Liquids Pipeline Projects - There's More Than Meets the Eye
Developments in extraction technology have created more production capability for the entire spectrum of energy commodities, including crude and natural gas liquids. As attention continues to focus on the infrastructure buildout in the Permian Basin, for example, most growth is related to liquids production and transportation, not the byproduct, dry gas. New builds, like Plains All American Pipeline's Sunrise Expansion Project, are coming online earlier than anticipated in order to alleviate the now long standing blockage in the area. However, the operations of gas and liquids pipelines are shaped by their long history of regulation. But it's possible to gather insights about liquids pipelines projects, such as company updates about when the pipelines may be coming online, as well as rates and terms of service, if you know where to look and can monitor it efficiently.
Natural gas pipelines and liquids pipelines are governed by two different statutes, the Natural Gas Act (NGA) and the Interstate Commerce Act (ICA), respectively. As we've seen, FERC plays a central role in the development of natural gas transportation projects. Companies compile formal and comprehensive applications, which kick off months of environmental review by FERC. In most cases, FERC then grants a certificate approval, putting the ball back in the company's court to develop extensive implementation plans and to obtain dozens of other permits. The byproduct of this regulatory scheme is a reasonably transparent process for market participants.
Liquids pipelines, by comparison, are considered common carriers governed by a regulatory scheme different than that of natural gas pipelines. Thus, rather than seeking a Certificate of Public Convenience and Necessity from FERC to construct a new pipeline, liquids pipelines must pursue siting approval from each affected state. These siting approvals are not nearly as transparent and consistently applied as FERC's approval process. But like their counterparts, interstate liquids pipelines' rates and tariffs are subject to the FERC's review.
Hope - Petitions for Declaratory Order & Related Tariff Filings
Petitions for Declaratory Order (PDO) are little known but useful windows into liquids pipeline development, whether for crude or another product. In order to request additions and modifications to existing tariffs, developers must provide the FERC with details about the operations that they intend to provide with respect to expanding their system or building a new one. As a result, details like participants (sponsor, project name, and shippers), timing (approval and expected in-service), and commercial details (open seasons, capacity, contract terms) are publicly disclosed months before any earth is turned. Take this example from the Plains Sunrise Pipeline PDO filed on May 25, 2018 for a new pipeline project that will transport crude oil from the Permian Basin to Cushing:
Sunrise plans to construct three miles of 16-inch pipeline in Loving County, Texas and 259 miles of 24-inch pipeline from Midland, Texas to Wichita Falls, Texas at a cost of approximately $418 million. The Project involves a combination of newly constructed capacity and leased capacity. Sunrise plans to lease pipeline capacity from Plains on segments extending from Loving, Texas to Midland, Texas and on segments extending from Wichita Falls, Texas to Cushing Oklahoma.
A view of PDO activity over the last two months shows evidence of market trends, specifically crude capacity out of the Permian Basin and ramping activity stemming from NGL production from natural gas producing regions.
Recent Petitions and Rulings on Declaratory Orders
| PDO Filing Date | Project | Product | Incremental Capacity |
|---|---|---|---|
| 7/31 - Targa |
New Pipeline (Scoop/Stack takeaway) |
NGLs | 110,000 bpd |
| 8/8 - Magellan |
West Leg expansion (Houston to El Paso) |
Refined Products | 100,000 bpd |
| 8/14 - Cactus II |
New Pipeline (Permian takeaway) |
Crude | 585,000 bpd |
| 8/14 - Enterprise |
Enterprise TE Expansion (Indiana to Chicago) |
Refined Products | 34,500 bpd |
| 8/20 - White Cliffs |
White Cliffs / DCP (DJ takeaway / conversion) |
NGLs | 50,000 bpd |
| 8/27 - Plains |
Sunrise Pipeline (Permian takeaway) |
Crude | 90,000 bpd |
| 9/7 - Medallion |
Six expansions (Permian takeaway) |
Crude | 187,000 bpd (aggregate) |
| 9/12 Enlink |
Chickadee Expansion (Permian takeaway) |
Crude | 38,000 bpd |
In addition to project specific intelligence, other details about rates and terms of service are captured in FERC tariff documents, such as potentially converting, for example, an NGL pipeline to crude service, if it will provide interstate service.
By using the customizable alerting feature from the LawIQ platform, our customers are aware of these developments, such as the ruling approving Plains' Petition for Declaratory Order for its Sunrise Pipeline, and more importantly, the opportunities they present.
Insights Coming Soon
Overview of LNG pipeline projects
Review of oil pipeline affiliate rule
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