Trying to Pierce the Permian Pipeline Fog
The growth of oil production in the Permian is leading to a corresponding increase in associated gas. A recent LawIQ Insights, Will Flaring Rules Limit Oil Production?, examined the flaring regulations in Texas, and we intend to conduct a similar analysis, with supporting data, for New Mexico's regulations. The way to avoid flaring, however, is to actually transport the associated gas from the production field to a demand center. There are plenty of pipeline projects that are on the drawing board to do just that. However, many of these proposed pipelines will stay entirely within the state of Texas. The burning question for all stakeholders is: When will Permian projects go in service?
These "intrastate" pipelines do not need to file with FERC for approval to site, construct and operate. While some complain about FERC's lack of transparency, the information about pipelines being constructed and operated in Texas is substantially more opaque and more difficult to obtain than for a FERC project. This lack of transparency and complexity increases the uncertainty around the progress of each project in the development phase. But all is not lost in the fog. As we discuss below, monitoring progress of Permian projects is difficult but, contrary to the pundits, not impossible. This LawIQ Insights offers an initial window into how we intend to enable our customers to do just that.
Regulatory Framework for Texas Intrastate Pipelines
A pipeline that will be located solely within the state of Texas and which will transport either oil or gas is regulated by the Texas Railroad Commission (TRC). The regulatory oversight and recordkeeping of the TRC is not nearly as robust as that offered by FERC. That does not mean that there is no value in monitoring the TRC activity, just that it is much more difficult to do so, and of less value when considered in isolation. Any pipeline that intends to build more than one mile of pipe, is required to file with the TRC a report, at least 30 days prior to commencement of construction. In addition, pipelines are required to have a permit to operate the pipeline from the TRC.
Unlike FERC, the TRC does not review and approve the siting of the pipeline, nor does it assess the environmental impacts of the proposed pipeline project. However, the pipeline developer is still required to obtain as many as 12 authorizations from other regulatory agencies that can provide insight into how the project is progressing and how long it may be before it will be authorized to begin service. We'll cover a few of the authorizations in this initial report.
Texas Commission on Environmental Quality
Almost any project of any magnitude will include compression and, if that compressor creates air emissions, the project will need to obtain some type of authorization from the Texas Commission on Environmental Quality (TCEQ). Depending on the location and size of the compressor stations, this regulatory permitting process can last from two to 18 months.
Most of the pending Permian projects will cross streams and wetlands. Depending on the significance of these crossings, the project may need to obtain a Clean Water Act (CWA) section 401 water quality certificate (WQC) from the TCEQ. While these WQCs have become infamous in the Northeast for delaying or blocking projects, they have not yet been as contentious in Texas, and they can often be obtained in less than three months. The WQC must be obtained before the start of construction and therefore can be an indicator as to when construction can begin.
United State Army Corps of Engineers
Because most projects will cross streams and wetlands, the projects will typically need to obtain a permit under Section 404 of the CWA and may also need to obtain a permit under Section 10 of the Rivers & Harbors Act from the United States Army Corps of Engineers. Projects coming from the Permian and heading to East Texas may need to obtain a permit from three separate offices of the Corps of Engineers in Albuquerque, Galveston and Fort Worth. Depending on the type of impacts on these water resources, these permits may take from four to 12 months to obtain. Similar to the WQC, the receipt of these permits before construction is an indicator of how the project is proceeding through the regulatory process.
United States Fish and Wildlife Service
There are over 90 endangered species native to the area between the Permian and East Texas. For this reason, every project needs to at least consult with the United States Fish and Wildlife Service (USFWS), and if there is a chance of an incidental take, the USFWS may issue a biological opinion about the impact of the project. This consultation can take from 30 days to 6 months or more if a biological opinion is necessary and, as with the Section 404 and 401 permits, must be completed before the start of construction.
Putting it All Together
Monitoring these sources of information and others creates issues for all of those focused on the build-out of oil and gas infrastructure from the Permian. LawIQ is ready to help by extending our capabilities to include all of these permitting regimes in Texas so that, as the buildout occurs over the next few years, we will be able to provide our customers with our analysis regarding the projects that are progressing, those that are not, and the projects' likely in-service dates. With many of these gas projects being as large as 2 Bcf/day of gas, the projects will certainly move the markets. So those with an interest in the project developers, basin differentials, or gas supply will benefit from this new addition to our product offerings.
Our platform provides our customers with a window into the existing intrastate pipelines that service Texas, including the Permian, as seen by the example below:
Insights Coming Soon
Discussion on recent opposition to projects that is unrelated to environmental impact concerns
What to make of the Form 501G and our view on some key issues that will arise when pipelines start completing them
Insights You May Have Missed