FEATURES 26. Natural Gas Revolution

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Published by Benjamin Media Inc.

Volume 6

February 2013

Issue 2

ON THE COVER: The shale gas boom —

led in part by the development in the Marcellus and Utica shale — has created unbalance in the natural gas market, where production outstrips demand. Companies looking to expand their midstream business must be careful to avoid getting caught over-building and being stuck with underused assets.

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Balancing the Natural Gas Markets Production vs. demand and the implications for midstream pipeline companies. By Herve Wilczynski and Brian Forbes

FEATURES

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America has a strategic advantage in the “Natural Gas Revolution” and stands to benefit from the forecasted increase in demand. Policy and transportation infrastructure must first adapt to keep pace with the new demand. By Tim Brown

Choosing the right excavator for a pipeline project can be a key factor in a successful installation. Hyundai’s dealers help contractors sort out their iron. By Jaselle Spencer

Natural Gas Revolution

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2013 Canadian Oil Pipeline Report

The oil sands in western Canada are driving pipeline construction from Alberta and British Columbia to various markets in North America, as well as to the coast for export. By Bradley Kramer

Hyundai’s Helping Hand

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Good Idea. Good People. Good Result.

In the mid-1980s, the North American pipeline industry teamed up to find a repair solution, which resulted in the composite products that are used today. By Scott Cooksey

DEPARTMENTS

COLUMNS

8 18 40 46

6

News Project Roundup

Editor’s Message

Product Showcase

MARKETPLACE

Calendar

45 46

Business Cards Index of Advertisers

North American Oil & Gas Pipelines (ISSN 2166-6334) is published twelve times per year. Copyright 2013, Benjamin Media Inc., 10050 Brecksville Rd., Brecksville, OH 44141 USA All rights reserved. No part of this publication may be reproduced or transmitted by any means without written permission from the publisher. One year subscription rates: complimentary in the United States, Canada and Mexico. Single copy rate: $10. Subscriptions and classified advertising should be addressed to the Peninsula office. POSTMASTER: send Changes of Address to North American Oil & Gas Pipelines, P.O. Box 190, Peninsula OH 44264 USA. Canadian Subscriptions: Canada Post Agreement Number 7178957. Send change address information and blocks of undeliverable copies to Canada Express; 7686 Kimble Street, Units 21 & 22, Mississauga, ON L5S 1E9 Canada North American Oil & Gas Pipelines Magazine is not affiliated or associated with North American Pipe Corporation of Houston, Texas.

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Editor’s Message Feeling Gassy Two main factors are driving the expansion of energy pipelines in North America. One is the subject of our cover story on page 20 and what Tim Brown of Snelson Companies calls “The Natural Gas Revolution” in his article on page 26. The second is the continued development of the Canadian oil sands, which dominates the projects covered in the 2013 Canadian Oil Pipeline Report on page 30. Natural gas will continue to be a hot topic this year, as the concern over hydraulic fracturing and the demand for cheap sources of energy butt heads. Companies involved with manufacturing fracking fluids are developing non-toxic products to reduce the environmental impact of the process. Meanwhile, the “technological triumph” of accessing energy resources from shale has caused the market to be flooded with natural gas, according to Herve Wilczynski and Brian Forbes of the consulting firm A.T. Kearney. Production is outstripping demand, and midstream pipeline companies need to exercise caution to avoid over-building infrastructure that may become underused. Increasing demand would help balance the market, but that may be easier said than done. While the Northeast is suddenly stacked with a cheap natural gas resource, a look at my electric bill shows that coal is still the primary energy source in the region. Switching those coal plants to cleaner natural gas-fired plants would certainly increase demand, but that’s an expensive proposition. Another avenue to increase natural gas is on the road. While the local transit authority owns a few natural gas-fueled buses, the majority of the fleet runs on diesel. In both examples above, federal leadership could change the course of the industry in the United States. Natural gas is a cleaner burning fuel than both coal and diesel. Initiatives from the U.S. Department of Energy and the Department of Transportation to promote the use of this abundant resource in the production of electricity and for government-owned fleets (e.g., municipal service trucks and regional transportation authorities) would spark a quick increase in demand that would help balance the market and justify the construction of pipelines and other infrastructure. Exporting natural gas is another way that the government could further increase demand. Federal leadership would also improve the impact that the Canadian oil sands has on the economy throughout North America. The United States is already the second biggest beneficiary from the development of pipelines and infrastructure in Alberta’s oil-rich region. The U.S. government could further improve that relationship by embracing pipeline projects that would carry more Canadian oil to U.S. markets. Promoting a continental energy policy would solidify North America as one of the world’s top oil and gas producers, as the International Energy Agency proclaimed in its report last year. Embracing the resources that are produced domestically would also ensure energy security, which has long been a platform for politicians of every stripe. Instead of seeking regulations to limit energy development, we should be seeking to enhance the techniques of extracting energy that limit environmental impact. That is true progress.

Publisher Bernard P. Krzys Associate Publisher Robert D. Krzys Editor James W. Rush Managing Editor Bradley Kramer Contributing Staff Editors Sharon M. Bueno Andrew Farr Keith Gribbins Pam Kleineke Kelly Pickerel Production Manager Chris Slogar Graphic Designers Sarah E. Haughawout Deb McManus Elizabeth C. Stull Marketing Director Kelly Dadich Regional Sales Managers Ryan Sneltzer Dan Sisko Audience Development Manager Alexis R. White Web & Interactive Manager Mark Gorman Conference Manager Melanie Roddy Editorial Advisory Board Cortez Perotte Pipeline Product Engineer/Industry Representative, Caterpillar Inc. Todd Porter Vice President of Business Development, New Century Software Inc. Eric Skonberg Principal Engineer, Trenchless Engineering Corp. Don W. Thorn President, Welded Construction LP Kevin Waschuk Vice President, Waschuk Pipe Line Construction Ltd. Bob Westphal Senior Strategic Advisor, Michels Corp. Editorial & Advertising Offices 10050 Brecksville Rd. Brecksville, OH 44141 USA (330) 467-7588 • Fax: (330) 468-2289 www.napipelines.com e-mail: [email protected] Reprints

Brad Kramer Managing Editor [email protected]

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Wright’s Media Ph: 877-652-5295 Fax: 281-419-5712

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North America News Governor Approves Keystone XL Pipeline Route in Nebraska TransCanada Awaits Approval of Presidential Permit to Begin Work

The Keystone XL project has cleared another hurdle, as Nebraska Gov. Dave Heineman approved TransCanada’s rerouted pipeline proposal on Jan. 22. In a letter to President Barack Obama and outgoing Secretary of State Hillary Clinton, Heineman outlined a number of findings by the Nebraska Department of Environmental Quality (NDEQ) in its final evaluation report sent to the governor on Jan. 3, including the avoidance of the Sand Hills region and the Ogallala Aquifer. The governor’s approval is the last step in the re-route review process established by the Nebraska State legislature, after TransCanada’s first Presidential Permit for the project was denied in January 2012. Heineman requested that Nebraska’s evaluation be included in the Department of State’s Supplemental Environmental Impact Statement, as the project awaits approval of its second Presidential Permit application, which TransCanada filed on May 4, 2012. 8

“Over the past year, we have been listening to Nebraskans as we worked to identify a new route for the Keystone XL pipeline that avoided the Sand Hills, protected sensitive areas and addressed as many concerns as possible,” said Russ Girling, TransCanada’s president and CEO. “The NDEQ process has clearly taken into account the input from Nebraskans and [the] approval of the Nebraska re-route by Gov. Heineman moves us one step closer to Americans receiving the benefits of Keystone XL — the enhanced energy security it will provide and the thousands of jobs it will create.” Girling insisted that the need for the Keystone XL grows stronger as North American oil production increases, as the project also reduces the need for imported oil. “Having the right infrastructure in place is critical to meet the goal of reducing dependence on foreign oil,” Girling said. “Keystone XL is

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the most studied cross-border pipeline ever proposed, and it remains in America’s national interests to approve a pipeline that will have a minimal impact on the environment.” Heineman’s approval letter highlighted these findings by the NDEQ: • The preferred route avoids the area that is defined as the Nebraska Sand Hills. This area was defined by state and other agencies in 2001 — long before a pipeline was considered. • Construction and operation of the Keystone XL pipeline is expected to have “minimal environmental impacts in Nebraska.” • Construction of Keystone XL will result in $418.1 million in economic benefits and support up to 4,560 new or existing jobs in Nebraska. The project will generate $16.5 million in taxes from pipeline construction materials and is expected to yield up to $13 million in local property tax revenues in its first full year of valuation. napipelines.com

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• Normal operation of the pipeline is expected to have no effect on ground or surface water quality or use along the pipeline route in Nebraska. In the unlikely event of a spill from the pipeline, impacts on water resources would be localized and would not impact the Ogallala Aquifer as a whole. • TransCanada will implement a detailed emergency response plan for Keystone XL and is responsible for cleanup, remediation and compensation related to oil released from the pipeline. • The 57 special conditions TransCanada has agreed to adopt for the construction, operation and maintenance of Keystone XL will make it safer than typical pipelines built in the United States and will result in “more rigorous adherence to industry standards.” The special conditions include burying the pipeline deeper underground, installing a higher number of data sensors and remote controlled shut-off valves and increased inspections and maintenance. TransCanada will also use special techniques to reduce disturbance and enhance pipeline safety near wetlands, rivers, residential and commercial areas, steep terrain and fragile soils. • The physical and chemical properties of crude oil transported in Keystone XL will be similar to the light and heavy crude oils already being transported safely in pipelines across the United States. TransCanada will provide local emergency responders with material safety data sheets for

Kinder Morgan Announces Phase 2 of Edmonton Terminal Expansion With an expansion project already under way, Kinder Morgan Energy Partners has further plans for its Kinder Morgan Canada Terminals, announcing the construction of an additional 1.2 million barrels of merchant storage capacity at Trans Mountain Pipeline’s Edmonton terminal in Strathcona County, Alberta. Construction of the new tankage is scheduled to 10

products contained in the pipeline immediately in the event of a spill. This proposed oil pipeline will transport oil from Hardisty, Alberta, and Baker, Mont., before reaching delivery terminals in Steele City, Neb. Keystone XL is estimated to cost about $5.3 billion (USD) to build and will support the creation of 9,000 jobs on the American portion of the pipeline and about 2,200 on the Canadian side. The projected in-service date for Keystone XL is late 2014 or early 2015, subject to approval of the company’s Presidential Permit application. In addition to the company’s work on Keystone XL, TransCanada began construction on the Gulf Coast Pipeline Project in August 2012. Since work on this project began, TransCanada has employed about 4,000 skilled laborers, trades people, inspectors and project management specialists to build the pipeline from Cushing, Okla., to delivery points in the Houston and Nederland, Texas, areas. The initial capacity of the Gulf Coast Pipeline will be 700,000 barrels of oil per day (bpd), with the ability to increase to 830,000 bpd. The company expects that the Gulf Coast Pipeline will go into commercial service in late 2013. Since the original Keystone Pipeline began operating in 2010, it has safely delivered more than 350 million barrels of oil to refineries in the U.S. Midwest. Long-term commercial contracts remain in place for Keystone XL, which is designed to carry about 830,000 barrels of oil from Alberta, Montana, North Dakota and South Dakota to Steele City, Neb.

commence this spring following receipt of supporting permits, with completion expected in late 2014. Phase 2 will cost approximately $112 million. Construction of Phase 1 of the expansion, which consists of 3.6 million barrels of new storage, is ongoing and all of that capacity is expected to be in service by late 2013. Total capital investment for the combined 4.8 million barrel project is approximately $420 million and is supported by long-term contracts with major producers and refiners. When completed, total storage capacity at the Edmonton facility will be 9.4 million

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TransCanada Picked to Develop Natural Gas Infrastructure

Progress Energy Resources Corp. has selected TransCanada Corp. to design, build, own and operate the proposed $5 billion Prince Rupert Gas Transmission project, which will transport natural gas from the North Montney region near Fort St. John, B.C., to the Pacific Northwest LNG export facility in Port Edward near Prince Rupert, B.C. The companies expect to finalize definitive agreements in early 2013. Along with its Coastal GasLink Pipeline project, this is the second major natural gas pipeline proposed to Canada’s West Coast for TransCanada, according to company president and CEO Russ Girling. In addition, TransCanada proposes to extend its existing NOVA Gas Transmission Ltd. (NGTL) system in northeast B.C. to connect both to the Prince Rupert Gas Transmission project and to additional North Montney gas supply from Progress and other parties. This new infrastructure will allow the Pacific Northwest LNG export facility to access both the abundant North Montney supplies as well as other Western Canada Sedimentary Basin (WCSB) gas supply through the NOVA Inventory Transfer (NIT) trading hub and the extensive existing NGTL pipeline network. Initial capital cost estimates associated with extensions of the NGTL System are approximately $1 to 1.5 billion, with an in-service date targeted for the end of 2015.

barrels, including the existing Trans Mountain system facility and the North 40 merchant terminal. “The new tanks further demonstrate the strategic importance of Trans Mountain’s Edmonton hub and the role it will play in staging Western Canadian crude oil production into export markets, including West Coast markets served by Trans Mountain Pipeline,” said Bill Henderson, vice president of Kinder Morgan Canada Terminals. “The hub also gives Kinder Morgan’s customers flexibility and optionality in this time of increasing production and volatile prices.” napipelines.com

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Bredero Shaw Introduces RiskReducing Model for Offshore Pipeline Coating Projects Risk is inherent to offshore oil and gas pipeline operations, but Bredero Shaw has devised a method to improve coating and protect the asset throughout its lifecycle.

Complete Coating Assurance addresses three types of risks, according to Johnson. Project risk is reduced because the pre-designed and validated pipe and joint coating interface will not fail at installation. Schedule risk is reduced through the company’s vast, responsive and strategic production and delivery infrastructure. Performance risk is reduced because the integrated design of the pipe and joint coating package ensures reliable operating performance for decades. “We also stand behind our work with a strong warranty that includes installation,” Johnson added. “We handle the entire job with no outsourcing, so we take complete responsibility and give our customers a single point of accountability.”

API: U.S. Refinery Sector Critical to Security, Strong Economy Bredero Shaw, the largest division of ShawCor Ltd., has introduced “Complete Coating Assurance,” which combines products, expertise, global infrastructure and services to address every stage of the project, from concept and Pre Feed to commissioning. It is the first and only model that ensures failproof line pipe and field joint coating integration, and encompasses all project activities from solution design to installation. The primary elements of Complete Coating Assurance include engineering services, pipe and joint coating design, coating system validation, logistics management, pipe coating application and field joint coating “This is a step-change for the pipeline coating industry,” said Gregg Johnson, vice president of sales, marketing and business development at Bredero Shaw. “Offshore projects are getting more complex every day. Depths, temperatures and pressures are getting more extreme. Locations are more remote. The stakes are higher than ever, and so are the risks. This model addresses the risks through product innovation, advanced validation technologies, deep experience and extensive global logistical capabilities. We have both the skills and structure to design and deliver any project anywhere.” 12

A new television ad launched by energy advocates highlights the importance of the U.S. refining industry. Cindy Schild, refining senior manager at the American Petroleum Institute (API), said a strong energy future for the United States depends in part on the country’s ability to refine and distribute the fuels consumers need. Schild called for the U.S. government to make sound decisions on the Renewable Fuels Standard, transportation infrastructure such as the Keystone XL pipeline and refinery regulations, which could contribute to a more robust, competitive refinery sector that would continue to support America’s economy and strengthen its national security. “Our nation’s energy future has never looked better, in large part because of our rapidly advancing ability to tap into vast new oil and natural gas resources right here in the United States,” Schild said. “But a strong energy future for our nation depends also on our ability to refine and distribute the fuels from these resources.” U.S. refineries compete in a global market place, Schild said, adding that “common-sense policies” are important in ensuring a competitive U.S. refining sector. Such policies would help the country to continue creating cleaner fuels and products in technologically advanced facilities, adding jobs and revenue to the U.S. economy and promoting energy security.

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“Our refinery sector has contributed greatly to the nation’s steady improvement in air quality over the decades,” she said. “Since 1990, it has invested more than $137 billion meeting environmental requirements. Over that time, pollution levels for the six common air pollutants, including ozone, have substantially declined, as have total emissions of toxic pollutants. America’s refineries are an indispensable part of the nation’s industrial base and our economic and energy security. We must do the right things to keep them strong.”

Interior Secretary Salazar to Step Down in March U.S. Interior Secretary Ken Salazar, who oversaw a moratorium on offshore drilling after the BP oil spill in 2010, will step down in March, after serving in the position for four years under President Barack Obama. A former U.S. senator from Colorado, Salazar spent most of his time at the Interior Department pushing renewable power such as solar and wind. Salazar’s departure marks the third of Obama’s top energy and environmental officials to depart, with Environmental Protection Agency administrator Lisa Jackson and Energy Secretary Steven Chu also expected to depart. Salazar plans to return to his home state of Colorado, having fulfilled his promise to Obama to serve four years as Secretary. He intends to leave the department by the end of March. “I have had the privilege of reforming the Department of the Interior to help lead the United States in securing a new energy frontier, ushering in a conservation agenda for the 21st century and honoring our word to the nation’s first Americans,” Salazar said. “I thank the more than 70,000 employees at the Department for their dedication to our mission as custodians of America’s natural and cultural resources. I look forward to helping my successor in a seamless transition in the months ahead.” Salazar promoted conservation to protect America’s lands, wildlife and heritage. Under the banner of President Obama’s America’s Great Outdoors program, the Interior has established 10 national wildlife refuges and seven national parks since 2009; established further protections for wildlife and preserved millions of acres of See Salazar page 14 napipelines.com

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Bernard, Tregaskiss Launch New Websites Welding equipment providers Bernard and Tregaskiss have together announced the launch of new websites. The development of these websites follows the recent announcement of the companies’ branding migration, which positions Bernard as a brand for semi-automatic MIG guns and Tregaskiss as the brand for robotic MIG guns and peripherals. The websites reflect those new positions.

BernardWelds.com and Tregaskiss.com both feature tabs at the top of every page that allow visitors to navigate easily between the two websites. Both websites also include valuable product information, technical support sections, and pressrooms featuring informative technical articles and case studies. For visitors who wish to customize a semi-automatic or robotic MIG gun for their exact application, both Bernard and Tregaskiss websites feature online MIG gun configurators. Visitors can also locate their nearest Bernard or Tregaskiss distributors through the convenient “Where to Buy” feature located at the top of each website. Additional features on the websites include tradeshow and event information, downloadable product literature and manuals, how-to guides and spec sheets.

Enbridge to Undertake Canadian Mainline Expansion Looking to add increased capacity to its Canadian mainline system, Enbridge Inc. has announced plans to further expand its pipeline system between Hardisty, Alberta, and the U.S. border. The proposed expansion will add an additional 230,000 barrels per day of capacity at an estimated cost of approximately $400 million and involves increased pumping horsepower, with no line pipe construction. The expansion will require regulatory approvals. The Canadian mainline is held by Enbridge Pipelines Inc. (EPI), a wholly owned subsidiary of Enbridge Inc. The expansion has been approved by mainline shippers under the terms of EPI’s competitive tolling settlement and is expected to be in service in 2015. napipelines.com

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Salazar Continued from page 12 land; and implemented communitydriven, science-based conservation strategies that take into account entire ecosystems and working landscapes. While Salazar fostered the increase in solar energy projects and offshore wind initiatives, his legacy may be most significant to the oil and gas industry. Salazar overhauled the Interior’s management of oil and gas resources, implementing tough new ethics standards and led the department’s response to the Deepwater Horizon oil spill and split the former Minerals Management Service into three independent agencies. During Salazar’s watch, the Interior offered millions of acres offshore in the Gulf of Mexico for safe and responsible exploration and development and is proceeding with cautious exploration of Arctic resources. Onshore, the department has also leased millions of acres for oil and gas development over the last four years, while protecting special landscapes for hunting and fishing and other uses. “We have undertaken the most aggressive oil and gas safety and reform agenda in U.S. history, raising the bar on offshore drilling safety, practices and technology and ensuring that energy development is done in the right way and in the right places,” Salazar said. “Today, drilling activity in the Gulf is surpassing levels seen before the spill, and our nation is on a promising path to energy independence.”

Far East Energy Secures $60 Million for Drilling, Production, Reserves Development and ODP Submission Houston-based Far East Energy Corp., which specializes in coalbed methane fields in China, has completed funding placement of $60 million of senior secured notes with a three year term and associated warrants, combined with the decision by Standard Chartered Bank to roll forward $21 million of its existing $25.125 million credit facility for one year. “We are thrilled with our new investment group,” said Michael R. McElwrath, Far East Energy CEO and president. “We are also quite pleased 14

that Standard Chartered Bank rolled forward eighty percent of the current SCB credit facility and is continuing its strong support of the Company and its Shouyang Project. Access to this combination of capital provides the funding for a major drilling program that should enable the company to realize much of the vast potential of the Shouyang CBM block.” Far East will use the proceeds for drilling and completion of wells in its Shouyang Block; construction of associated gathering and compression facilities; development of an overall development plan for the 1-H Pilot area; repayment of $4.125 million of principal outstanding under the SCB credit facility, together with all capitalized and accrued interest and an amendment fee; and general corporate purposes. Far East intends to implement two main drilling programs: 1) drill additional wells in its core production development area in the north portion of the Shouyang Block to accelerate progress towards increased gas production and sales levels, and 2) drill additional appraisal wells in the south, west and east sections of the block to enhance reserves and ensure that the company retains the highest potential portions of the block in future PSC extensions. Drilling rigs and crews are ready to be mobilized and, subject to weather and seasonal factors, new well drilling is expected to commence during the first quarter of 2013. “With a four-year PSC extension now in place for Shouyang, proved reserves under U.S. standards, and an existing gas pipeline off-take contract, as well as the support of our exceptional Chinese partner, China United Coalbed Methane Corporation (CUCBM), we look forward to a year focused upon intensive drilling activity in addition to increased gas marketing activities and the accomplishment of an ODP,” McElwrath said. “We believe that, in combination, these factors underline the significant progress made on the Shouyang Project over the past year. The financing proceeds and extension of a significant portion of the SCB credit facility provide us with the means to move the project into full development and to access long term debt funding for the company. Speaking on behalf of the entire management team, we are very pleased with this outcome.” Knight Capital Americas LLC acted as advisory agent in connection with the private placement.

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IPAA Welcomes Two Government Relations Staffers This week, Mallori McClure and Samantha McDonald joined the government relations staff of the Independent Petroleum Association of America (IPAA), the national trade association that represents America’s independent natural gas and oil producers. Both former Capitol Hill staffers specializing in energy and environment issues, McClure worked as senior legislative assistant to Congressman Doug Lamborn (CO-05) and McDonald worked as a legislative assistant for Congressman John Fleming (LA-4). “Mallori’s and Samantha’s experience on Capitol Hill, both advising legislators who not only sat on the House Natural Resources Committee, but who represent important energy-producing states primes them perfectly to advocate for America’s independent oil and natural gas producers inside the Beltway,” IPAA president and CEO Barry Russell said. “Their legislative expertise in energy and environment issues will be a vital asset as these issues move into the spotlight in the 113th Congress.” As senior legislative assistant in Congressman Lamborn’s office, McClure acted as senior policy advisor in his role as Chairman of the Energy and Mineral Resources subcommittee in the House Natural Resources Committee. McClure also built up broad coalitions in the energy and mining sectors. She also has experience in the U.S. Senate as a staffer for the Republican Policy Committee. At IPAA, McClure will be expanding outreach to oil and natural gas producers in the West, with a particular focus in cultivating relationships with IPAA member companies in Texas. A native of Colorado, she has a bachelor’s degree from Colorado State University. In her role as a legislative assistant for Congressman Fleming, McDonald specialized in issues relating to development of the Haynesville natural gas shale and offshore resources. She also acted as point-person for the Congressman’s seat on the House Committee on Natural Resources, the Subcommittee on Energy and Minerals and in his role as Chairman of the Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs. Previously, McDonald worked in the offices of Congressman Steve King (IA-05) and Congressman John Peterson (PA-05). See IPAA page 16 napipelines.com

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Ervin Equipment Adds More Bottom Dump Trailers to Serve Oil Boom Toledo, Ill.-based Ervin Equipment is expanding its supply services to the aggregates, asphalt, road-building and oilfield industries by providing an expanded line of new and used bottom dump trailers. A long-time supplier of a variety of specialty trailers, Ervin has seen the demand for bottom dump trailers spike in recent months. To continue to serve

the growing needs of its customer base as a single source supplier for all trailer requirements, Ervin is expanding its selection to include bottom dump trailers as well as exploring other units requested by customers in the oil boom areas. Bottom dump, or belly dump, trailers are popular in areas where terrain or other jobsite restrictions such as overhead obstacles may pose safety risks with traditional rear-dump trailers. This particular style of trailer is most commonly used in the north central, south central and western states, which are currently involved in the oilfield activities.

To serve customers seeking new trailers, Ervin Equipment partners with companies such as Gallegos Trailers and Construction Trailer Specialists (CTS). “As the demand for these types of trailers grows, Ervin’s continuing commitment to building partnerships like the ones we have with CTS and Gallegos and our continuing eye on researching the evolving demands of the market, leave us in an excellent position to quickly fulfill any fleet manager’s need for any type of trailer — even in large quantities,” said John Connor, a salesman at Ervin Equipment.

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IPAA Continued from page 14 At IPAA, McDonald will be primarily responsible for the portfolio of issues relating to offshore oil and natural gas development concentrated in the Gulf and southeast region. Hailing from Pennsylvania, McDonald has a bachelor’s degree from Scranton University and a master’s degree from The George Washington University’s Graduate School of Political Management. “We’re thrilled to welcome Mallori McClure and Samantha McDonald on board. They will be an integral part of IPAA’s government relations team going forward, as we seek to promote policies that encourage American oil and natural gas production,” Russell concluded.

Fortistar Acquires Vocational Energy On Dec. 31, 2012, Fortistar, through its affiliate TruStar Energy, purchased a majority interest in Vocational Energy. TruStar Energy will continue the existing construction business of Vocational Energy and expand into offering long-term fuel supply agreements to companies wishing to convert their transportation fleets to compressed natural gas (CNG). The company will also be able to take advantage of Fortistar’s supply of landfill gas offering a renewable component to the fuel supply. A future division is expected to provide operations and maintenance services to owners of CNG facilities. Existing Vocational Energy management will remain in place as a central part of the TruStar Energy team. “We are very excited about joining with Vocational Energy, the best construction and technical team in the industry,” said Mark Comora, president of Fortistar. “Together as TruStar Energy our mission is to set a new standard of excellence in the industry.” TruStar Energy president and CEO Adam Comora said the acquisition of Vocation Energy will allow the company to provide “one-stop shopping” for its customers that are looking to convert their fleets to clean-burning CNG. Fortistar is headquartered in White Plains, N.Y., and has a 25-year history of investing in and managing energy assets, including ownership stakes in more than 60 projects in North America selling electricity and gas to a wide range of commercial, industrial and utility customers. 16

FlexSteel Introduces 8-in. Version of Flexible Line Pipe A Houston-based manufacturer of spoolable steel pipe for the oil and gas industry has expanded its offerings with a larger diameter option. FlexSteel Pipeline Technologies has introduced an 8-in. diameter pipe rated for up to 1,500 psi. The new largerdiameter pipe offers up to 125 percent increased flow rate compared to FlexSteel 6-in. pipe. The 8-in. diameter FlexSteel was developed with the same helically wound steel core as existing FlexSteel pipe for failure-free performance with the durability of steel and the installation, performance and cost benefits of flexible pipe products. “The new 8-in. FlexSteel was developed in response to customer requests for a spoolable pipe solution with greater flow capacity,” said Brian Anderson, vice president of strategy and marketing for FlexSteel. “The 8-in. product provides all the benefits of our revolutionary spooled pipe to deliver superior lifecycle performance and value.” Developed with corrosion-resistant technology, FlexSteel pipe performs under grueling cyclic loading environments and installs up to five times faster than traditional steel line pipe

to provide the lowest total cost of ownership compared to steel. Additionally, the 8-in. pipe has 93 percent fewer connections per mile vs. steel. FlexSteel can be installed easily and quickly in all types of terrain with minimal disruption to land. It does not require special bedding or handling. FlexSteel’s time-tested swaged fittings make for fast, reliable connections that are not sensitive to cleanliness or ambient temperature. FlexSteel spooled pipe is used in various applications including oil and gas, water, CO2 transportation and other sectors.

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Denbury Acquires ConocoPhillips Oil Fields for $1 Billion Denbury Resources Inc. has entered into an agreement to acquire producing property interests in the Cedar Creek Anticline (CCA) of Montana and North Dakota from a whollyowned subsidiary of ConocoPhillips for $1.05 billion cash. The assets to be purchased include additional interests in certain of Denbury’s existing operated fields in CCA along with operating interests in other CCA fields. The acquisition is subject to satisfactory completion of customary title and environmental due diligence, as well as the satisfaction of customary closing conditions. The acquisition is expected to close near the end of the first quarter of 2013 with a Jan. 1 effective date. The purchase price is subject to standard adjustments for revenues and costs of the properties to be acquired from the effective date to the closing date. Denbury plans to fund the purchase out of the approximately $1.3 billion of cash received from its Bakken sale and asset exchange with ExxonMobil completed in December 2012, $1.05 billion of which was deposited in qualified trust accounts to allow for potential future asset purchases that would qualify for like-kind exchange treatment. The use of federal tax rules on like-kind exchanges for both the CCA properties to be acquired and the Rocky Mountain carbon dioxide reserves acquired in the ExxonMobil exchange transaction is expected to allow Denbury to defer more than $400 million of the $500 million of cash taxes originally estimated on the Bakken transaction prior to completing the CO2 reserves acquisition and agreeing to acquire the CCA properties. Denbury estimates that at year-end 2012 the proved conventional (non-tertiary) reserves associated with the CCA properties to be acquired were approximately 42 million barrels of oil equivalent of which approximately 95 percent was oil and 4 percent natural gas liquids and 91 percent was proved developed producing. Net to the acquired interest, Denbury estimates current average production from the to-be-acquired properties at approximately 11,000 barrels of oil equivalent per day (boe/d), of which 99 percent is oil and natural gas liquids. Assuming the acquisition closes at the end of the first quarter of 2013, Denbury estimates that its full-year 2013 average daily production would increase by approximately 7,700 boe/d. napipelines.com

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North American

Pipeline Project Roundup The following oil and gas pipeline projects have been announced. Projects are in order of most recent approximate starting date. All projects are for 2013 unless noted. T.G. Mercer Consulting Services Inc. was awarded a contract by EPOC WEP III to unload and rack approximately 175 miles of 16- and 20-in. pipe in Lea and Guadalupe counties, N.M. Headquarters is Willow Park, Texas. The superintendent is Bruce Munro. Approximate start date: Feb. 1. Snelson Companies Inc. was awarded a contract by Williams Ohio Midstream to install 1,300 ft of 26-in. pipeline and one 16-in. launcher in Monroe County, Ohio. Headquarters is Moundsville, W.Va. The superintendent is Trevor Thayer. Approximate start date: Jan. 28. Right-of-Way Clearing & Maintenance Inc. was awarded a contract by Michels Corp. to clear approximately 5.8 miles of 12-in. and 16-in. pipeline right-of-way in Ritchie and Doddridge counties, W.Va. Headquarters is unknown. The superintendent is Neil Kinneer. Approximate start date: late January (announced Jan. 28). R.L. Coolsaet Construction Co. was awarded a contract by Marathon Petroleum Co. for 15 anomaly repairs on 20in. pipeline in Marion, Clay and Crawford counties, Illinois. Headquarters is unknown. The superintendent is Joe Elliott. Approximate start date: Jan. 25. Foltz Welding, LTD, dba Continental Pipeline Services was awarded a contract by Shell to take up and relay 1,400 ft of 40-in. pipeline and install 1,300 ft of 24-in. pipeline in Marshall County, Miss. Headquarters is Byhalia, Miss. The superintendent is Scott Schoonover. Approximate start date: Jan. 21. InterCon Construction Inc. was awarded a contract by J Wood Contracting LLC to install approximately 8,800 ft of 20-in. and 4,400 ft of 12-in. pipeline via directional drilling in Belmont County, Ohio. Headquarters is on the jobsite. The superintendents are Dan Greiman and John Jones. Approximate start date: Jan. 21. Northern Clearing Inc. was awarded a contract by Michels Corp. to hand cut trees on approximately 21 miles of 30-in. pipeline right-of-way in Bradford, Wayne and Pike counties, Pa. Headquarter is unknown. The superintendent is Mitch Putnam. Approximate start date: Jan. 21.

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Listings Contributed by

Phillips & Jordan Inc. was awarded a contract by Welded Construction LP for clearing and grubbing on approximately 5.42 miles of 16-in. pipeline right-of-way in Harrison County, Ohio. Headquarters is Cadiz, Ohio. The superintendent is Mark Smith. Approximate start date: Jan. 21. Precision Pipeline LLC was awarded a contract by Talisman Energy to install 6.5 miles of 16-in. pipeline and 5 miles of 20-in. pipeline in Bradford County, Pa. Headquarters is Rome, Pa. The superintendent is Jake Breunig. Approximate start date: Jan. 21. Welded Construction LP was awarded a contract by Chesapeake Midstream to install 23,093 ft of 16-in. pipeline and 6,359 ft of 6-in. pipeline in Harrison County, Ohio. Headquarters is Cadiz, Ohio. The superintendent is Rob Seebeck. Approximate start date: Jan. 21. T.G. Mercer Consulting Services Inc. was awarded a contract by Enterprise Products to unload and rack 560 miles of 30-in. pipe in Lincoln County, Okla., and Grayson, Kaufman, Navarro, Brazos, Montgomery, Fort Bend, Jefferson and Hardin counties, Texas. Headquarters is unknown. The superintendent is McNeil Mercer. Approximate start date: Jan. 17. Letourneau Products Mfg. Corp. was awarded a contract by Rockford Corp. for clearing, grubbing and matting on approximately 9.8 miles of 16- and 20-in. pipeline in Bradford County, Pa. Headquarters is Wysox, Pa. The superintendent is Mark A. Letourneau. Approximate start date: Jan. 16. Dun Transportation & Stringing Inc. was awarded a contract by Enbridge/Evraz to offload and stockpile approximately 65 miles of 36-in. pipe in Randolph and Salisbury counties, Mo. Headquarters is the pipe yard. The superintendent is Greg Norman. Approximate start date: Jan. 15. lndianhead Pipeline Services LLC was awarded a contract by Troy Construction to provide foam breakers and pillows for approximately 354 miles of 20-in. pipeline in Baylor, Archer, Young, Jack, Wise, Parker, Johnson, Hill, McLennan, Falls, Robertson, Brazos, Grimes and Montgomery counties, Texas. Headquarters are Archer City and Cleburne, Texas. The superintendent is Mike McGill. Approximate start date: late January (announced Jan. 14).

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Rockford Corp. was awarded a contract by Talisman Energy to install approximately 8.15 miles of 16-in. and 1.64 miles of 20-in. pipeline in Bradford County, Pa. Headquarters is Hillsboro, Ore. The superintendent is Kevin Newcomb. Approximate start date: Jan. 14. Rockford Corp. was awarded a contract by Linde to install approximately 1,360 ft of 24-in. pipeline in Washington County, Ore. Headquarters is Hillsboro, Ore. The superintendent is Sammy Thompson. Approximate start date: Jan. 14. Phillips & Jordan Inc. was awarded a contract by Rockford Corp. for clearing and grubbing on approximately 117.71 miles of 20-in. pipeline in Lincoln, Fairfield, Pickaway, Fayette, Greene and Clinton counties, Ohio. Headquarters is Lancaster, Ohio. The superintendent is James “Bucky” Lane. Approximate start date: Jan. 8. Apex Pipeline Services Inc. was awarded a contract by Mark West to install and test approximately 5 miles of 8-in. steel pipeline in Wetzel County, W.Va. Headquarters is Jacksonburg, W.Va. The superintendent is Robert A. Keaton. Approximate start date: Jan. 7. Associated Pipe Line Contractors Inc. was awarded a contract by Pennant Midstream LLC to install approximately 5.5 miles of 12-in., 3.5 miles of 20-in. and 3.5 miles of 24-in. pipeline in Mahoning County, Ohio. Headquarters is Edinburg, Pa. The superintendent is Kevin Berryman. Approximate start date: Jan. 7. Laney Inc. was awarded contracts by Troy Construction for the following: 1) road boring on 192 miles of 20-in. pipeline in Johnson, Hill, McLennan, Falls, Robertson, Brazos and Grimes counties, Texas. Headquarters is Cleburne, Texas. The superintendent is Randy Cassell. And 2) road boring on 152 miles of 20-in. pipeline in Archer, Jack, Parker and Johnson counties, Texas. Headquarters is Archer City, Texas. The superintendent is Grady Keller. Approximate start dates: 1) Jan. 4 and 2) Jan. 7. Latex Construction Co. was awarded a contract by Atlanta Gas Light to install 21 miles of 24-in. pipeline in Clayton, DeKalb and Fulton counties, Ga. Headquarters is Chamblee, Ga. The superintendent is Bill Burt. Approximate start date: Jan. 7. Snelson Companies Inc. was awarded a contract by Pacific Gas & Electric (PG&E) to provide support crews and general maintenance work in Central and Northern California counties. Headquarters is Ceres, Calif. The superintendent is Jeff Elliott. Approximate start date: Jan. 7.

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Utility Services Authority LLC was awarded a contract by Diamond K Corp. to install approximately 7,500 ft of 24-in. pipeline via directional drilling in Palm Beach and Martin counties, Fla. Headquarters is unknown. The superintendent is Erv Yoder. Approximate start date: Jan. 7. Harpole Construction Inc. was awarded a 15-mile construction contract by Williams Midstream. The project consists of 15 miles of 8-in. steel. Headquarters is Harpole Construction Yard in Farmington, N.M. The superintendent is John (Jake) Harpole. Approximate start date: Jan. 2. Pe Ben USA Inc. was awarded a contract by Michels Corp. to provide ten stringing trucks and pilot cars to help string 36-in. pipe on the TransCanada Gulf South Pipeline project. Headquarters is Stillwater, Okla. The superintendent is Justin Whitley. Approximate start date: Jan. 2. Harpole Construction Inc. was awarded an approximately 40-mile pipeline construction contract by Western Refining. The project consists of 19.7 miles of 10-in. steel in Lea and Eddy counties, N.M., and 21.4 miles of 12-in. in New Mexico and Reeves counties, Texas. Headquarters is Harpole Construction Yard in Hobbs, N.M. The superintendent is Jerry Harpole. Approximate start date: Dec. 20, 2012. Letourneau Products Mfg. Corp. was awarded a contract by Sheehan Pipe Line Construction Co. for clearing, grubbing and matting on approximately 73.10 miles of 20-in. pipeline in Harrison, Tuscarawas, Coshocton and Muskingum counties, Ohio. Headquarters is Newcomerstown, Ohio. The superintendent is Claude R. St. Pierre. Approximate start date: Dec. 17, 2012. The Napp-Grecco Co. was awarded a contract by PPL Interstate Energy for anomaly digs on an 18-in. pipeline in Delaware County, Pa. Headquarters is Glen Mills, Pa. The superintendent is Randy Betz. Approximate start date: Dec. 17, 2012.

WANT TO SEE YOUR PROJECT HERE? Send submissions to Associate Editor Brad Kramer at [email protected] with the subject heading “Project Roundup.”

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Balancing the Natural Gas Markets

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Production vs. Demand and the Implications for Midstream Players By Herve Wilczynski and Brian Forbes

The U.S. shale gas market is out of balance with production outstripping demand. The shift in production locations has shifted the needs for transport, especially in the Northeast with the development of the Marcellus and Utica shale resources. Will the current patterns persist? Despite all the talk about shale gas development — the potential environmental consequences of hydraulic fracturing, the potential to replace coal with gas for generating electricity, the potential for the United States to export liquefied natural gas (LNG) — none of it addresses the bigger picture: The market is structurally out of balance, and it can’t stay this way. The technological triumph of shale gas has led to production that far outstrips demand, and if this were a normal market, price and demand shifts would have already delivered a quick rebalancing. The drop in gas prices has resulted in a shift in upstream activity toward liquid rich plays. The wind of change is also affecting midstream in very material ways. Parts of the natural gas infrastructure are now operating at under capacity (gas pipelines in Louisiana and parts of Texas) and a few assets have been converted to address the choke points created by the rapid development of shale

oil (conversions have taken place to move crude east toward Lake Charles). Some crude pipelines have reversed flow (e.g., Enterprise Product Partners’ Seaway Pipeline) and others are considering change of service. Over the past 20 years, gas prices have fluctuated between $2 and $15 per million Btu. At the low end, the producers are not viable, and at the high end, potential users of gas cannot afford to use it. Will we face more years of such fluctuations before achieving balance, especially since numerous decisions affecting that balance are still up in the air? And yet, bets must be placed now. Should the midstream players bet on a return of activity in the dry gas basins or should they double down on the liquid rich plays?

A Quest for Balance

The hydrocarbon business is all about balance. Balance among production, refining and converting, and marketing has been a vaunted but elusive goal for more than a century, as Daniel Yergin chronicles in The Prize, a Pulitzer Prize-winning history of the global oil industry. An investment in one industry sector (for example, upstream exploration and production) may be useless unless paired with appropriate investments in other sectors. In the oil industry, factors encouraging balance include vertical integration — global companies that control everything from exploration to delivery — and regu-

lation of production, either overtly through organizations such as OPEC or more naturally through high barriers to entry. In the gas industry, those factors are lacking. So the relevant questions are not so much, Is the shale gas boom real? Or, Is it here to stay? (The short answer is yes.) The questions companies should be asking are: How will the natural gas glut rebalance in the long term? What impact does this have on infrastructure decisions? As an analogy, consider the U.S. deregulation of natural gas wellhead prices in 1989. Was it real? Was it here to stay? Yes, but after a brief period of sustained low prices in the 1990s, the industry has been plagued with volatility. Prices have bounced up and down, sometimes benefitting producers, sometimes end users. The problem has been balance. When prices were low, up went the infrastructure of gas-fired power plants and pipelines. After the investments were locked in, all that demand sent gas prices so high that much of it could not be used. Will the same thing happen again? We can’t say for sure because the factors are different and some of them are yet to be determined. But we can say this: The industry is still not structured to achieve win-win scenarios. It is not integrated, which means that big trends in one area can go almost unnoticed in another. Understanding what’s going to happen requires first understanding who all the players are.

MARCELLUS UTICA UTICA UNDERLYING MARCELLUS

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An Uncoordinated Set of Actors

The U.S. shale gas ecosystem comprises a set of players with different incentives and investment horizons that have grown up mostly independent of each other and are generally not inclined to understand the motivations of the other players. The shale gas family includes a variety of actors: Independent producers focus on short-term plays and have an investment time horizon of just a few years. They are not afraid to take risks, have few barriers to entry, and can bring on capacity quickly and inexpensively. But if gas prices stay below $4 per million Btu, many players with predominantly dry gas portfolios will continue to struggle and possibly go out of business. Super majors and global producers take a longer view on their investments and can afford to delay investment in certain parts of the world if local conditions are not favorable. 22

Midstream players, which are predominately arranged as master limited partnerships (MLPs) at this point, are driven by the desire to secure the proper yield for their shareholders. The inherent cost of capital advantage they have over the exploration and production (E&P) companies means they can make investments in infrastructure the E&P companies can’t. This has manifested in a slow buy-out of the E&P held infrastructure by the MLPs. It is clear that fewer investments are being made in natural gas pipelines in the current market, but if the glut in supply starts to abate, there could be opportunity. Gas exporters are eyeing liquefaction facilities on the coasts that could competitively export LNG and take advantage of high prices abroad if the price spread between the United States and overseas markets stays above $5. Although 4.5 trillion cubic feet of capacity has been proposed,

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these facilities could cost up to $10 billion per trillion cubic foot and take a minimum of five years to permit and build. Chemical companies are looking at natural gas liquids (NGL) as feedstock. Low-cost ethane (as a substitute for byproducts of crude oil refining), for example, makes polyethylene cheaper to produce in the United States than anywhere in the world, except the Middle East. So the industry could build eight to 10 (or more) new gas crackers at approximately $2 billion apiece, including some downstream investments, but it would need confidence in ethane prices being competitive for 10 or more years. Power generators want low-cost gas to generate electricity. Before the shale boom, existing gas plants were operating at less than 50 percent of capacity. However, they can ramp up quickly and squeeze out other forms of power generation, primarily coal. napipelines.com

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If power generators knew gas prices would stay below $6, they could begin replacing existing coal plants with gas plants that take just two to three years to build. Some of these players are already pairing up. Chemical companies are signing long-term ethane supply agreements with shale NGL producers and midstream companies. LNG companies are doing the same with their suppliers and their customers. Others are staying single for now, at least until there is more (or a narrower range) price certainty and fewer wildcards.

Five Possible Futures, One Likely Scenario

If supply and demand were stable and investment cycles were shorter, it would be easy for market forces to align them. But the U.S. market for natural gas and NGLs is driven by several diverse and unpredictable variables: the global economy, oil prices, energy and environmental policies, a rise in the global gas supply or technological advances that are still unknown. Although these variables could interact in any number of

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permutations, A.T. Kearney’s analysis finds five scenarios that could capture a range of potential outcomes. The most likely scenario, which we call free markets, involves the least dramatic changes from current conditions. In this scenario, GDP growth is modest, oil prices remain within current trading ranges, LNG export becomes a reality, and no major global natural gas production or technological advance affects the balance of forces seen today. We believe the price of natural gas in the free-markets scenario will find equilibrium by 2020 in the $6 to $7 range. Any lower than that and production from dry-gas wells would not be profitable and would not increase sufficiently to meet demand; any higher and demand from power plants will wane. But in this range, demand is high in all major sectors, leading to high margins for producers and strong capital investments. In this free-markets scenario, there will be a need to continually supply the LNG export facilities with gas. This will mostly rely on current midstream infrastructure but debottlenecking and linking to new produc-

tion areas in more profitable shale plays would occur as economically appropriate. This would likely result in the Fayetteville, Haynesville, Barnett and other similar formations to flow toward the Gulf Coast for export and chemical production markets. Although the free-markets scenario is the most likely in our analysis, the outcome of global events and governmental actions could lead us down other paths. There are four other possible scenarios: Troubled times. A geopolitical event triggers a disruption in oil supply, sending oil prices up and the global economy into a double-dip recession. Natural gas demand collapses to 20 percent below the free-market scenario level. Limited export. The U.S. government decides to limit natural gas exports and provides support for other fuels in an effort to achieve energy independence, thus depressing natural gas demand. Global gas competition. Other major economies are successful in developing wet shale plays. As a re-

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sult, demand falls for both LNG exports and ethane-based chemicals from the United States, challenging the overall economics of shale gas plays in North America. High output. Robust global GDP growth and lack of global shale developments lead to the highest level of U.S. natural gas demand. These scenarios represent a combination of various, and sometimes drastic, supply and demand discontinuities. Nevertheless, the resulting gas prices are spread across a surprisingly narrow range of $5 to $8 per thousand cubic feet (mcf). We believe market trends point to a strong future for natural gas and its ability to pull prices up structurally, with upstream production economics determining the floor price and competition between coal and gas defining the ceiling price.

Navigating Turbulent Times for Midstream Decision-Makers

One of the biggest difficulties in looking forward is knowing when

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a current trend represents lasting change and when it is merely a bump in the road. Shale gas represents lasting change, but every change has many paths to balance. And on the road from here to long-term balance, there will undoubtedly be many short-term irritations — a mild winter, a Middle East crisis — that will send some analysts to wrong conclusions. The regulatory certainty and more balanced pricing reflected in the free-market scenario could provide a foundation of stabilized demand on which to build investments. That’s a likely path to long-term balance, but even it would be filled with both short-term bumps and more serious detours caused by players with different incentives. The continued rise of the MLP business model in midstream has been in direct response to the low return on capital of these assets and the shifting focus areas of upstream production. This will most likely continue but there are some situations where integrated oil and gas companies should consider pipeline ownership: being able to secure economically effective

transportation capacity to link upstream and downstream markets can be a matter of strategic importance, especially in areas of new development. Those companies interested in expanding their midstream business have to pay careful attention to the shifting production and demand patterns created by the combination of how the gas equilibrium is reached and how the access to cheap gas and chemical feedstocks is exploited. While many opportunities have been and will be created, there is a danger of over-building and getting stuck with underused assets. The winners will be those that fundamentally understand the cross-industry dynamics and can create a stable position with proper economic return. Herve Wilczynski is a partner and Brian Forbes is a principal in A.T. Kearney’s Energy Practice. They are both based in Houston and can be reached at [email protected] and [email protected]. A.T. Kearney is a global management consulting firm.

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THE NATURAL GAS REVOLUTION U.S. Infrastructure Growth Means Benefits for Consumers and Economy By Tim Brown

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omestic supply of natural gas is at an all-time high; prices are the lowest they’ve been in decades. Big oil players have heavily invested in natural gas hedging their bets on a long-term win when demand and infrastructure meet. The Natural Gas Revolution has begun and the global race to be first in the market and ready with supply is under way. America has the strategic advantage given its shale resources, production capabilities and current storage levels. The revolution will benefit those players who have properly invested in it. With an overabundance in liquid natural gas, forward thinkers such as T. Boone Pickens and corporations such as Shell are vying for position with early investments. A boom in the industry will lead to a boom for the suppliers in the market, but the benefits won’t stop there. Consumers will enjoy lower unemployment rates, thanks to the jobs created, and lower cost of goods, thanks to reduced transportation costs. To meet the growing demand, infrastructure for transportation of the gas needs to be expanded, updated and maintained. Pipeline that was origi-

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nally installed in rural areas is now located under residential areas as urban centers have continued to grow. This article provides a background on the Natural Gas Revolution, why it is good for the consumer and the economy, and how it affects growth in infrastructure.

Recent History

According to the BP Statistical Review of World Energy, global gas demand increased 600 percent from 1965 to 2010. Between 1990 and 2010, a major shift toward gas became evident with coal consumption declining nearly 50 percent from 460 million tons of oil equivalent (Mtoe) equivalent to 260 Mtoe. In that timeframe, natural gas consumption increased from 290 to 430 Mtoe. Price volatility became an issue within that timeframe due to these factors and there were two notable price spikes: one in 2000-2001 and another in 2002-2003. Not only had demand increased from a general standpoint but: • Severe weather put pressure on the power grid for heating and cooling.

• The California electrical grid was over capacity, which put pressure on natural gas to fill the gap. When supply can’t meet demand, the price spikes and demand destruction starts to occur. By the mid-2000s, prices had increased from $2 per million British thermal units (MMBtu) in the 1990s to $3 per MMBtu. To moderate the price, drilling began and gas production started to rise. Simultaneously, demand fell off because of industries and businesses failing, relocating or switching fuel sources due to lack of supply and/or price.

The Current Situation

Today, natural gas is a critical source of energy for the United States and the world because it is a cleaner and extremely abundant fuel source. •Natural gas supplies more than “onehalf of the energy consumed by residential and commercial customers, and about 41 percent of the energy used by U.S. Industry,” according to the American Public Gas Association. • There are more than 900 U.S. public gas systems in the country, with

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Philadelphia Gas Works as the largest and longest operating. • The lifespan of existing resources has been increased from 70 to 300 years thanks to the shale gas revolution and techniques for extraction, such as hydraulic fracturing and horizontal drilling. Demand has not yet reached anticipated levels and prices are at an all-time low, but the major players in the oil industry are showing signs they know it will happen. Major corporations are strategically positioning themselves to take advantage of the Natural Gas Revolution. For example, Exxon is a major player investing heavily in the Natural Gas Revolution. In December 2009, they placed a big bet on the future of natural gas when they acquired XTO Energy Inc. Investors showed their displeasure and concern that Exxon overpaid and their stock price plummeted accordingly. The price of natural gas fell further, but Exxon stands by its decision waiting for the long-term payoff. The company is hedging its bets as stock increased only slightly since then, at about 17 percent, and higher oil prices have helped absorb that investment. The United States is well-positioned to benefit significantly when the demand inevitably increases because of the abundant supply. Thanks to the low cost and economic efficiencies related to alternative fuel sources, industrial demand is forecasted to increase and overtake coal by 2025. Simmons & Co. reports supply continues to exceed demand by 1.2 billion cubic feet per day (bcfd) thanks, in large part, to over-capitalization of organizations and increased efficiency in drilling. This will result in full storage and will slow down production to balance the market. The growth in demand, forecasted at 1.7 bcfd is driven by industrial, not consumer demand.

Economic Effects of the Natural Gas Revolution

Economy: Greater natural gas production, transportation and consumption will lead the country’s economic recovery because it will help to keep manufacturing domestic, create more jobs and reduce fuel costs which will, in turn, reduce cost of goods. Environment: According to the U.S. Energy Information Administration, natural gas burns 50 percent cleaner than coal and about 30 percent cleaner than oil. Its lower car28

bon content and fewer impurities mean it produces less sulfur dioxide, a primary contributor to acid rain. It is already used widely for personal and industrial consumption. Industry and consumers: Natural gas is used to produce cosmetics, medicine, light bulbs, home flooring, batteries and so much more. It is critical to growing food by heating dairy and poultry farms, and it can fuel transportation vehicles. Other products rely on natural gas in their manufacturing process such as sunscreen, sunglasses and bathing suits. Another benefit to consumers and industry is that it is cleaner and less expensive. Job creation: The natural gas industry supports nearly 3 million jobs and adds about $385 billion to the national economy. Jobs associated with this industry pay higher than average salaries. They also contribute to state and local tax revenues. North Dakota now has the lowest unemployment rate in the nation, attributed almost exclusively to oil and gas development. Changes the way we use energy: Natural gas can reduce our dependency on foreign oil sources and reduce imports. As well, major utilities are switching to power generated by natural gas rather than coal. Keeps manufacturing domestic: The growth in availability of natural gas means the United States can manufacture its own fertilizer, chemicals and pharmaceuticals, creating more jobs and exporting more goods. Opportunity for exports: Exporting supply will aid international allies such as Japan, but it would increase prices domestically for consumers. A dilemma is presented to the U.S. presidential administration: Should the United States export natural gas to countries where the price is higher and, if so, how much? The dilemma pits the idea of freetrade against protecting the U.S. economy. It’s a political hot potato because natural gas producers and the national economy stand to benefit from exports, but at the same time it will increase prices affecting large energy-dependent manufacturers and shippers. Regardless of the outcome, the forecasted increase in demands will have major effects on the infrastructure of the natural gas transportation system.

Infrastructure Growth

To reap the benefits of the opportunities the Natural Gas Revolution offers,

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transportation networks need to be updated, expanded, and maintained. The U.S. natural gas pipeline network is an integrated transmission and distribution grid that can transport natural gas to and from nearly any location in the lower 48 states. The natural gas pipeline grid comprises: •More than 210 natural gas pipeline systems. • More than 300,000 miles of interstate and intrastate transmission pipelines. • More than 1,400 compressor stations that maintain pressure on the natural gas pipeline network and assure continuous forward movement of supplies. • More than 11,000 delivery points, 5,000 receipt points, and 1,400 interconnection points that provide for the transfer of natural gas throughout the United States. • Twenty-four hubs or market centers that provide additional interconnections. • Four hundred underground natural gas storage facilities. • Forty-nine locations where natural gas can be imported and/or exported by way of pipelines. • Eight LNG (liquefied natural gas) import facilities and 100 LNG peaking facilities. Natural gas transportation begins at the drilling site and ends at the consumer or industrial use. Local utilities will transport natural gas from distribution points on the transmission pipelines to businesses and households. Safety is the most important consideration throughout the transportation and distribution process. Every aspect from production to distribution has to meet strict standards set by local and national agencies. For an in-depth review of these standards, visit the U.S. Department of Transportation site.

Pipeline Expansion

The pipeline infrastructure is not only the essential link from the production field to the residential, commercial or industrial consumer, but it also serves another crucial function — that of adding storage and buffering demand spikes. This reduces, and in most cases eliminates, the need to provide for storage close to the point of consumption. In anticipation of the forecasted increase in demand, additional pipeline will be needed for a few reasons. napipelines.com

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Production areas have changed geographically, meaning the network doesn’t serve the current demand well, and an aging infrastructure won’t have the capacity soon. When pipelines were constructed centuries ago, they were installed far from population centers for safety reasons. By keeping the pipes away, everyone is safer. In recent decades, as urban sprawl has continued to expand, many people are now living over pipelines. These networks need to be moved further out and modified accordingly. By running the pipeline in rural areas and then bringing it into population centers in smaller volumes, with smaller diameter pipe, the infrastructure can be safely updated and maintained. Lastly, aging infrastructure must be updated. Most consider 1859 to be the beginning of the natural gas industry in America. At that time, a 2-in. diameter, 5.5-mile long pipeline was built from the well to the village of Titusville, Pa. One of the first significant pipelines, constructed in 1891, was 120 miles long and carried gas for the city of Chicago. However, it would be the 1920s before any significant pipeline infrastructure began to be put in place. Further, it wasn’t until after World War II that the “pipelining process” — i.e., welding techniques, metallurgical advancements and pipe manufacturing — would be advanced enough to allow the construction of reliable pipeline infrastructure. Although the industry has steadily upgraded pipelines, added capacity and replaced older systems, the growth of natural gas as one of the most important, readily available energy sources has led to the need to add significant transportation infrastructure to what already exists. Even with the steady growth in pipeline capacity, it is estimated the United States and Canada will need roughly 30,000 to 60,000 additional miles of pipeline through 2030. This added capacity will not just move natural gas long distances between regions, but will also serve growing demands. The need for clean, dependable, cost-efficient energy sources such as natural gas is growing exponentially. Clearly, the need for natural gas pipelines, and the companies that put them in will remain strong for the future.

If the natural gas industry is going to continue to meet demands in the future, long-range planning of this scale needs to occur. It’s not reflected on a balance sheet, but it is something that has to occur

within the next century and with future generations in mind. Tim Brown is director of business development at Snelson Companies Inc.

Conclusion

The environmental and economic benefits of natural gas and the trend away from coal all point to an explosion in demand for this abundant and inexpensive source of energy. Ideally, with U.S. support of production, balanced with moderate exports to allow the price to self-correct without drawing down heavily on reserves, demand will increase as transportation vehicles and other energy dependent manufacturers switch fuels. Infrastructure investment and expansion will need to continue at rapid pace to meet the rising need and avoid a replay of the early 2000s and demand destruction. napipelines.com

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E

R E

O

R T

P I P

E I N

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2013 CANADIAN OIL PIPELINES REPORT

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Oil Sands Development Continues to Drive Expansion Projects By Bradley Kramer

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anada sits atop the third largest crude oil reserve in the world, with the Alberta oil sands, and the country also shares one of the most prolific formations of the shale oil and gas boom, with the Bakken region at the U.S. border in Saskatchewan. Continued demand from the United States and growing interested from Pacific Rim countries is driving pipeline expansion throughout the provinces. Production from the oil sands is approaching 1.7 million barrels per day (bpd), according to a 2011 report by the Canadian Energy Research Institute (CERI). In “Economic Impacts of New Oil Sands Projects in Alberta (2010-2035),” the research group argues that the oil sands operations are central to the country’s energy industry, as well as a significant contributor to Canada’s GDP. “Of the oil that Canada exports, both conventional and unconventional, almost all goes to the United

30

States,” the report states. “On the other side of the border, the [United States] imports more oil from Canada than from any other country. The energy ties between these two nations are therefore tight, and the oil sands in particular are increasing in significance for both countries.” The oil sands provide an economic boost to both Canada and the United States, according to CERI, as “investments made in new oil sands projects and the monies spent on continuing operations create jobs that, in turn, generate ripple effects throughout both of these economies.” CERI estimates that new oil sands projects will provide an additional $2.1 trillion (CAD) to the Canadian GDP from 2010 to 2035, while increasing employment from 75,000 jobs in 2010 to 905,000 jobs in 2035. Furthermore, the investment and operation of these projected new oil sands projects in Alberta would make important contributions to the U.S.

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economy as well. CERI reports that the U.S. economy receives the second largest impact from Alberta’s oil sands after Alberta, with an expected $521 billion added to U.S. GDP by 2035 and employment growing from 21,000 jobs in 2010 to 465,000 jobs in 2035. There are a number of oil pipeline projects currently under construction or awaiting approval from the Canadian government, many of which will expand already existing transportation systems that transport crude from the oil sands to various markets. What follows is an overview of those projects and their current progress: Alberta Clipper Capacity Expansion Location: Alberta, Manitoba Stakeholder(s): Enbridge Overview: Due to increasing demand for pipeline capacity, Enbridge is proposing to expand napipelines.com

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capacity to its existing Line 67 (initially known as the Alberta Clipper Pipeline) from 450,000 to 570,000 bpd. The Canadian portion of Line 67 is 1,078 km and transports crude oil from the company’s Hardisty Terminal in Alberta southeast to the Gretna Station in southern Manitoba. Line 67 then connects at the international border to the U.S. portion of the system and continues to Superior, Wis. The pipeline capacity expansion includes installation of one new mainline pump at eight facilities, four new mainline pumps and an electrical substation at the Metiskow Station and an addition of a metering terminal and booster pump at the Hardisty Terminal. Progress: Enbridge Pipelines submitted its application for the project to the Canadian National Energy Board (NEB) in October 2012. Subject to receiving regulatory and environmental approvals, construction is scheduled to commence in May 2013, and anticipated construction completion and in-service timing is mid-2014. Athabasca Pipeline Twinning Project Location: Alberta Stakeholder(s): Enbridge Athabasca Overview: Enbridge is proposing to develop a new 345-km, 36-in. crude oil pipeline to provide transportation service for increased oil production in the Kirby Lake area in Alberta. The new pipeline would generally follow the company’s existing Athabasca Pipeline right-of-way, starting at the Kirby Lake Terminal, near Winifred Lake, Alberta, and ending at the Battle River Terminal, located in the Hardisty crude oil hub area. The project also involves two new pump stations. Progress: Enbridge Athabasca submitted an application for the project to the Alberta Energy Resources Conservation Board (ERCB) in March 2012 and received approval in November 2012. The company expects to begin right-of-way clearing and pipeline construction in the Green Zone (Crown Land) once frozen ground conditions exist in December 2012. Pipeline construction in the White Zone (privately held land) is expected to begin in August 2013, and civil construction at pump station locations in October 2013. The planned pipeline in service is January 2015. napipelines.com

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Bakken Pipeline Project Location: Saskatchewan Stakeholder(s): Enbridge Overview: In the effort to connect Canadian energy resources with the U.S. Midwest, this 124-km, 16-in. pipeline began construction in August 2012 and went into service in January. The pipeline connects to the Enbridge Pipelines Inc. (EPI) mainline and will serve as a continuous, long-term source of supply to Eastern Canadian and U.S. Midwest markets, thus maintaining the long-term competitiveness of refineries in those regions. In its application to the Canadian Nation Energy Board (NEB), Enbridge requested approval to build and operate a new pump station along with the pipeline to transport crude oil from the Bakken and the Three Forks Formations in Montana and North Dakota to refinery markets in North America. With a starting point in Steelman, Saskatchewan, the pipeline will be linked to EPI’s mainline in Cromer, Manitoba. The NEB approved the project Dec. 22, 2011. The board has also given Enbridge Bakken approval to acquire and operate Line EX-02, which is currently owned by Enbridge Pipelines (Westspur) Inc. The capital cost for this project was estimated at $180.1 million. Progress: The Canadian portion of the Bakken Pipeline is in service, but Enbridge continues to build an additional portion of the line in the United States. The company has also undertaken a number of other facilities and pipeline expansion projects related to the Bakken shale formation, including the PortalLink Reactivation and Reversal project. Meanwhile, reclamation activities are expected to continue until September. Edmonton to Hardisty Pipeline Location: Alberta Stakeholder(s): Enbridge Pipelines Inc. Overview: Enbridge proposes to construct and operate a new 181-km, 36-in. pipeline to transport crude oil from the company’s existing Edmonton Terminal to its Hardisty Terminal. The project also includes the construction and operation of a new initiating pump station at the Edmonton Terminal, construction and operation of two new pump stations at its existing Kingman and Strome stations, as well as associated facilities and infrastructure at its Edmonton and Hardisty terminals. The

proposed pipeline right-of-way will be alongside and contiguous to an existing Enbridge pipeline right-ofway and other linear disturbances for approximately 96.6 percent of its length. If approved, the pipeline would deliver crude oil to other existing pipelines and facilities located in the Hardisty area, including delivery onto the Enbridge Mainline system. Progress: Enbridge filed an application with the NEB in December 2012. The board is currently holding public information sessions on the project. Line 9B Reversal and Line 9 Capacity Expansion Location: Ontario and Quebec Stakeholder(s): Enbridge Overview: Line 9 is an existing 30-in. diameter pipeline with a current capacity of approximately 240,000 bpd, extending from Sarnia, Ontario, to Montreal, Quebec. The pipeline transports crude oil from areas such as the North Sea, West Africa and the Middle East, in a westbound direction. The scope of the proposed project includes reversing the flow of the 639-km section of Line 9 from North Westover, Ontario, to Montreal (Line 9B) by modifying existing facilities. After conducting a commercial open season for the project in May and June 2012, Enbridge confirmed additional demand to ship crude oil — mainly light crude oil — on the reversed pipeline from what had been originally anticipated. As a result, the company has proposed to expand the capacity of Line 9B from 240,000 to 300,000 bpd. The project will take place within existing Enbridge properties and rights of way with the exception of some temporary workspace required for the installation of a small new metering facility near Enbridge’s North Westover Station. The project work also includes facilities upgrades at a number of stations and terminals to account for the capacity increase. Progress: Enbridge received approval from the NEB in July 2012 to reverse the flow on Line 9B running between Sarnia and North Westover, Ontario. The company filed an additional application with the board in November 2012 to approve the reversal of the segment of Line 9B between North Westover, Ontario, and Montreal, in addition to requesting an expansion of the entire Line 9 capacity from Sarnia, Ontario, to Montreal and a revision to the Line 9 rules and regulations tariff to allow transportation of heavy crude.

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Norealis Pipeline Project Location: Alberta Stakeholder(s): Enbridge, Husky Oil Operations Ltd. Overview: Husky Oil Operations chose Enbridge Pipelines (Athabasca) Inc. to construct and operate a new pipeline and associated facilities to transport blended bitumen from the Husky-operated Sunrise Energy facility to Enbridge Athabasca’s existing Cheecham Terminal, located about 60 km south of Fort McMurray, Alberta. The project proposal includes a new terminal, a 112-km, 24-in. pipeline from Hartley Terminal to the Cheecham Terminal, various facilities at the existing Sunrise Energy site, two new connector pipelines, approximately 9 km long, between the existing Sunrise Energy facility and the Hartley Terminal, and facilities at Cheecham Terminal. Progress: Enbridge received full approval of the Norealis project from the Alberta Energy Resources Conservation Board (ERCB) in April 2011, and the company began construction that summer. The project is expected to be in service in winter 2013. Northern Courier Pipeline System Location: Alberta Stakeholder(s): TransCanada Corp., Fort Hills Energy LP Overview: TransCanada was selected by Fort Hills Energy to design, build, own and operate the proposed $660 million Northern Courier Pipeline project, which comprises a 90-km pipeline system to transport bitumen and diluent between the Fort Hills mine site and the Voyageur Upgrader located north of Fort McMurray, Alberta. The pipeline is fully subscribed under long-term contract to service the Fort Hills mine, which is jointly owned by Suncor Energy Inc., Total E&P Canada Ltd. and Teck Resources Ltd., and is operated by Suncor Energy Operating Inc. Northern Courier is conditional on and subject to the Fort Hills project receiving sanction by its co-owners and obtaining regulatory approval. Progress: TransCanada has started engaging with Aboriginal communities and stakeholders about the pipeline route and has initiated environmental field studies. The company expects to file an application with the ERCB in early 2013. Pending all required regulatory and project approvals, construction is expected to begin in 2014, with an in-service date of mid-2016. 32

Northern Gateway Pipeline Project Location: Alberta, British Columbia Stakeholder(s): Enbridge Overview: The Northern Gateway system would include two 1,177km pipelines from Alberta to the British Columbian coastline, with associated storage tanks and terminals, at a cost of $5.5 billion. A 36in. diameter oil pipeline would carry 525,000 bpd of crude westward from Edmonton, Alberta, to Kitimat, B.C., where the product could then be taken by ship to the Pacific Rim countries or U.S. markets on the West Coast. The second pipeline (20-in. diameter) would transport 193,000 bpd of natural gas condensate eastward. Condensate is used to thin petroleum products for pipeline transport. Progress: The project is currently under review by the NEB joint review panel, which is expected to continue until mid-2013. Pending approval, construction would begin in 2014, with an in-service date of 2017. Northwest Mainline Komie North Extension Project Location: Alberta Stakeholder(s): NOVA Gas Transmission Ltd. (NGTL), a wholly owned subsidiary of TransCanada PipeLines Ltd. Overview: The proposed project involves the construction and operation of four new segments of pipeline and related facilities that would add another 166 km to what is commonly known as the Alberta System. The new sections would be built alongside or contiguous to existing rights of way over a distance of approximately 115 km, while the remaining portion, about 51 km long, would require new rights of way. The projected in-service date would be April 2014. Progress: The NEB recommended partial approval of the project on Jan. 30. In its application, NGTL proposed to build a $333.2 million project consisting of two separate pipeline segments. The NEB recommended approval for the Chinchaga section, a 33-km pipeline loop running between the Chinchaga meter station and the Meikle River compressor station located about 76 km northwest of Manning, Alberta. The NEB did not recommend approval for the Komie North section, which is an extension to the Horn River Mainline and includes

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approximately 97 km of pipe, which is proposed to be located 110 km north of Fort Nelson, B.C. The board concluded that proposed toll treatment is inappropriate for the Komie North section, and NGTL’s evidence did not provide any alternate toll treatment for consideration, which led to the conclusion that this section was not economically feasible. The NEB also concluded that approval of the Komie North section, as proposed, would have negative commercial impacts on other parties. With regards to the design of the Komie North section, the board found that NGTL did not establish the need for a pipeline of the proposed size to go to Fortune Creek at this time. The board concluded that the Komie North Section is premature. Woodland Pipeline Extension Project Location: Alberta Stakeholder(s): Enbridge, Imperial Oil Ltd. Overview: The Woodland Pipeline is a 137-km, 36-in. pipeline that went into service in September 2012 to transport crude oil from the Kearl oil sands to the Cheecham Terminal, with an initial pipeline capacity of 200,000 bpd. Enbridge is developing a 385-km, 36-in. pipeline to extend the Woodland Pipeline. The project would also include two new two new pump stations, one at the Roundhill Station and the other at the Cheecham Terminal. Progress: The ERCB approved the project in August 2012. Enbridge is in the process of completing design and engineering details, with construction expected to begin in 2013 and in in-service date of 2015. This is not a comprehensive list of the oil pipeline projects in Canada. For more information about these and other projects, you can visit the NEB website at www.neb-one.gc.ca or the ERCB site at www.ercb.ca. North American Oil & Gas Pipelines provides quarterly updates of oil and gas pipeline projects in the United States in Canada. The next update will be May, covering U.S. oil pipeline projects. Bradley Kramer is managing editor of North American Oil & Gas Pipelines. Contact him at bkramer@ benjaminmedia.com. napipelines.com

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Add a new excavation resource to your reference library today! Moving The Earth: The Workbook of Excavation — Sixth Edition As necessary as your hard hat – this workbook covers the work you do and the machines you use. Consists of detailed information on international developments in earthwork construction, updated OSHA excavation safety standards, and both SI and U.S. customary units and more.

Topics Covered Include Your Work: * Land clearing and controls * Rock, soil, and mud * Ponds and earth dams * Landscaping and agricultural grading * Roadways * Blasting and tunneling * Costs and management Publisher: McGraw-Hill Professional Hardbound/1232 pages

Your Machines: * Revolving shovels and excavators * Conveyor machinery * Tractors and bulldozers * Front-end loaders * Scrapers and trucks * Grading and compacting machinery * Compressors and drills * Auxiliary equipment

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Step-by-step instructions on how to read plans, estimate labor and equipment costs, evaluate a site, determine undercuts, figure factors for swell and shrinkage and much more.

Topics Covered Include: * Read topo maps * Set crows feet * Install water, drain and sewer pipes * Lay or remove asphaltic concrete * Use a laser level * Cut drainage channels * Pressure-test sewer pipes * NEW! Use GPS and sonar for absolute precision

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Topics Covered Include: * How to read plans and specs * When you have to undercut * Why a site visit is mandatory * Dealing with irregular regions * Factors for estimating swell Price: and shrinkage $44.99* * How soil characteristics can affect your estimate * The best ways to evaluate subsurface conditions * Calculating machine owning & operating costs * Figuring your overhead Publisher: Craftsman Book Co | Softbound/446 Pages

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price subject to change without notice.

edu.benjaminmedia.com | 330-467-7588

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HYUNDAI’S HELPING HAND

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Choosing the Right Excavator for a Pipeline Project By Jaselle Spencer

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ndustry experts project the U.S. and Canada will need between roughly 30,000 to 60,000 additional miles of pipeline through 2030. In North America, more than 41,000 miles is expected for 2013. The domestic shale oil and gas revolution has caused this industry to explode. When it comes to choosing heavy construction equipment for the job, the right excavator can be the key to the success of a pipeline construction project. There are a number of criteria that a pipeline contractor should keep in mind when choosing an earth-mover. “The pipeline contractor needs to consider the terrain that the pipeline is passing through to determine the

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equipment that will do the job,” says Al Springer, sales and marketing director for Highway Equipment Co., in Zelienople, Pa. “The key specifications that the pipeline contractor looks for in excavators are engine horsepower, hydraulic power and weight.” Pipeline contractors should talk to their dealer about their application to ensure they choose an excavator that has the correct specs.

SERVING THE SHALE

Highway Equipment Co. serves the Marcellus and Utica shale gas industry in Pennsylvania, Ohio, West Virginia and New York. In business since 1933, the company has established itself as one of the region’s leading

rentals, sales and service providers. Highway Equipment is setting up many of its pipeline construction customers with Hyundai Construction Equipment excavators. “In order to perform in this difficult application, the excavator needs to be tough and strong,” Springer says. “This is why our contractor customers choose Hyundai excavators.” For pipeline construction projects, Highway Equipment sells or rents its customers the following Hyundai excavator models: R210LC-9, R290LC-9, R380LC-9 and the R480LC-9. Pipeline contractors need auxiliary hydraulics to run attachments and single grouser bar track pads if the project requires climbing and descending in mountainous terrain. All of the exca-

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There are a number of factors that pipeline contractors need to consider when choosing a hydraulic excavator. Chief among those criteria are jobsite terrain, engine horsepower, hydraulic power and operating weight, according to Al Springer of Highway Equipment Co., in Zelienople, Pa.

vators have cab guards and screens to protect the operator. Springer explains which attachments pipeline contractors need to use with their excavators. “Pipeline contractors use a wide range of hydraulic excavator attachments,” he says. “To start the pipeline project, the pipe is delivered by trucks to the project. The pipe needs to be unloaded and eventually strung along the pipeline trench. Our contractors use Hyundai excavators with Vacuworx vacuum pipe lifters to handle the long lengths of pipe safely and without damage to the outside coating on the pipe. They use hydraulic rotating grapple saws on Hyundai excavators to clear the trees from the pipeline right-of-way. Hyundai excavators with hydraulic hammers can be used to excavate the pipeline trench when rock is encountered. Pipeline construction contractors



use Hyundai excavators with special screening/padding buckets to place backfill material/dirt around the pipe after it is placed in the trench. They use Hyundai excavators with hydraulic boom mounted soil compactors to compact the soil over the pipe. They also use many other attachments depending upon the conditions on the job.” Convenience and comfort of the operator also are important differentiating factors between machines. Keep an eye out for these value-adding features like fully adjustable seats and armrests, large foot pedals, ergonomic joysticks, storage space, LCD monitor control, safety glass, automatic climate control, etc. When you look at the various lines available, Springer says, it’s important to look for models where these features and benefits come standard, rather than cost extra.

R210LC-9

R290LC-9

One of the features Springer appreciates on the Hyundai excavators is the Hi-Mate GPS system. “The pipeline project is constantly moving and the Hyundai excavators are never in one place for more than a day. The project travels for miles and miles. Locating and knowing where the excavators are is very important.” Hyundai’s 9-series excavators come standard with Hi-Mate, Hyundai’s proprietary remote management system that provides operators and dealer service personnel access to vital service and diagnostic information on the machine from any computer with internet access. Users can pinpoint machine location using digital mapping and set machine work boundaries, reducing the need for multiple service calls. Hi-mate saves time and money for the owner by promoting preventative maintenance and reducing machine downtime.

R380LC-9

R480LC-9

Operating Weight (lbs) 50,520 65,870 84,220 108,420 Engine hp 143 hp @ 1,900 rpm 197 hp @ 1,900 rpm 271 hp @ 1,850 rpm 342 hp @ 1,900 rpm Maximum Dig Depth 22 ft, 1 in. 24 ft, 7 in. 24 ft, 8 in. 25 ft, 7 in. Bucket Breakout force, lbs (SAE) 29,320 37,480 45,190 49,600

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RENT VS. BUY

Equipment dealers offer a number of options when it comes acquiring a machine. The decision over whether a contractor should rent or purchase a piece of equipment requires a careful evaluation of a few considerations. “Pipeline contractors need to consider the location and length of the job,” says Shane Sirmons, national sales and marketing manager for Hyundai. “It may be less costly to rent the equipment, rather than to move their own equipment to the jobsite. When renting the equipment, the newer it is the better for the pipeline contractor. New equipment provides the pipeline contractor with the latest technology to get the pipeline completed safely and on time.”

“The major challenge that pipeline contractors face is completing the pipeline safely and on time,” Springer says. “This is how they make money. Dependable equipment is a must. Hyundai excavators provide the dependability that the pipeline contractor requires. They run all day, every day.” Pipeline construction contractors can benefit from the support and resources of Hyundai’s dealer network. Hyundai’s expansive network

has multiple locations across the Americas. Hyundai dealers are fully trained on the machines, parts, specs and usage and are proven to be a valued resource for the pipeline construction industry, from the purchase decision maker to the operator out in the field. Jaselle Spencer is a sales and marketing specialist with Hyundai Construction Equipment Americas Inc.

OVERCOMING CHALLENGES

Pipeline construction involves numerous challenges. Having the right equipment can go a long way in ensuring a project’s success.

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pipeline repair

Good Idea Good People Good Result Pipeline Industry Teams Up to Find Repair Solution

FIGURE 1

COIL PASS INSTALLATION METHOD

During this typical installation method, the coil of composite material is passed between two installers on either side of the pipe.

By Scott Cooksey

Role of Pipeline Operators

In the mid-1980s, natural gas pipeline operators in North America were intimately involved in the development of a technology to repair pipelines as an alternative to traditional methods. A steering committee of industry experts was convened in 1987 with the purpose of considering the use of composite technology as a means to mitigate pipeline integrity concerns in regard to the pressure containing ability of the pipe. The criteria to investigate were identified. A program of research and development efforts was established. The following decade was used to demonstrate both the short-term viability of the technology, as well as long-term engineering parameters and permanency of targeted repairs. Many components and architectures were considered. Many alternative designs were rejected due to deficiencies with regard to specific technical requirements. Following several iterations, one product with a rather specific architecture, design and specific constituent components was identified as acceptable. The industry has used this technology extensively since commercial introduction in the early 1990s. 38

The Goal

The primary goal of the research and development program was to develop a minimally invasive, low-risk means to quickly and permanently repair blunt metal loss anomalies on high-pressure pipelines. Various traditional repair methods had been in wide spread usage for several decades, each requiring the use of hot work, welding, cutting and related technologies, which raised concerns. A method of repairing pipe using modern composite technology would eliminate these concerns. The true goal of this effort was worker, land owner and public safety, while mitigating the risks associated with pipeline repairs. Many specific technical issues needed to be considered and addressed for proper validation of the long-term performance for any proposed technology. Field variables had to be minimized to insure that each and every repair was and would remain fully functional. The engineering properties needed to be clearly identified, critical engineering assessment documented and verification completed, and each required to maximize pipeline integrity and maximize the safety of the pipeline, workers and the public.

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The Product

A pre-cured, composite system was developed. It has been widely used around the globe for the last 20 years. The technology that was envisioned and developed by the North American pipeline industry has produced benefits in North America and approximately 80 other countries around the globe. The system has proven to be remarkably trouble-free. It has consistently met the original goal. It is a safe, efficacious repair system that augments pipeline integrity and pipeline safety. Figure 1 shows a typical installation in progress. This method is known as the “coil pass” method as the coil of composite material is literally passed between two installers on either side of the pipe. Eight layers of composite material are always used. The repairs are permanent and may be installed in as few as 15 minutes per application.

Ingenuity Provides a Step Forward

An occasional pipeline anomaly is encountered where clearance around the pipe is limited. This may be due to immovable bedrock below the pipeline, difficult terrain or other local issues that make passing the coil around the pipe a less than optimal method of installation. napipelines.com

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Results of Teamwork

FIGURE 3

APPLICATION IN LIMITED CLEARANCE EXCAVATION Here, a spool feeder operates in a “bell-hole,” showing how this simple tool eases installation in limited excavation areas. A spool feeder device has been developed to ease installation and eliminate the constraints of tight clearance issues around the pipe in such situations. With this simple tool, only a few centimeters of clearance under the pipe are required. The device and installation method is shown in Figure 2. As illustrated, the weight of the coil is suspended on the spool feeder, thus minimizing fatigue of the field workers. Less required clearance means the amount of time invested in digging the ditch or trench, clearing around the pipe and the linear length of the excavation site can each be reduced. This may be a significant cost driver for urban location or other repair sites with special circumstances. Figure 3 shows a spool feeder in a “bell-hole.” (Please note the limited length of the excavation.) The benefits of this simple device and installation technique are many. The workers on-site enjoy a less physically demanding repair. This ensures that quality is maintained at the highest of levels. Time and cost of excavation can be minimized. The assetowner controls costs. The contracting company, crew or gang doing the actual field work will be able to complete work at each site quickly and efficiently. They can then move to other required tasks. Further, as the predictability of repair time is improved, project managers can better schedule crews and assets. Finally, the public interest is served with high quality integrity works, coupled with minimum of risk and the inconvenience associated with open trenches. Safety regulators (state or provincial, national or local) are well satisfied that all stakenapipelines.com

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holders are being well served. They are well familiar with this technology and its history of success and performance. Despite all of these many benefits regarding safety, integrity and ease of installation, the technology would not be commercially successful if it were found to be unduly expensive. Many pipeline operators have adopted this repair technology as their primary integrity repair system. They not only gain safety and integrity while minimizing risk, they use the technology as it also reduces the time and costs for repairs.

More than 25 years ago the North American pipeline industry united in an effort to evaluate new technology and consider application of technology to the field of pipeline integrity. One of the technologies and products developed has been extensively put to use. All stakeholders have enjoyed benefits. Pipeline integrity and public safety have been augmented. The asset owner has received benefits of reduced open ditch time and reduced costs. The field repair crews have learned new skills, minimized physical challenges which require endurance and strength, resulting in less fatigue with fewer errors, resulting in improved quality and safety. Ultimately, utility rate-payers have benefited with a consistent supply of product and attractive total costs. The pipeline industry of North America sent their best and brightest people to participate in the project a quartercentury ago. Today, the public is still collecting the dividends of these investments. Scott Cooksey is marketing director and North American sales coordinator for Clock Spring Co. and is based in Houston. (Photos courtesy of Clock Spring Co.)

SPOOL FEEDER APPLICATION TOOL A spool feeder device eliminates the constraints of tight clearance issues around the pipe, requiring only a few centimeters of clearance under the pipe to operate. FIGURE 2

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PIPELINE PRODUCT EXPO

PIPELINE PRODUCT

EXPO

Bernard Dura-Flux Welding Gun The new Bernard Dura-Flux Gun with replaceable power cable liner was designed with a variety of cost-saving and comfort-enhancing features. This self-shielded flux-cored gun allows for quick, easy power cable maintenance when necessary, and has an advanced handle design with an optional dual schedule switch integrated into it. The handle design helps reduce downtime associated with operator fatigue, while the dual schedule switch allows for easy wire feed speed adjustment while welding. The gun offers 350 amps of welding capability at 60 percent duty cycle. The Dura-Flux Gun features internal trigger leads to prevent the trigger cord from becoming tangled on surrounding equipment and also improves the maneuverability of the gun. A sealed trigger protects against contaminants and is easy to replace if damaged. It also absorbs less heat than a traditional metal trigger to increase arc-on time and extend component life. The gun can be configured with a variety of cable length and neck options and adapted for use

with multiple styles of wire feeders from major manufacturers. It uses Quik Tip Series consumables from Bernard, which can be installed or changed over with a simple twist.

For more information, visit www.bernardwelds.com.

Hobart Bros. Fabshield Flux-Cored Wire Fabshield 79T8 and Fabshield 79T8 Ni2 self-shielded fluxcored wires have been specifically formulated for welding on oil and gas transmission pipelines. The Fabshield 79T8 wire is ideal for welding API 5L Grades X70 steel and below, while the Fabshield 79T8 Ni2 is best suited for API 5L Grade X80 pipe. Both wires feature high impact strengths at low temperatures, as well as low diffusible hydrogen levels to help resist cracking in severe environments. The Fabshield 79T8 wire creates a weld with 5.5 ml of diffusible hydrogen per 100 g of weldment and the Fabshield 79T8 Ni2 wire offers 7.3 ml per 100 g. These wires require no shielding gas so they are easily portable for welding in remote areas. They generate a fast-freezing, easy-to-remove slag, making them suitable for welding in all positions and capable of reducing cleanup time. Their smooth operating characteristic make them appealing to welding operators and help increase productivity by offering better control of the weld puddle. The Fabshield 79T8 wire is available in 1/16- and 5/64-in. diameters and the Fabshield 79T8 Ni2 wire is available in 5/64-in. diameters. Both ship on 10-lb plastic spools in 40

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hermetically sealed buckets (four spools to a bucket) to ease transportation to jobsites.

For more information, visit www.hobartbrothers.com. napipelines.com

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PIPELINE PRODUCT EXPO

Lincoln Electric FCAW-G Pipeliner Family Lincoln Electric’s new portfolio of gasshielded flux-cored (FCAW-G) electrodes are suitable for automated and semi-automatic pipe welding applications. Designed for hot, fill and cap pass welding, Pipeliner 81M is recommended on up to X70 grade pipe, 101M is advised for up to X80 grade pipe, and 111M for up to X100 grade pipe. Optimized for automated welding, these products have a consistent arc and a fast freezing slag to maintain a flat bead shape all around the pipe.

KEY FEATURES: • Designed for optimal performance in automated pipe welding applications where a consistent arc length is critical. • Fast freezing slag provides consistent puddle support and a flat bead shape all the way around the pipe.

• ProTech packaging for moisture resistance.

These flux-cored wires conform to AWS A5.29/ A5.29M: 2010: E81T1-GM, E101T1-GM, E111T1-GM classifications for X70, X80 and X100 pipe grade welding. Each product is available in 10- and 25-lb plastic spools and packaged in a vacuum sealed foil bag. Pipeliner 81M, 101M and 111M come in a standard diameter of 1.2 mm.

• Q2 Lot Controlled and Tested — Certificates showing actual deposit chemistry and mechanical properties per lot available online.

For more information, visit www.lincolnelectric.com.

• Capable of producing weld deposits with impact toughness exceeding 27 J (20 ft-lb) at minus-40 F. • Low diffusible hydrogen levels.

Miller Big Blue 350 PipePro The Big Blue 350 PipePro, purpose-built for transmission pipeline welding, provides 20 to 400 amps for both DC stick (325 amps at 100 percent duty cycle) and DC TIG welding, 14 to 40 volts for MIG and fluxcored welding (350 amps at 100 percent duty cycle) and 12,000 watt peak/10,000 watts continuous auxiliary generator power for running tools on site. The Big Blue 350 PipePro features Infinite arc control that allows arc characteristics to be tailored to specific applications in stick, MIG and flux-cored welding. Overall arc quality is improved, stick flaring issues are eliminated, and MIG/flux-cored controls have been enhanced and simplified to optimize the machine for wire welding. This is critical as many transmission pipelines are transitioning to high-strength steels where flux-cored welding provides optimal performance. Its engine lowers rpm to 1,850 (compared to 3,600 rpm), and reduces noise and lowers fuel use by as much as 50 percent compared to other units. The machine is available in an optional stainless steel package to withstand corrosive elements in harsh

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environments, and all models come standard with a LINE-X coated top cover for added durability and reliability.

For more information, visit www.millerwelds.com.

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PIPELINE PRODUCT EXPO

PIPELINE PRODUCT

EXPO

Serimax Maxiluc Line-up Clamps For more than 30 years as one of the the world’s foremost premium welding solutions providers, Serimax, a subsidiary of Vallourec Group, has continuously strived to improve pipeline welding technology. Using feedback from field support and key contractor personnel, the company recognized an opportunity to improve its extended fleet of equipment to align and better serve the contractor needs. In so doing, Serimax has developed Maxiluc, a new patented generation of re-rounding lineup clamps with a novel design approach. With the move to higher strength material and pipe end tolerances in terms of out-of-roundness, aligning pipes with an acceptable hi-lo can be challenging for a conventional ILUC. The Maxiluc was developed with an accurate analysis to define the points to be improved to better correct out-of-

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roundness. Thanks to a maximized piston area exposed to air, an increased clamping shoes surface area and a re-engineered roller brackets for minimum friction between internal pipe surface and each clamping shoe to allow self-centering of the clamp in the pipe, the Maxiluc can remove more than 1-in. of out-of-roundness. By continually focusing on safety, quality and its ability to serve and bring value to customers, Serimax’s ongoing investment program in new technologies ensures its leading position at the cutting edge of the pipeline construction technology.

For more information, visit www.serimax.com.

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PIPELINE PRODUCT EXPO

RMS MOW II Modular Orbital Welding System RMS Welding Systems announces the latest changes to the MOW II Modular Orbital Welding system, which take the system to a higher level of reliability, control and quality assurance. The MOW II OD girth welding system has a proven track record of almost 2,000 km (approximately 1,200 miles) of installed large diameter pipe since 2006. With multi-microprocessor control and high frequency inverter power sources, precision is built-in. Through-thearc torch height control and horizontal seam tracking are well established on the MOW II. RMS has built upon these technologies and added further precision by developing through-the-arc weave width control, called width tracking. Width tracking is a feature that continuously monitors arc conditions, using those signals to control torch positioning and weaving, on-the-fly. Width tracking keeps the arc parameters in a field-proven process window, ensuring a consistent level of sidewall penetration at both joint faces, despite inevitable variations in joint fit-up. This higher level of quality and repeatability results in less rework, lowering the client’s construction costs.

For more information, visit www.rmsweldingsystems.com.

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Business Cards

YOUR AD HERE! Contact Ryan Sneltzer 330.315.2114 or [email protected]

GET LISTED! Expose your company to 12,500* NAOGP subscribers with a FREE basic listing in the North American Oil & Gas Pipelines Buyer’s Guide!

www.napipelines.com/buyers-guide.com

Deadline: 9.30.13 Benefits Include: • Listing in the Online Buyer’s Guide www.bmi-buyersguide.com • Free listing in the print edition in up to five industry categories • Bonus distribution at major industry events • 12-month shelf life!

Questions?

Contact Mia Cronan at [email protected] or 330-467-7588. *Publisher’s Own Data

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FEBRUARY 2013 | North American Oil & Gas Pipelines

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North American Oil & Gas Pipelines Calendar THE EVENTS PIPELINE Conferences, Meetings & Trade Shows

FEBRUARY 19-20

Hydrocarbon Measurement School & Exhibition Corpus Christi Aria Measurement Society Omni Marina Hotel Corpus Christi, Texas Web: www.ccams.info

MARCH 5-10

DCA Annual Convention Loews Miami Beach Hotel Miami Web: www.dcaweb.org

6-10

APCA Annual Convention The Sanctuary Kiawah Island, S.C. Web: www.americanpipeline.org

17-21

NACE Corrosion 2013 Orange County Convention Center Orlando, Fla. Web: www.nace.org

19-20

Shale Gas Development and Water Issues Symposium American Institute of Professional Geologists Hilton Austin Airport Austin, Texas Web: www.aipg.org

APRIL 2-4

3-5

INGAA Foundation Spring Meeting Ritz Carlton Amelia Island Amelia Island, Fla. Web: www.ingaa.org

10-11

Marcellus, Utica and Point Pleasant Shale: Energy Development and Enhancement Symposium American Institute of Professional Geologists McKinley Grand Hotel Canton, Ohio Web: www.aipg.org

16-17

API Pipeline Conference Loews Coronado Bay Hotel Coronado (San Diego), Calif. Web: www.api.org

16-19

LNG 17 International Conference and Exhibition on Liquefied Natural Gas George R. Brown Convention Center Houston Web: www.lng17.org

MAY

12-16

PLCA Canada Annual Convention Fairmont Queen Elizabeth Montreal Web: www.pipeline.ca

DCA Safety Congress Bellagio Las Vegas Web: www.dcaweb.org

14-16

88th Annual School & Exhibition International School of Hydrocarbon Measurement (ISHM) Cox Communications Center Oklahoma City Web: www.ishm.info

21-23

American Gas Association Convention Gaylord Palms Orlando, Fla. Web: www.aga.org

JUNE 11-13

Gas & Oil Expo North America Stampede Park Calgary, Alberta Web: www.gasandoilexpo.com

22-23

North American Pipeline Symposium Marriott Calgary Downtown Calgary, Alberta Web: www.CanadianInstitute. com/NAPipeline

26-28

Summer Leadership Meeting Association of Oil Pipelines (AOPL) Fairmont Banff Springs Banff, Alberta Web: www.aopl.org

JULY 17-21

DCA Mid-Year Meeting Park Hyatt Beaver Creek Avon, Colo. Web: www.dcaweb.org

23-25

Oil Sands Heavy Oil Technologies Telus Convention Center Calgary, Alberta Web: www. oilsanstechnologies.com

AUGUST 9-12

Appalachian Gas Measurement Short Course Robert Morris University Moon Township, Pa. Web: http://agmsc.org

23-24

Western Regional Gas Conference Tempe Mission Palms Hotel and Conference Center Tempe, Ariz. Web: www. westernregionalgas.org

21-22

GeoGathering GIS for Gathering and Production Lines Colorado Springs, Colo. Web: www.geogathering.com

29-31

Tulsa Pipeline Expo Tulsa, Okla. Web: www.tulsapipelineexpo.com

Advertisers Index Advertiser............................................ Website....................................................... Page

McLaughlin........................................... www.mightymole.com........................................ 9

Benjamin Media Online Buyer’s Guide......................... www.napipelines.com/buyers-guide.com........ 45

Mesa Products..................................... www.mesaproducts.com................................. 45 Michels Corporation............................. www.michels.us................................................ 13

Benjamin Media Resource Center....... edu.benjaminmedia.com................................. 33

Minnesota Limited................................ www.mnlimited.com......................................... 27

DRS Drilling LLC................................... 216-510-5156................................................... 15

Mississippi Lime & www.mississippi-limeAnadarko Basin Midstream................ anadarko-midstream.com................................ 24

E.H. Wachs........................................... www.ehwachs.com.......................................... 43 FAE USA Inc......................................... www.faeusa.com.............................................. 35 Fecon Inc.............................................. www.fecon.com................................................ 37 Foremost Industries............................. www.foremost.ca.............................................. 29

46

Advertiser............................................ Website....................................................... Page

Artic Oil & Gas Symposium.................. www.ArticGasSymposium.com........................ 17

No-Dig 2013......................................... www.nodigshow.com....................................... 44 TigerCat................................................ www.tigercat.com............................................. 25 Trencor................................................. www.trencor.com................................................ 7

Girard Industries................................... www.Girardindustries.com............................... 23

Upgrading Crude by Rail Capacity www.crude-by-railTerminals, Railcars & Destinations..... destinations-summit.com................................. 24

Horizontal Technology Inc.................... www.horizontaltech.com.................................... 5

Vermeer................................................ www.vermeer.com............................. Back Cover

Hyundai Construction Equipment........ www.hceamericas.com...................................... 3

WennSoft.............................................. www.wennsoft.com............................................ 2

IPLOCA................................................. www.iploca.com............................................... 42

Wounded Warrior Project..................... www.woundedwarriorproject.org..................... 11

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