Natural-gas rigs are stopping production because of a shortage of pipeline capacity

posted at 1:21 pm on May 27, 2014 by Erika Johnsen

This doesn’t directly have anything to do with the Keystone XL pipeline per se, but it does once again highlight just how dumb that entirely trumped-up and drawn-out debate really is. America already has a network of more than two million miles worth of pipeline sprawling across the United States, but because of the recent oil-and-gas production boom brought on by technological innovations in fracking, we still need millions more as well as a whole slew of existing infrastructure updates. Without more pipelines, we’ll be working underneath entirely self-imposed restrictions on our production capacity — a phenomenon that’s already happening, via Bloomberg:

Rigs targeting natural gas in the U.S. slipped from a one-month high with drillers limited by a shortage of pipeline capacity to move supplies to market.

The gas count dropped by one to 325 this week, data posted on Baker Hughes Inc.’s website today show. Rigs drilling for the power-plant fuel declined in U.S. plays from the Fayetteville of Arkansas to the Haynesville in Arkansas, Louisiana and Texas, the Houston-based field services company said. …

U.S. rigs drilling for natural gas slid by 29 in the past year even as prices gained, underscoring the record volume from existing rigs. The boom has companies jockeying for transportation capacity as output in the Marcellus alone is set to rise by 25 percent in June from a year earlier, according to Bloomberg Industries data.

“Why drill it if you can’t sell it?” James Williams, president of energy consulting firm WTRG Economics, said today by telephone from London, Arkansas. “There are still several thousand wells waiting to connect to pipelines.”

And seeing as how Obama’s Environmental Protection Agency is about to reveal tough new emissions regulations for existing power plants that are going to shut down a lot of our coal-generated electricity, we’re probably going to want to build up the capacity to deliver all the natural gas we can manage to produce as quickly and efficiently as possible.

This little tidbit, however, does directly have a lot to do with Keystone XL pipeline, and yet again underscores the utter pointlessness of the anti-pipeline eco-radicals’ relentlessly single-minded campaign, via Reuters:

Canadian exports of crude oil by rail hit a record high of 160,000 barrels per day in the first quarter of 2014, Canada’s National Energy Board says, a more than 50 percent rise from the same period a year earlier.

Canada shipped 160,164 bpd out of the country by rail between January and March, a sharp rise from the first quarter of 2013, when it exported 105,632 bpd, the NEB said on Friday. The first-quarter figure was a 7 percent increase from the final quarter of 2013, when 149,479 bpd were exported by rail.


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Warren Buffett

jake-the-goose on May 27, 2014 at 1:26 PM

Nobody could have seen this coming. Right?

platypus on May 27, 2014 at 1:29 PM

obama’s “choke America” policy is just warming up, ready to hit full stride after this November’s elections.

GaltBlvnAtty on May 27, 2014 at 1:30 PM

Progressive fascist democrats predicted that there would be food, commodities, and energy shortages in the 60s and 70s. When those shortages failed to materialize the leftists set about making those shortages occur with government intervention which was first pioneered by Stalin.

jukin3 on May 27, 2014 at 1:35 PM

This doesn’t directly have anything to do with the Keystone XL pipeline per se

then why bring it up?

ThisIsYourBrainOnKoch on May 27, 2014 at 1:36 PM

David Burge ‏@iowahawkblog 2h

Google celebrating Rachel Carson this morning; her millions of malaria victims, not so much.

davidk on May 27, 2014 at 1:37 PM

Canada shipped 160,164 bpd out of the country by rail between January and March, a sharp rise from the first quarter of 2013, when it exported 105,632 bpd, the NEB said on Friday. The first-quarter figure was a 7 percent increase from the final quarter of 2013, when 149,479 bpd were exported by rail.

Since choo-choo trains only travel over land, and Canada shares a land border with only one country, can any good Greenie guess to which country Canada is exporting oil by rail? You get one guess!

This is black gold for the freight railroads, if crude oil exports increase 7.1% in a quarter and a whopping 51.6% in a year. Since the average railcar can haul about 550 barrels of oil, this represents an average of 291 railcars per day going back and forth over the border (and some of them rather far south to reach US refineries in Missouri and Illinois). This represents over 100,000 opportunities a year for an oil spill due to a derailment.

But the 160,164 BPD is only about 20% of the proposed capacity of the Keystone XL pipeline, estimated at 800,000 BPD.

Do the math, Greenies–the Keystone XL pipeline is a no-brainer, for those with any brains.

Steve Z on May 27, 2014 at 1:42 PM

Putin smiles.

Bmore on May 27, 2014 at 1:44 PM

Buffet Brothers!!

right2bright on May 27, 2014 at 1:48 PM

OT.

Bmore on May 27, 2014 at 1:44 PM

How are you feeling about the Senate race?

Barred on May 27, 2014 at 1:49 PM

David Burge ‏@iowahawkblog 2h
Google celebrating Rachel Carson this morning; her millions of malaria victims, not so much. davidk on May 27, 2014 at 1:37 PM

Sheesh, hadn’t seen that. Pol Pot is responsible for fewer deaths than she is.

Akzed on May 27, 2014 at 1:54 PM

obama’s “choke America” policy is just warming up, ready to hit full stride after this November’s elections.

GaltBlvnAtty on May 27, 2014 at 1:30 PM

Yeah after Obama’s democrats lose their ass in November they will be ready to choke Obama.

Obama will be a dangerous lame duck…..

redguy on May 27, 2014 at 1:55 PM

David Burge ‏@iowahawkblog 2h
Google celebrating Rachel Carson this morning; her millions of malaria victims, not so much. davidk on May 27, 2014 at 1:37 PM

Sheesh, hadn’t seen that. Pol Pot is responsible for fewer deaths than she is.

Akzed on May 27, 2014 at 1:54 PM

Yeah my ninth grader was doing an assignment and noticed they were saying who great the banning of DDT was – I printed this article and had my son deliver it to his teacher……
(the school does not like me, heh, heh)

DDT, FRAUD, AND TRAGEDY
Why are millions dying of malaria, a disease all but extinct forty years ago?

http://spectator.org/articles/48925/ddt-fraud-and-tragedy

redguy on May 27, 2014 at 1:58 PM

This is an economic issue, not a regulatory one. At the moment, there isn’t a lot of profit to be made in transporting natural gas. The current companies that do it like TransCanada aren’t making enough money from it to sustain current operations, let alone future operations. The only way to build more pipelines is if we can raise the price per unit of natural gas. That’s not likely to happen soon, even with the inevitable scale down of coal.

ConservOvrGOP on May 27, 2014 at 2:10 PM

You might want to explain to your readers US producers would be opposed to Keystone’s Canadian leg. You might also want to explain that not only are logistics an issue but also the economics of extracting natural gas at the current price level. They can blame logistics but they might not want to admit that price makes drilling in many areas uneconomic so they will cut their losses.

lexhamfox on May 27, 2014 at 2:27 PM

You might want to explain to your readers US producers would be opposed to Keystone’s Canadian leg.
lexhamfox on May 27, 2014 at 2:27 PM

Why would US producers be opposed to the XL’s Canadian leg?

ConservOvrGOP on May 27, 2014 at 2:35 PM

There is a certain point where it’s almost pointless to drill for it, if you don’t have the infrastructure in place to move it away from the wellhead. The far western section of the Permian Basin in Texas was new drilling territory just like the Bakken Shale in North Dakota and as a result last year, was basically the “Valley of the Flames” at night, as exploration companies simply had to flair off the natural gas because the pipelines weren’t in place to get the gas to market and the drilling strikes were outpacing the collection abilities.

Texas being Texas, the pipeline trenching and laying is well underway, but the more new areas that are drilled the more line that needs to be put in, and sometimes you can only move so fast, because crews and materials aren’t in place. That’s the question for other parts of the country, whether the delays are simply due to a shortage of materials and labor, or if both are available but the government red tape and/or environmental protestors are keeping the working from being done.

jon1979 on May 27, 2014 at 2:55 PM

canadian railroads been aggressively going after oil market for last year anyways, no matter the status of pipeline they were bound to rise. iirc CN also had order for heated coil cars to allow oil sands to go without so much dilution. but I don’t think there is yet any port they can offload to. but there will be.
no matter status of any pipeline oil by rail is going to rise here too.
unit train can be built and running in week or so to any place on network, pipeline contracts (from what I have been reading) are pretty damned difficult to adjust.
we need both pipe and rail, and should build both. but, IMO, they augment each other vs directly competing.

dmacleo on May 27, 2014 at 2:59 PM

Now you know why Warren Buffett is smiling so much.

GarandFan on May 27, 2014 at 5:14 PM

One thing about having us old pharts around is we remember many things that should not be remembered in the interest of blue-state myths and lies. In the 70′s, we had an oil embargo and a cold winter. In the oilpatch support industry, we couldn’t get forgings from Pissylvania except at about three – to – five times the normal price. Therefore, we did not sell our interstate natural gas to Pa. We sold our gas intrastate and we had plenty in Oklahoma. The federal government intervened and forced all gas sales intra- inter-state to be controlled and rationed by them. They even set the price. Well, the price of natural gas in Ok tripled or quadrupled, then supplies started getting low. Seems like the washington bast..ds took our natural gas and gave it to the eastern states. We didn’t have gas here, not even on our drilling rigs. However, my relatives in Chicago were getting our gas at one-fourth the price to us and were bragging about it. Of course, we couldn’t get the Pa, Il, and In pipe to the rigs to deliver more gas. Us old pharts voewd, “never again.” Let you bast..ds free and starve in the dark. They took us by surprise before. Governor Alfalfa Bill Murray stationed troops on the rigs once before to prevent federal theft. It can be done again.

Old Country Boy on May 27, 2014 at 5:51 PM