Obama-era regulations that put the brakes on oil and gas development continue to fall by the wayside under the current administration. Two executive orders signed April 10 by President Donald Trump sought to limit the power of states to delay natural gas, coal and oil projects.
The announcements were applauded by those in the Louisiana and Texas oil and gas industry, where an abundance of supply and increasing consumption are fueling heightened demand for pipelines. The orders essentially make it harder for states to block new pipeline development on environmental grounds, calling on the Environmental Protection Agency to review a section of the Clean Water Act requiring applicants to get certification from affected states.
Absent the edicts, economist Loren Scott, of Loren C. Scott & Associates in Baton Rouge, says future pipelines coming out of the oil- and gas-rich Permian Basin could have run the risk of local interference as projects neared metropolitan areas in Texas on the way to the Gulf Coast. “It’s (the Permian) much further away and you may have to get into the neighborhood of some metro areas where you might get some flak,” Scott says.
Nonetheless, laying pipeline has traditionally met minimal local resistance in the oil- and gas-friendly Southern states—with the notable exception of the recently completed Bayou Bridge Pipeline running from Nederland, Texas, to St. James Parish. “You’re going across two states,” says Scott, “that are not generally afraid of pipelines.”
Gifford Briggs, president of the Louisiana Oil and Gas Association, says Trump is simply continuing his administration’s policy of gradually removing the regulatory hurdles to progress. “He has also taken some actions at FERC (Federal Energy Regulatory Commission) to speed up the approval process for Liquefied Natural Gas projects, so it’s not surprising that he’s doing the same thing with pipelines.”
Briggs hopes the recent orders will facilitate the extraction of oil and gas out of the shale plays, adding that the cheap and abundant supply is the primary reason for the surge of industrial and LNG projects along the Gulf Coast. In southwest Louisiana’s LNG market, demand for natural gas is expected to reach 14 billion cubic feet a day by 2025.
Improving market dynamics have also given Baton Rouge-area pipe manufacturers and fabricators the confidence to open up their pocket books. In February, Epic Piping announced plans to spend up to $40 million to expand its pipe spool fabrication facility in Livingston, and invest in a new 24,000-square-foot administrative office in Baton Rouge. Then, in March, Stupp Corp. announced it will spend $22 million to expand and upgrade its two steel pipe manufacturing plants at its north Baton Rouge headquarters.
Stupp’s current investment will, in part, enable the company to prepare for increased pipe demand in the Permian and elsewhere. They’re adding assets that will improve efficiency and help it achieve tighter specifications, while also preparing the supplier for greater production capacities in the pipeline market. The project will result in 128 new jobs, and bring Stupp’s employment level near its peak of five years ago.
“(The investment) is designed to optimize the capabilities of the assets,” says Chip McAlpin, Stupp vice president of corporate strategy and development. “It will include the installation of some new equipment and allow us to process pipe more efficiently. In years of high market demand, we will be able to hit higher performance numbers.”
By increasing its global production footprint by more than 30% percent, Epic Piping will be able to produce larger and heavier pipe. Its employee count, currently at 900, will increase to more than 2,000. The expansion will prepare the company for increased demand for pipe spool products, driven largely by several active and planned projects in the petrochemical and LNG markets.
Others are equally thrilled with Trump’s actions. Ian Jefferies, president and CEO of the Association of American Railroads, says in a statement that the orders clear the path for transporting LNG by rail car. “Our sector welcomes the sections in the executive orders that allow companies to get products to market quicker,” he says. “This includes the potential to safely move LNG by rail and efforts to modernize the project planning and permitting process, which has sometimes been used as a tool to slow and block critical infrastructure projects.” His organization had earlier petitioned the government for changes to the regulations.
Maury Hudson, chairman of the Louisiana Energy Export Association, says his organization unanimously supports Trump’s recent action, as it also updates Pipeline and Hazardous Materials Safety Administration regulations (Part 193, Liquefied Natural Gas Facilities: Federal Safety Standards) that governs the siting, design and operations of LNG facilities.
Hudson says the changes relax certain requirements. “The regulations as currently written do not allow for modern, risk-based methods for determining the testing frequency of certain safety equipment. In order to reflect best practices and best available technologies, the regulations are due for an update to keep up with the rapid development of LNG export facilities in the U.S.”
Everyone not happy
Anne Rolfes, executive director of the Louisiana Bucket Brigade, a New Orleans-based environmental group, says the regulatory easing could be catastrophic, as “there are already too many pipelines in Louisiana. This state is saturated (with pipelines). According to the Louisiana Department of Natural Resources, we have well over 100,000 miles of pipeline in this state. We increase our risk with every additional foot we build.”
She takes issue with the idea that pipelines are safer than highway transport, an argument made by industry during the Bayou Bridge protests. “They (industry) consistently said that pipelines were safer than truck transport, but they never had any data to back that up. They just don’t have any real data behind a lot of their claims.”
Her organization’s focus has shifted from Bayou Bridge to the burgeoning industrial sector in St. James Parish. “Because of cheap natural gas and because the oil industry wants to push plastic, there is just an unbelievable onslaught of construction in this state. And St. James is ground zero.”
LOGA’s Gifford takes issue with environmentalists’ claims, saying there are those with legitimate environmental concerns, then there are those who “just don’t want oil and gas activity.”
“They don’t want pipelines. They don’t want drilling. They don’t want hydraulic fracturing. They don’t want oil. They don’t want gas. So that level of opposition is always going to be out there and when you’ve got an administration that supports you, you’re not as fearful of those.”
LNG is primary catalyst
Jason French, vice president of government and public affairs for Tellurian Inc., says his company has started booking capacity on two proposed pipeline projects—which it will own and operate—in order to move supply from the Haynesville Shale to the Gulf Coast. The pipelines will, in part, support its Driftwood LNG Plant south of Lake Charles, expected to break ground later this year.
Tellurian’s $1 billion Haynesville Global Access Pipeline will connect natural gas pipelines and production facilities in DeSoto Parish to those in Calcasieu Parish. Once complete in 2023, the 42-inch natural gas and 160-mile pipeline will transport up to 2 billion cubic feet of natural gas per day. A separate $1.4 billion project—the Delhi Connector Pipeline—would move natural gas from the Perryville/Delhi Hub in Richland Parish to Calcasieu Parish. Once complete in 2023, the 180-mile pipeline will move another 2 billion cubic feet of natural gas per day.
“Without significant pipeline infrastructure in a year, we believe you’re going to see a significant deficit of natural gas,” French says. “As crazy as that is to believe, you’re going to have a shortage of natural gas in southwest Louisiana.”