Westmoreland County Pipeline Explosion: Corrosion Found Back in 2012

This is big news.  Anyone living close to a natural gas pipeline really ought to read this article.

The short story is that Tetco found corrosion on its pipeline back in 2012.  They didn’t just find a little bit, either.  Fully 1/3 of the thickness of the pipe had corroded away.  That didn’t set off alarm bells, though.  Why?  Because the industry standard was to expect 1-3% of the thickness of the pipeline to wear away each year.  Since the pipeline was scheduled for another inspection in 2019, they figured they would just check up on it then.

The corrosion actually occurred at a rate of 10-15% per year.

The pipeline exploded.

The company is going to be paying out the wazoo for damage to property and to the poor guy who got burns over most of his body while running away from the fireball.

The moral of the story is this: when the pipeline representative tells you that the pipeline has regularly scheduled inspections and that they know how to keep it safe, they aren’t right.

The rep isn’t lying.  The rep believes what his/her employer is telling them.  The pipeline actually believes it is doing what it should (in most situations).  They’re just not right.  They simply can’t account for any and all contingencies.

Pipeline companies really need to step up the inspection schedules and come up with some better technology to protect the people that live next to their pipelines.  We mentioned in a previous post that less than 20% of all pipeline problems are discovered by the technology employed for that purpose.  Well over 50% are discovered by landowners and pipeline employees visually inspecting the pipeline right of way.  That’s just not acceptable, at least not when the company is telling people that their technology will keep them safe.

Pipeline News Article with some Substance

It’s rare to see a news article about either the Atlantic Coast Pipeline or the Mountain Valley Pipeline to have much other than environmental or company rhetoric.  This one is the exception, including quotes from a Virginia attorney who obviously has some experience with pipeline easements, quotes from some actual easement agreements, a bit of analysis, and some hard numbers.  It was nice to see.  Please pop over to the article and read it.

Atlantic Coast Pipeline: Schedule

A couple days ago the FERC issued a notice that the final Environmental Impact Statement for the Atlantic Coast Pipeline would be finished on June 30, 2017.  After the EIS is available, there is a 90 day decision deadline, basically an opportunity for other federal agencies to weigh in on the EIS.  So on September 28, 2017, the EIS is expected to be approved.

The ACP will not be able to begin construction before that date.  When, exactly, it will begin construction is unknown.  Dominion had previously hoped to begin construction in the summer of 2017, but unless you consider the end of September to be the summer that looks pretty unlikely.

Rover Pipeline and the Environment

OK, that headline is a big subject, and the actual subject of this post is much, much smaller.  A better headline for this story would be extremely long and pretty much cover the entire story.

The FERC has filed its final environmental impact study for the Rover pipeline.  It’s a mere 481 pages, and, just like every other government document, riveting reading in every way.

I enjoy reading technical legalese as much as the next guy, but the FERC has provided a handy summary of its recommendations so I don’t have an excuse to snuggle up with a blanket and some hot chocolate. There are also links on that page to .pdfs of the entire report and particular sections of it if you really want to dig into the details.  Just a little light summer reading, right?  Enjoy!

Why Your Royalties are Low Right Now

There are actually a couple of reasons why your royalty checks are pretty small (relative to a couple years ago) right now.  First, production from wells always decreases over time, second, the price of gas is down, third, the producer is probably taking post-production costs out of your check, and fourth, the producer is probably throttling back production from the well.

Side Note: if you think your producer is taking out post-production costs you should call the office and talk with us about it.  We can probably force them to stop.

We’re going to focus on the second reason in this post, the price of gas.  Prices are down for a couple of reasons.  One is that there’s just way more gas available across the nation than there ever has been.  A second reason is that the gas here in the Appalachian basin is…..stuck.  It’s backed up.  It’s constrained.  Whatever you want to say, there’s just not enough transportation capacity for it all.

Because there’s not enough transportation capacity, you aren’t getting paid top dollar for the gas coming out of your property.

It’s not just that we can’t transport all the Appalachian basin gas to someone who will buy it, either.

The price of gas is set at the Henry Hub in Louisiana.  The Henry Hub is a place where a bunch of pipelines come together and there’s a bunch of storage.  Whatever gas is selling for at the Henry Hub is the benchmark price for gas in the United States.  It changes constantly based on a huge number of factors.

Here in the Appalachian basin there are a couple of local hubs.  Prices for gas are set at these hubs.  They are based on the Henry Hub price, and then changed either up or down depending on local market conditions.  Once upon a time we could sell gas for more than Henry Hub prices.  It hasn’t been that way in a long time.

Because we’re producing so much gas we don’t have enough space for it all in the local hubs and other pipelines in the area.  Because of that, gas sells at a discount to the Henry Hub price.

So not only can we not get all our gas into a pipeline in the first place, we also can’t get full price for it.

And that is one of the reasons why royalty checks have been relatively small lately.

Is there any hope for the future?  Well, RBN Energy is doing a two-part series on pipeline buildout in the Appalachian basin.  Here’s the first part, and the second part will be coming in the near future.

On top of getting a better price for our gas compared to the Henry Hub, we also need to start shipping gas out of the country for foreign markets to buy.  Right now, 99% of the gas produced in the United States is consumed in the United States.  That is changing rapidly, with the Sabine Pass LNG plant shipping its first cargo of LNG back in February of 2016, and with other plants coming online in the next couple of years.  Once natural gas has become a world commodity we should be able to sell at a better price than we can get right now.

Pipeline Safety: Pipeline Coatings

Texas Eastern Pipeline Inspection Section

The pipeline that blew up in Westmoreland county, PA back at the end of April is going to be partially dug up and fully inspected along a 263 mile stretch, shown above.  Thanks to Great Southern Press for putting the map together.

The article by Anya Litvak over at PowerSource goes into some detail about pipeline coatings and what probably went wrong on the Westmoreland County, PA pipeline.  It’s an excellent article and well worth the read.

If you don’t have the five or ten minutes it will take to read it, just make sure that if you have a Texas Eastern pipeline across your property that was built in the 1970s or 1980s that you have Spectra Energy come out and inspect you section of the pipeline.

 

How They Decide Pipeline Size

RBN Energy wrote a nice little article about how the companies determine the size of the pipe they are going to need to put in your ground.  You might not think you care anything about the thought process of the company, but in reality the more you know the more likely you are to make good decisions when negotiating with them.  Knowledge is power.  Don’t let them have all the power.

Here’s the article.

Comment Time on the Atlantic Coast Pipeline

If anyone would like to comment to the FERC about the Atlantic Coast Pipeline, now is the time to do so.  My comments would focus on opposition to the use of eminent domain and on the safety concerns I have recently found.  Others are concerned about damage to the immediate environment around the pipeline and the trickle down effects on global warming.  Some few are concerned that we are overbuilding pipeline infrastructure.  Whatever your concern, now is the time to voice your opinion.

The link to use when filing your opinion is:

https://ferconline.ferc.gov/QuickComment.aspx

Good luck!  Regardless of the outcome lets be grateful we live in a place where we can at least voice an opinion.

Westmoreland Pipeline Recently Upgraded for Faster Flow

Westmoreland Pipeline Explosion Spectra-blaze

The pipeline that blew up in Westmoreland County about two weeks ago had been upgraded in November of 2014, adding compression that made the gas flow faster.  It had previously been operating at 700,000 MCF per day, and bumped up to 1.3 million MCF per day.  It’s possible (though not yet proven) that the higher flow rate could have contributed to the corrosion that appears to have caused the failure of the pipe.

We’re fans of adding pipelines in West Virginia, as our clients (mineral and royalty owners) will benefit from the better gas prices that will result.  However, it’s important to point out that there are dangers and risks that come with these pipelines.  You have to go into this kind of thing with both eyes open, doing research and getting advice from competent professionals.

If you have a company approach you about a pipeline easement, take the time to read the agreement carefully, ask questions, and make absolutely sure to get some advice from people who know what they’re doing.  We have the education and experience to help you out.  Give us a call at 304-473-1403.

Pipeline that Exploded Last Friday had Corrosion on some Welds

Westmoreland Pipeline Explosion Spectra-blaze

Photo from Marcellus Drilling News.

A burned out house is surrounded by charred ground and trees following a natural gas explosion at a pipeline complex on Friday, April 29, 2016, in Salem Township, Pa. The explosion caused flames to shoot above nearby treetops in the largely rural area, about 30 miles east of Pittsburgh, and prompted authorities to evacuate businesses nearby. (AP Photo/Keith Srakocic)

A burned out house is surrounded by charred ground and trees following a natural gas explosion at a pipeline complex on Friday, April 29, 2016, in Salem Township, Pa. The explosion caused flames to shoot above nearby treetops in the largely rural area, about 30 miles east of Pittsburgh, and prompted authorities to evacuate businesses nearby. (AP Photo/Keith Srakocic)

The Pittsburgh Post-Gazette ran an excellent article about the Texas Eastern pipeline that blew up one week ago today.  It says that corrosion has been found on two welds near the explosion.  It also says that while corrosion has been found, that isn’t necessarily the reason for the explosion, and that the investigation (which could take years) could determine that there was some other cause for the explosion.

It also goes into some detail about “incidents” on the Texas Eastern pipeline.  Over the 30 year life of the pipeline there have been 62 incidents, ranging from the discovery of leaks to barges and airplanes hitting the pipeline.  Accidents happen, eh?

It’s very interesting that there are two “incidents” per year on the pipeline.  That just underlines the importance of going into a pipeline negotiation with your eyes wide open.  Understand that while the money can be good, there is some risk involved.  The likelihood of an “incident” that will affect you, your loved ones, or your property is low, but if an “incident” happens it’s likely to be life altering.