May 7, 2018 – Natural Gas Intelligence
Pipeline Investments Dogged by Changing Regulations, On-and-off Tariffs, Protesters and Fear of Redundancy
By Charlie Passut
Developers and marketers of natural gas, crude oil and natural gas liquids pipeline projects face a unique set of factors that directly affect the issue of investment risk, including the fear of building a late project that ultimately proves to be unprofitable…
Read the full article here: http://www.naturalgasintel.com/articles/114296-pipeline-investments-dogged-by-changing-regulations-on-and-off-tariffs-protesters-and-fear-of-redundancy
… Andrew Black, CEO of the Association of Oil Pipe Lines (AOPL), said pipeline marketers and developers suffered "two significant losses" at the hands of FERC. The first occurred in December 2015 when the Federal Energy Regulatory Commission changed the methodology behind its rate index process.
"FERC made two changes to its methodology that really changed the index," Black said. "Steel costs are going up and pipeline safety costs are going up. But you have an index that is only half of what we believe the cost change experience in oil pipelines allows it."
Meanwhile, Black said the second "loss" took place two months ago, when the Commission ruled it would no longer allow master limited partnership (MLP) interstate natural gas and oil pipelines to recover income tax allowances in cost of service rates.
"Any shipper in pipeline has to recognize now that the permitting process can take longer and it's going to be uncertain," Black said. "We talk about steel tariffs, but nobody in this room can have any idea whether there will be a tariff or a quota on steel."
Black cited recent surveying of the pipeline industry by RBN Energy LLC. The head of AOPL said RBN analysts had found that pipelines were not only "competing with each other and other modes for delivering fuels now, [they are also] competing for expansion projects.
"RBN has profiled that the fear from the Permian Basin is that you build the pipeline that becomes one pipeline too many," Black said. If that were to happen, a pipeline's "long-term contracts really aren't long-term any more, and maybe [they] shouldn't have made that decision [to build]. They're worried about overbuilding, and they have to factor that into their prices." …
