Operating in the shadows, Energy Transfer Partners, ETP, is trying to gain an edge over others — notably TransCanada and the partnership of Enbridge and Enterprise Products Partners, EPP — to offer pipeline access from the Bakken, Alberta oil sands and the Utica shale plays to Gulf Coast refineries.
Industry sources say its plan is pinned on reversing its 770-mile Trunkline system to a southbound operation from the Midcontinent, shifting from the declining natural gas business to the shale-rich core of the United States and beyond to Alberta.
They are projecting that the switch to a Gulf-bound crude pipeline could expand Trunkline’s capacity to 400,000 barrels per day from 150,000 bpd.
Michigan governor protestsAlthough ETP has kept tight-lipped about its plans, the proposal was dragged into the public spotlight through a motion to “intervene and protest” by Michigan Gov. Rick Snyder filed with the Federal Energy Regulatory Commission.
Snyder said the proposal to convert a “key piece of the natural gas infrastructure” in Michigan into an oil pipeline “will not serve Michigan’s energy needs” to heat homes and businesses in a large part of the state.
In addition, he expressed concern over the “implications this would have on the state’s economic development and energy policy as a whole.”
Snyder said Michigan “needs more natural gas infrastructure, not less. We must have an energy policy that supports excellent reliability, at a competitive price, while protecting the environment.”
He said ETP’s plans would affect almost one-third of Michigan’s overall natural gas supply and greatly reduce “both flexibility and redundancy,” putting at risk the gas needs of thousands of Michigan residents if there was a single pipeline break or other problem.
Snyder asked FERC to allow him to participate in the Trunkline proceeding and to reject ETP’s application.
Illinois is mounting a similar challenge.
Line would still carry gasBut, in a regulatory document, ETP said neither Michigan nor Illinois would be isolated from natural gas service because the proposed looped pipeline would still be able to carry gas without inflicting service disruptions or higher prices on gas customers.
Wood Mackenzie analyst Harold York makes the case that the Trunkline conversion would have a clear scheduling advantage over TransCanada’s Keystone XL system, which has to be started from scratch.
He estimated the U.S. requires about 1.4 million bpd of new crude transportation capacity by 2020 to ease pressure stemming from the Midcontinent.
A Raymond James analyst believes the current inventory glut into and out of PADD II would evaporate by 2014 if all of the existing pipeline proposals, excluding Trunkline, proceed.
That list includes the 700,000 bpd southern portion of Keystone XL from Cushing, Okla., and the 450,000 bpd twin pipeline to run parallel to the Enbridge-ETT Seaway connection that is targeted to reach 850,000 bpd within two years.
April 2014 targetETP has reportedly targeted April 2014 to introduce the converted Trunkline, indicating it is ready to place itself in direct competition with the Seaway expansion.
Other pipeline proposals likely to come into service after April 2014 include Portland-Montreal Pipeline reversal to provide 200,000 bpd and Sunoco’s planned 40,000 bpd West Texas-Houston Access link.
EPP said it is unaware of ETP’s plans, but insists it has gained solid market backing for the three major upgrades to Seaway — the 150,000 bpd reversal completed in April, the 400,000 bpd expansion due on-stream in early 2013 and the twin 850,000 bpd pipeline by mid-2014.
Although Trunkline might sidestep environmental opposition because it is dealing only with an existing pipeline, the anti-industry Oil Change International said that will depend on what type of crude it carries, especially if that includes diluted bitumen from the oil sands.