Better pipeline infrastructure will reduce oil and gas transportation costs and improve safety.
The domestic energy production landscape has changed markedly in recent years. America surpassed Russia to become the world's top producer of natural gas in 2009. The Environmental Information Agency recently announced that U.S. exports of crude oil and petroleum products have more than doubled since 2010. Despite such increases in domestic production, the development of transportation energy infrastructure has not kept pace. Oil and gas need to travel from the wellhead to their final destination, whether that is storage or processing plant, or customers at the end of the chain.
A more robust pipeline infrastructure would make transportation of oil, natural gas and their products more efficient by reducing transportation costs and offering a more reliable mode of transportation. A well-developed energy transportation network would also reduce regional price differences.
One concern with pipeline projects is safety, specifically the rate of incidents, accidents and casualties. These concerns are part of the reason that increases in pipeline capacity have fallen behind growing energy production.
What happens when existing pipeline infrastructure is insufficient to meet the needs of developing energy production in new locations? Either projects are rendered unprofitable, or producers turn to alternative modes of transportation, often road and rail. These alternative modes will continue to be a part of the energy transportation infrastructure, but from a safety perspective they both have higher incident rates than pipelines.
From 2007 to 2016, per billion ton-miles of oil and gas products transported, there were 0.66 incidents for oil pipelines (i.e., the fewest accidents), 0.73 for natural gas pipelines, 2.20 for rail and 7.11 for road.
Pipelines have been getting safer over time. The rates of "serious" pipeline accidents – those that result in a fatality or an injury requiring inpatient hospitalization – per 1,000 miles of pipeline have fallen substantially. Looking at annual averages over 5-year periods to minimize 1-year fluctuations, the average from 1997 to 2009 was 0.025 accidents per 1,000 miles. This rate halved during the period 2012 to 2016. Operators, in conjunction with the Pipeline and Hazardous Materials Safety Administration, which monitors and administers pipeline safety, have made considerable progress in pipeline safety and oversight of pipelines and should continue to work towards further improvement.
Even these rates understate the safety of pipeline materials and operations. The Pipeline and Hazardous Materials Safety Administration supplies data on the underlying causes of serious pipeline incidents. For the longer-range gas transmission pipelines, the leading cause of accidents is excavation damage, generally the result of an agent other than the pipeline operator or a contractor excavating and damaging the pipeline. "Other outside force damage" is tied for the second-leading cause, of which vehicular damage accounts for the vast majority. While "incorrect operation" accounted for 16 percent of these incidents, there were no associated fatalities. The equipment and operation of pipelines is safer than the top-line incident rates suggest, based on the underlying cause data provided. Further gains in pipeline safety could come from developing methods to reduce third-party contact with them.
Interstate natural gas pipelines fall under the purview of the Federal Energy Regulatory Commission, but in recent months the commission board has not had a quorum. This inhibits the agency's ability to review and decide on major pipeline projects. Restoring a quorum to the board has bipartisan support and would allow the agency to resume normal operations. Until that time, more than 30 major natural gas projects are in a regulatory limbo, and there is a further chilling effect on other would-be projects.
In March, April and May, when the agency was operating without quorum on the board, it certificated no additional pipeline capacity. Before it lost a quorum, the agency had been able to certificate eight projects in February that added more than seven million cubic feet per day of capacity.
Across the different regulatory agencies that affect pipeline proposals, the combination of market forces and the regular review and oversight process should determine the viability of these projects. Ad hoc or irregular delays increase regulatory uncertainty and could deter future development.
The growth in U.S. oil and gas productions represents a substantial economic opportunity for America. However, if pipeline development stalls, America will not be able to monetize all the gains. Some production facilities will no longer be viable or producers will switch to more incident-prone and costly transportation alternatives. That is why it is vital that pipeline proposals be evaluated without delay.
This piece originally appeared in U.S. News & World Report
Charles Hughes is a policy analyst with Economics21 at the Manhattan Institute and author of the new report, The Energy Bottleneck: Why America Needs More Pipelines. Follow him on Twitter here.