East Coast show why some energy observers worry that this is a problem. The pipeline, which began…
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