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New pipeline under Cook Inlet endorsed Citizens council favors reopening Drift River oil terminal temporarily, then building subsea line to end risky tanker traffic Wesley Loy For Petroleum News
The Cook Inlet Regional Citizens Advisory Council is endorsing a limited reopening of the Drift River terminal, but believes a new pipeline under the inlet is the best oil transportation option long term.
That’s the gist of a new “position paper” from the council, a congressionally mandated organization that watches over industry activity in Alaska’s Cook Inlet oil and gas basin.
Located on the inlet’s west side, the Drift River terminal is where tankers load locally produced crude oil for delivery across the inlet to the Tesoro refinery at Nikiski.
The terminal’s location is problematic, as it sits in the Drift River flood plain about 22 miles northeast of Mount Redoubt, an active volcano.
The terminal, which features several huge oil storage tanks, has been largely closed since Redoubt erupted in March 2009. The eruption sent mudflows known as lahars down the Drift River, but protective berms built around the terminal saved it from a potentially disastrous inundation.
Multiple Redoubt eruptions Hilcorp took over the terminal Jan. 1 as part of its purchase of Chevron’s Cook Inlet properties. A Hilcorp subsidiary, Cook Inlet Pipe Line Co. or CIPL, operates the terminal.
Hilcorp has applied to reopen the terminal, and is working to improve its fortifications.
The council, in a July 25 press release, said it had several meetings with Hilcorp, and developed a two-page position paper on the terminal’s future.
The paper says the council believes the oil terminal’s close proximity to the active volcano “contributes significantly to the risk of oil spills at the terminal.”
The terminal was built in the 1960s on what would seem an unwise site because “it was the only feasible location due to the proximity of water depth sufficient to accommodate large crude oil tankers.”
The paper notes that the Redoubt erupted not only in 2009, but in 1989-90 and earlier in 1966, 1933 and 1902.
Since the shutdown of the tank farm, terminal operators have used a “tight line” technique to pipe crude from upstream producers directly onto tankers.
This system is not ideal, the council says, as it increases the number of Cook Inlet tanker transits. That raises risk, especially in winter when drifting ice is common in the inlet.
Subsea pipeline favored Hilcorp’s plan to reopen the terminal on a limited and temporary basis is preferable to continuing tight lining, the council position paper says.
It encourages Hilcorp to continue its efforts to retrofit the Drift River terminal with increased flood control protections.
Hilcorp is proceeding with work this summer to construct higher barriers around the tank farm, using sheet piling. The Alaska Department of Environmental Conservation is the major regulator considering the company’s request to reopen the terminal.
Within five years after the terminal reopens, a new subsea pipeline should be built for shipping oil across the inlet, replacing tanker operations, the council says.
The council believes a properly engineered subsea pipeline presents “a much lower spill risk than a marine facility and associated tanker traffic,” the position paper says. “The potential worst case spill amount from a pipeline spill is much lower than the worst case spill amount from an oil tanker.”
Hilcorp spokeswoman Lori Nelson said of the council paper: “We feel like this position taken is good and fair.”
Hilcorp would welcome a subsea pipeline as a better and cheaper alternative for moving oil, she said, but the company is unsure at this point what size line is needed.
Trans-Foreland line planned The council doesn’t mention it, but another oil and gas company is aiming to build a subsea pipeline to move west side production across the inlet.
Anchorage-based Cook Inlet Energy LLC says it is well along in planning what it calls the trans-Foreland pipeline. The line would be 25 miles long and would run from Cook Inlet Energy’s Kustatan production facility to the Tesoro refinery. The Kustatan facility is near West Foreland point, while the refinery is near East Foreland point.
Cook Inlet Energy has described its pipeline as 8 inches in diameter with a capacity to move 90,000 barrels per day. That’s a volume far above overall Cook Inlet oil production today. But several companies including Hilcorp, Apache and Cook Inlet Energy are moving aggressively to explore and boost production.
The estimated cost to build the pipeline is $53 million, Cook Inlet Energy has said.
Cook Inlet Energy is a subsidiary of Tennessee-based Miller Energy Resources Inc.
During a July 25 investor conference call, company executives said they’re “about to enter into an open season process” to line up shippers for the pipeline, and the goal is to finish construction by the fall of 2014.
Hilcorp’s Nelson said her company supports Cook Inlet Energy’s effort, but Hilcorp might not be “in a position to jump into an open season situation.”
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