After a roughly three-year wait for a critical state permit, Enbridge’s Great Lakes Tunnel and Pipe Replacement project for its Line 5 pipeline across the Straits of Mackinac in Michigan has taken a step forward. The Army Corps of Engineers’ permits for the tunnel project would seem to be the only major obstacle standing in the way of construction, but there may well be more challenges ahead. Like a few other oil and gas projects — namely, Mountain Valley Pipeline (MVP) and Dakota Access Pipeline (DAPL) — Line 5 has become entangled in controversy, including local opposition worried that a spill would irreparably damage their surroundings and spoil the state’s natural resources. In today’s RBN blog, we take a closer look at the Line 5 project, its next steps, and the opposition it continues to encounter.
Daily Energy Blog
Folks not directly involved in the FERC’s rate-setting process for interstate gas pipelines may think it’s a largely mechanical — and painfully boring — activity. But the process is actually often incredibly dynamic, with a lot of give-and-take among pipeline representatives, pipeline customers and FERC staffers, all aimed at reaching an agreement on rates that everyone involved can live with. We recently explained the “formal process” and (informal, confidential) “settlement process” that usually play out along parallel tracks. In today’s RBN blog, we expand on our look at the rate-setting process for gas pipelines with a few more nuances of how negotiated resolution really works.
Think energy markets are getting back to normal? After all, prices have been relatively stable, production is growing at a healthy rate, and infrastructure bottlenecks are front and center again. Just like the good ol’ days, right? Absolutely not. It’s a whole new energy world out there, with unexpected twists and turns around every corner — everything from regional hostilities, renewables subsidies, disruptions at shipping pinch points, pipeline capacity shortfalls and all sorts of other quirky variables. There’s just no way to predict what is going to happen next, right? Nah. All we need to do is stick our collective RBN necks out one more time, peer into our crystal ball, and see what 2024 has in store for us.
The rates regulators set for transporting natural gas on interstate pipelines are all-important. They determine how much it costs to get gas from A to B, whether new capacity can be funded, and serve as the bedrock of regional gas price relationships around the nation’s pipeline grid. But the process for establishing those rates can seem opaque and is often misunderstood — it’s one of those things you need to be directly involved in to fully grasp. Well, RBN’s Advisory Practice lives and breathes gas pipeline rate cases month in, month out, and we thought it would be interesting — and kind of fun — to take you behind the curtain and explain how rate cases at the Federal Energy Regulatory Commission (FERC) really play out.
A year ago, as New Year’s Day approached, we were looking ahead into very uncertain market conditions, having lived through a pandemic, crazy weather events, collapsing and then soaring prices, and Russia’s horrific invasion of Ukraine. Our job was once again to peer into the RBN crystal ball to see what the upcoming year had in store for energy markets. We’ll do that again in our next blog. But another part of that tradition is to look back to see how we did with our forecasts for the previous year. That’s right! We actually check our work. And that’s exactly what we’ll do today: review our prognostications for 2023.
Crude oil, natural gas and NGL production roared back in 2023. All three energy commodity groups hit record volumes, which means one thing: more infrastructure is needed. That means gathering systems, pipelines, processing plants, refinery units, fractionators, storage facilities and, above all, export dock capacity. That’s because most of the incremental production is headed overseas — U.S. energy exports are on the rise! If 2023’s dominant story line was production growth, exports and (especially) the need for new infrastructure, you can bet our blogs on those topics garnered more than their share of interest from RBN’s subscribers. Today we dive into our Top 10 blogs to uncover the hottest topics in 2023 energy markets.
The end of one year and the start of another provides a perfect opportunity to take stock — in this case, to examine total shareholder returns for the institutional and individual investors holding stock in oil and gas producers. As it turns out, 2023 was a mixed bag, with gas-focused E&Ps generally benefiting from a rebound in gas prices (current and future), oil-focused companies taking a hit, and diversified producers ending up somewhere in between. In today’s RBN blog, we continue our review of E&Ps’ total shareholder returns (TSR) with a look at Gas-Weighted and Diversified E&Ps.
According to the World Wildlife Fund, the Javan rhino and the Amur leopard top the global list of most endangered species. Broadening the scope, in 2014-20 we probably would have added the E&P investor to the list, as shareholder returns plunged deep into negative territory for seven consecutive years on volatile commodity prices and massive industry overspending. Almost miraculously, a combination of higher prices and a strategic shift to distribute cash flow to equity holders resulted in record shareholder returns that brought investors back into the fold. However, weakening prices and significant increases in investment have dramatically shrunk returns this year. As we discuss in today’s RBN blog, total shareholder returns in 2023 were mixed: good for gas-focused E&Ps but less so for diversified and oil-focused producers.
Since the start of the Shale Revolution 15 years ago, U.S. NGL production has increased by an extraordinary 260% to more than 6.5 MMb/d. And it’s not just NGL production that’s up sharply. So are exports of NGL purity products, especially LPG (propane and normal butane) and ethane. All that growth — and the growth that’s still to come — wouldn’t be possible without a seemingly non-stop expansion of NGL-related infrastructure. Everything from gas processing plants and NGL pipelines to salt-dome storage, fractionators and export docks. And much of that infrastructure is in the hands of just a few large midstream companies that over the years have developed “well-to-water” NGL networks that enable their owners to collect multiple fees along the NGL value chain. In today’s RBN blog, we discuss highlights from our new Drill Down Report on NGL networks.
It seems like everyone has an opinion about the Strategic Petroleum Reserve (SPR), and everyone is at least a little bit right. For example, many assert the SPR provides a helpful crude oil supply buffer in the event of a major disruption from, say, a strong hurricane in the Gulf of Mexico or a war in the Middle East. Others say the market can take care of itself — the SPR just muddies the waters by getting government (and worse yet, politicians!) involved. Still others say the oil market has changed dramatically since the SPR was established almost a half-century ago and that the strategy behind the reserve should be revised in response to those changes. In today’s RBN blog, we discuss the very gradual refilling of the SPR after a big draining — and an ongoing debate about the reserve’s future.
The rates regulators set for transporting natural gas on interstate pipelines are all-important. They determine how much it costs to get gas from A to B, whether new capacity can be funded, and serve as the bedrock of regional gas price relationships around the nation’s pipeline grid. But the process for establishing those rates can seem opaque and is often misunderstood — it’s one of those things you need to be directly involved in to fully grasp. Well, RBN’s Advisory Practice lives and breathes gas pipeline rate cases month in, month out, and we thought it would be interesting — and kind of fun — to take you behind the curtain and explain how rate cases at the Federal Energy Regulatory Commission (FERC) really play out.
The price of the Tier 3 gasoline sulfur credit hit $3,600 in October, up by a factor of 10 since 2022 and roughly in line with the all-time high reached in 2019. The high price of this important credit is a direct indicator of the true cost of compliance with the Environmental Protection Agency’s (EPA) Tier 3 gasoline sulfur standard and has raised some alarm recently in refining and financial circles. In today’s RBN blog, we give some specific examples of how refiners and investment analysts are reacting.
We’ve reached the two-year anniversary of the reversal of the joint-venture Capline crude oil pipeline. With its current north-to-south flow, it adds to the few conduits that can move oil from the Midwest to the Gulf Coast, specifically the St. James, LA, oil hub. Flows have been on a steady climb since southbound service began in December 2021, but volumes appear to be short of its available capacity, and there are looming headwinds. In today’s RBN blog, we examine whether Capline’s flows could be affected by the impending startup of the Canadian government-owned Trans Mountain Expansion Project (TMX). Could rising Alberta production be its golden ticket?
Kinder Morgan owns and operates natural gas pipelines across pretty much every part of the U.S., from California to Massachusetts and North Dakota to Florida. But if you look at a map of its gas pipeline assets, you’ll notice a focus on lines in the Lone Star State that serve as critical pathways for Permian- and Eagle Ford-sourced gas flowing to Mexico, Texas’s Gulf Coast and a number of existing and planned LNG export terminals. Now, Kinder is poised to significantly expand its pipeline network in that part of the world with the planned $1.8 billion acquisition of NextEra Energy Partners’ STX Midstream unit, as we discuss in today’s RBN blog.
The Biden administration’s recent announcement at the COP28 climate change conference in Dubai that it has issued a final rule on reducing methane emissions from the oil and gas industry raises an important question: If the feds will be requiring every producer to phase out flaring, install new equipment, and meet new, aggressive standards for emissions monitoring and leak detection and repair, will there still be a need for entities like MiQ and Project Canary to score or assess the lower-emissions natural gas produced by a significant subset of enviro-conscious E&Ps? In today’s RBN blog, we discuss the potential impacts of the new EPA rule on gas certification/differentiation and the development of a market for low-methane gas.
