Tuesday, January 4, 2011

PR Government issues $500 million bonds for Gas Pipeline as CRS Report on gas pipelines is released

MJ: To build gas pipelines, the PR Government issues $500 million in bonds....

Vía Verde bonds are Wall Street ‘deal of the week’

By : John Marino

marino@caribbeanbusinesspr.com

Dec 23, 2010

Wall Street investment bankers are calling the $500 million Puerto Rico Electric Power Authority (Prepa) bond issue “the deal of the week” and predict that it will be bought up quickly as it finally goes on sale today.

The deal, first reported by CARIBBEAN BUSINESS last Friday, will finance the $450 million Vía Verde natural gas pipeline. It was hurried to market as it became clear that the Build America Bonds (BABs) program would not be extended beyond its Dec. 31 expiration.

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MJ: Regarding gas pipelines, the Congressional Research Service reports.....

CRS Report for Congress

Keeping America’s Pipelines Safe and Secure:

Key Issues for Congress

December 13, 2010

Summary

Nearly half a million miles of pipeline transporting natural gas, oil, and other hazardous liquids crisscross the United States. While an efficient and fundamentally safe means of transport, many pipelines carry materials with the potential to cause public injury and environmental damage. The nation’s pipeline networks are also widespread and vulnerable to accidents and terrorist attack.

The 2006 partial shutdown of the Prudhoe Bay, AK, oil field, and the 2010 pipeline accidents in San Bruno, CA, and Marshall, MI, have heightened congressional concern about pipeline risks. Both government and industry have taken numerous steps to improve pipeline safety and security over the last 10 years. While many stakeholders agree that federal pipeline safety programs have been on the right track, recent pipeline incidents suggest there continues to be room for improvement. Likewise the threat of terrorist attack on U.S. pipelines remains a concern.

The federal pipeline safety program was authorized through the fiscal year ending September 30, 2010, and is currently operating under a continuing resolution.

  • S. 3856 would reauthorize the program through FY2014. Both the House and Senate versions of the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2011
  • H.R. 5850 and S.3644 would provide appropriations for the federal pipeline safety program for FY2011.

The 111th Congress is considering new legislation to improve the safety and security of the U.S. pipeline network.

  • H.R. 6008 would require pipeline operators to provide immediate telephonic notice of a pipeline release to federal emergency response officials and would increase civil penalties for pipeline safety violations.
  • S. 3824 would increase the number of federal pipeline safety inspectors, would require automatic shutoff valves for natural gas pipelines, and would mandate internal inspections of transmission pipelines, among other provisions.
  • S. 3856 would increase federal pipeline safety inspectors, would require automatic or remote controlled shutoff valves on new gas pipelines, would require public access to pipeline emergency response plans, and would increase civil penalties for pipeline safety violations, among other provisions.
  • H.R. 6295 would require automatic or remote shut-off valves for many pipelines and public disclosure of pipeline locations, among other provisions.
  • S. 1333 would change natural gas pipeline integrity assessment intervals.
  • H.R. 2220 would mandate a new federal pipeline security study.

As Congress debates reauthorization of the federal pipeline safety program and oversees the federal role in pipeline security, key questions may be raised concerning pipeline agency staff resources, automatic pipeline shutoff valves, penalties for pipeline safety violations, and the possible need for pipeline security regulations.

In addition to these specific issues, Congress may wish to assess how the various elements of U.S. pipeline safety and security activity fit together in the nation’s overall strategy to protect transportation infrastructure. Pipeline safety and security necessarily involve many groups: federal agencies, oil and gas pipeline associations, large and small pipeline operators, and local communities. Reviewing how these groups work together to achieve common goals could be an oversight challenge for Congress.

Introduction

Nearly half a million miles of high-volume pipeline transport natural gas, oil, and other hazardous liquids across the United States.1 These transmission pipelines are integral to U.S. energy supply and have vital links to other critical infrastructure, such as power plants, airports, and military bases. While an efficient and fundamentally safe means of transport, many pipelines carry volatile, flammable, or toxic materials with the potential to cause public injury and environmental damage.

The nation’s pipeline networks are also widespread, running alternately through remote and densely populated regions, some above ground, some below; consequently, these systems are vulnerable to accidents and terrorist attack. The 2006 partial shutdown of the Prudhoe Bay, AK, oil field due to pipeline leaks, and the 2010 pipeline accidents in San Bruno, CA, and Marshall, MI, have demonstrated this vulnerability and have heightened congressional concern about pipeline risks.

The federal program for pipeline safety resides primarily within the Department of Transportation (DOT), although its inspection and enforcement activities rely heavily upon partnerships with state pipeline safety agencies. The federal pipeline security program began with the DOT as well, immediately after the terror attacks of September 11, 2001, but pipeline security authority was subsequently transferred to the Department of Homeland Security (DHS) when the latter department was created. The DOT and DHS have distinct missions, but they cooperate to protect the nation’s pipelines.

The Federal Energy Regulatory Commission is not operationally involved in pipeline safety or security, but it can examine safety issues under its siting authority for interstate natural gas pipelines, and can allow pipeline companies under its rate jurisdiction to recover pipeline security costs. Collectively, these agencies administer a comprehensive and complex set of regulatory authorities which has been changing significantly over the last decade and continues to do so.

The federal pipeline safety program was authorized through the fiscal year ending September 30, 2010, and is currently operating under a continuing resolution. S. 3856 would reauthorize the program through FY2014. Both the House and Senate versions of the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2011 (H.R. 5850 and S. 3644) would provide appropriations for the federal pipeline safety program for FY2011.

Safety and Security in the Pipeline Industry

Of the nation’s approximately half million miles of transmission pipeline, roughly 170,000 miles carry hazardous liquids—over 75% of the nation’s crude oil and around 60% of its refined petroleum products, along with other products.

Within this network, there are nearly interstate crude oil and liquid fuel pipelines, which account for roughly 80% of total pipeline mileage and transported volume. The U.S. natural gas pipeline network consists of around 217,000 miles of interstate transmission, and 89,000 miles of intrastate transmission.4 It also contains some 20,000 miles of field and gathering pipeline, which connect gas extraction wells to processing facilities.5Around 120 systems make up the interstate gas transmission network; another 90 or so systems operate strictly within individual states.6 These interstate and intrastate gas transmission pipelines feed around 1.2 million miles of regional pipelines in some 1,400 local distribution networks.7 Natural gas pipelines also connect to 113 liquefied natural gas (LNG) storage sites, which augment pipeline gas supplies during peak demand periods.

Pipeline Safety Record

Taken as a whole, releases from pipelines cause few annual fatalities compared to other product transportation modes. According to the Department of Transportation (DOT), hazardous liquid pipelines reported an average of 2.4 deaths per year from 2005 through 2009. During the same period, natural gas transmission and distribution pipelines reported an average of 1.0 and 10.4 deaths per year, respectively.9 Accidental pipeline releases result from a variety of causes, including third-party excavation, corrosion, mechanical failure, control system failure, and operator error. Natural forces, such as floods and earthquakes, can also damage pipelines. There were 102 hazardous liquid pipeline accidents, 84 natural gas transmission (including gathering) pipeline accidents, and 1,608 natural gas distribution accidents in 2009. Although pipeline releases have caused relatively few fatalities in absolute numbers, a single pipeline accident can be catastrophic in terms of deaths and environmental damage.

Notable pipeline accidents in recent years include:

  • 1999―A gasoline pipeline explosion in Bellingham, WA, killed two children and an 18-year-old man, and caused $45 million in damage to a city water plant and other property.
  • 2000―A natural gas pipeline explosion near Carlsbad, NM, killed 12 campers, including 4 children.
  • 2006―Corroded pipelines on the North Slope of Alaska leaked over 200,000 gallons of crude oil in an environmentally sensitive area and temporarily shut down Prudhoe Bay oil production.
  • 2007―An accidental release from a propane pipeline and subsequent fire near Carmichael, Mississippi killed 2 people, injured several others, destroyed 4 homes, and burned over 70 acres of grassland and woodland.
  • 2010―A pipeline spill in Marshall, Michigan released 819,000 gallons of crude oil into a tributary of the Kalamazoo River.
  • 2010—A natural gas pipeline explosion in San Bruno, California, killed 8 people (including 1 child), injured 60 others, and destroyed 37 homes.

Such accidents have generated persistent scrutiny of pipeline regulation and have increased state and community activity related to pipeline safety.

Pipeline Security Risks

In addition to their vulnerability to accidents, pipelines may also be intentionally damaged by vandals and terrorists. Some pipelines may also be vulnerable to “cyber-attacks” on computer control systems or attacks on electricity grids and telecommunications networks.Oil and gas pipelines, globally, have been a favored target of terrorists, militant groups, and organized crime.

In Colombia, for example, rebels have bombed the Caño Limón oil pipeline and other pipelines over 950 times since 1993. In 1996, London police foiled a plot by the Irish Republican Army to bomb gas pipelines and other utilities across the city.Militants in Nigeria have repeatedly attacked pipelines and related facilities, including the simultaneous bombing of three oil pipelines in May 2007.

A Mexican rebel group similarly detonated bombs along Mexican oil and natural gas pipelines in July and September 2007.In June 2007, the U.S. Department of Justice arrested members of a terrorist group planning to attack jet fuel pipelines and storage tanks at the John F. Kennedy (JFK) International Airport in New York.

Natural gas pipelines in British Columbia, Canada, were bombed six times between October 2008 and July 2009 by unknown perpetrators. In 2009, the Washington Post reported that over $1 billion of crude oil had been stolen directly from Mexican pipelines by organized criminals and drug cartels.Since September 11, 2001, federal warnings about Al Qaeda have mentioned pipelines specifically as potential terror targets in the United States.

One U.S. pipeline of particular concern, and with a history of terrorist and vandal activity, is the Trans Alaska Pipeline System (TAPS),which transports crude oil from Alaska’s North Slope oil fields to the marine terminal in Valdez. TAPS runs some 800 miles and delivers nearly 17% of United States domestic oil production. In 1999, Vancouver police arrested a man planning to blow up TAPS for personal profit in oil futures. In 2001, a vandal’s attack on TAPS with a high-powered rifle forced a two day shutdown and caused extensive economic and ecological damage.23 In January 2006, federal authorities acknowledged the discovery of a detailed posting on a website purportedly linked to Al Qaeda that reportedly encouraged attacks on U.S. pipelines, especially TAPS, using weapons or hidden explosives.

In November 2007 a U.S. citizen was convicted of trying to conspire with Al Qaeda to attack TAPS and a major natural gas pipeline in the eastern United States. To date, there have been no known Al Qaeda attacks on TAPS or other U.S. pipelines, but such attacks remain a possibility.

Conclusion

Both government and industry have taken numerous steps to improve pipeline safety and security over the last 10 years. While government, industry, and other stakeholders agree that federal pipeline safety programs have been on the right track, major pipeline incidents in 2010 suggest there continues to be room for improvement. Likewise the threat of terrorist attack on U.S. pipeline infrastructure remains a significant concern.

As Congress debates reauthorization of the federal pipeline safety program and oversees the federal role in pipeline security, key questions may be raised concerning pipeline agency staff resources, automatic pipeline shutoff valves, penalties for pipeline safety violations, and the possible need for pipeline security regulations, among other concerns.

In addition to these specific issues, Congress may assess how the various elements of U.S. pipeline safety and security activity fit together in the nation’s overall strategy to protect transportation infrastructure. For example, diverting pipeline resources away from safety to enhance security might further reduce terror risk, but not overall pipeline risk, if safety programs become less effective as a result.

Pipeline safety and security necessarily involve many groups: federal agencies, oil and gas pipeline associations, large and small pipeline operators, and local communities. Reviewing how these groups work together to achieve common goals could be an oversight challenge for Congress.