Crude oil and natural gas infrastructure problems, from gas pipeline explosions and oil spills to train derailments and fires, are in the news

Oil and natural gas infrastructure challenges

Published
American Association of Petroleum Geologists (AAPG)

Crude oil and natural gas infrastructure problems, from pipeline oil spills to train derailments and fires, have been in the news recently. Though these problems are not new, public concern is growing. Think tanks and government agencies have been considering the problems and potential solutions for some time and are now reporting the results of their studies. What follows are reports of one oil and one natural gas infrastructure study.

Oil

U.S. infrastructure to transport oil is facing unprecedented challenges: production has increased, especially from the Marcellus, Bakken and Eagle Ford—areas that were not historic production centers. In addition, much of the current oil production is lighter than that produced in the recent past. Also, large volumes of heavy oil produced in Canada are taxing the system. Further in the future, the transportation system will have to handle growth in Mexican production that is likely with the new oil system reforms.

The Center for Strategic and International Studies (CSIS) recently released a report considering these issues, Delivering the Goods: Making the Most of North America’s Evolving Oil Infrastructure (Frank Verrastro et al, February 2015). The report identified five areas in which regulation and policymaking will play an important role:

  • Safety concerns for crude oil traveling by rail.
  • How can the U.S. strategic petroleum reserve best respond to a global supply emergency given increased domestic production? The reserve depends on the existing commercial infrastructure to move its oil. That infrastructure is now filled to capacity with domestically produced oil.
  • Should the U.S. allow crude oil exports: refiners, who are shipping large volumes of refined products disagree with producers and consumers’ groups on the economic and environmental impact of crude exports.
  • The Jones Act: ships can help deliver oil from new producing areas to the U.S. existing refineries. The 1920 law requires ships transporting goods between U.S. ports be constructed in the U.S. and staffed by U.S. citizens or permanent residents. Opponents of the law say it restricts shipping volumes and increases costs. Supporters say the law promotes a strong merchant marine that is in the U.S. national security interest.
  • Concern that an expanded transportation network generates more spills and encourages increased oil consumption.
Natural Gas

In advance of releasing the Obama Administration’s Quadrennial Energy Review, the Department of Energy (DOE) recently published supporting studies and analyses. The report, Natural Gas Infrastructure Implications of Increased Demand from the Electric Power Sector, concludes that the demand for new interstate gas pipelines over the next 15 years will be less than 70 percent of the capacity additions constructed over the past 15 years.

Natural gas electricity generation is currently slightly less than coal-fired generation but is expected to grow as aging coal plants are retired and states or the federal government institute carbon-emission restrictions.

The need for additional interstate natural gas pipelines is mitigated by the current diversity of natural gas production and use for power generation that developed with increased production from shale reservoirs. In addition, the capacity of the current natural gas pipeline system to increase utilization and capacity reduces requirements for additional pipeline construction.

DOE did not consider whether siting energy infrastructure would be more challenging in the future. However, the recent, successful campaigns of energy non-governmental organizations to halt infrastructure projects—as a surrogate for emissions reduction regulations—suggests that pipeline siting will be more difficult.

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