GAO: US should improve oil product supply system

Nick Snow
Washington Editor

WASHINGTON, DC, Jan. 22 -- The US petroleum product distribution system is constrained in key areas and will likely become more so without timely investments, the US Government Accountability Office warned in a Jan. 18 report.

"Industry and federal agency officials report a systemic lack of pipeline capacity in the supply infrastructure system in key states including Arizona, California, Colorado, and Nevada, and note the existing supply infrastructure is insufficient to carry the commensurate volume of petroleum products and crude oil needed to meet growing demand there," GAO said.

It noted that in 2006, the US Department of Transportation proposed—and Congress approved—legislation requiring the US Energy and Transportation secretaries to periodically analyze where unplanned product pipeline outages or insufficient pipeline capacity increase prices, and whether regulations are adequate to minimize the potential for unplanned pipeline capacity losses.

"While there is widespread recognition that a study is needed to fully identify the extent of infrastructure inadequacy and the impact on prices, to date no such analysis has been undertaken," GAO said in a cover letter to the two US senators who requested the study: Commerce, Science and Transportation Committee Chairman Daniel K. Inouye (D-Hi.) and committee member Maria Cantwell (D-Wash.).

The senators asked GAO to evaluate trends in the international trading of products, refining capacity and its use internationally and domestically, international and domestic crude and product inventories, and the domestic supply infrastructure to better understand how changes in markets have affected prices, the service said.

Funds weren't allocated
US Department of Energy and DOT officials said the product supply systems study was not undertaken because Congress did not allocated funds specifically for that purpose, according to the report. The departments did not reallocate other funds for such a study, "although DOE told us it has met with DOT to discuss how this work could be approached." The cover letter said, "However, given that the study has not begun, it seems highly unlikely that agencies will be able to meet their June 2008 deadline for reporting to Congress."

GAO noted that there are many private sector plans to expand the domestic oil and product supply distribution system, and that such plans could significantly relieve stresses on the system if they are implemented quickly. "However, a complex permitting and siting process involving as many as 11 federal agencies and numerous stake and local stakeholders has slowed or impeded the expansion and construction of new pipelines," it said.

It added that the permitting process for building interstate gas pipelines and associated facilities is easier because the Federal Energy Regulatory Commission has been designated the lead federal agency to streamline that process. "No such lead federal agency exists to facilitate permitting of crude oil or petroleum product pipeline construction or upgrading," GAO observed.

The report made several recommendations aimed at improving how US product markets function. They included a suggestion that the Energy and Transportation secretaries coordinate with other agencies to encourage more uniform biofuels and petroleum product blending practices in addition to studying whether the domestic oil and product distribution system is adequate and whether a lead agency could be assigned to coordinate infrastructure construction permitting.

FERC chairman responds
In a response to the study, FERC Chairman Joseph T. Kelliher generally agreed with its recommendations. He said while the commission does not have petroleum pipeline construction siting authority, it has encouraged and supported building new and expanded crude and product lines through its issuances of orders on pipeline petitions for declaratory orders.

"The commission has approved certain rate methodologies and granted other rate assurances prior to construction in order to reduce the uncertainty and risk inherent with these large infrastructure projects," Kelliher wrote GAO.

FERC's responsibility for siting US interstate gas pipelines has given it extensive experience in issues surrounding pipeline construction and operation, which it has used to assist other agencies, Kelliher said. He cited assistance that FERC supplied the US Department of State in its environmental review of the proposed TransCanada Keystone Pipeline Project, an oil pipeline crossing from Canada into the US. "I believe our assistance with this project ultimately will provide for an expeditious, but thorough, review and facilitate needed infrastructure for the oil industry," Kelliher said.

"Finally, the report recommends that several agencies, including the commission, work together to evaluate the feasibility and desirability of designating a lead agency with eminent domain authority in order to streamline the process for siting oil and product pipelines, Kelliher said, adding, "The suggested use of the commission's role in the siting of gas pipelines as a model will help to expedite the deliberations of the agencies. Further, the active participation of the commission will help facilitate a decision on the lead agency designation."

Contact Nick Snow at nicks@pennwell.com.

Related Articles

BLM extends comment period for Colorado oil, gas project’s EA

07/21/2015 The US Bureau of Land Management has extended the comment period for a preliminary environmental assessment (EA) of a proposed oil and gas project ...

Study looks at gas transmission, storage sites’ methane releases

07/21/2015 A comprehensive study of US natural gas transmission and storage operations found total methane emissions from 2,292 on-site measurements, addition...

Joint venture plans grassroots refinery for North Dakota

07/21/2015 Quantum Energy Inc., Tempe, Ariz., said it will form a joint venture with Native Son Holdings LLC (NSH), The Woodlands, Tex., to build North Dakota...

MARKET WATCH: NYMEX crude oil price for August briefly dips below $50/bbl

07/21/2015 Light, sweet crude oil prices briefly dropped below $50/bbl on the New York market on July 20 for the first time since April but regained some supp...

Canadian provincial premiers propose national energy strategy

07/20/2015 Provincial premiers in Canada have proposed a national energy strategy with actions targeting “sustainability and conservation,” “technology and in...

PDVSA plans late-July restart for Amuay refinery’s FCCU

07/20/2015 Repairs remain under way on the fluid catalytic cracking unit (FCCU) at Petroleos de Venezuela SA’s (PDVSA) 645,000-b/d Amuay refinery in northwest...

EPA needs to improve oversight of fracing with diesel, OIG report says

07/20/2015 The US Environmental Protection Agency needs to improve its oversight of hydraulic fracturing using diesel fuels and address any compliance issues,...

URTeC: Shell’s Hackbarth says unconventional innovation begins with data

07/20/2015 Operators should resist the impulse to pull back on investments in technology despite a down oil market, said Claudia J. Hackbarth, manager, unconv...

Unplanned maintenance under way at Venezuelan refinery

07/20/2015 Petroleos de Venezuela SA (PDVSA) said unplanned maintenance to a reformer at its at its 190,000-b/d Puerto La Cruz refinery in eastern Venezuela i...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts


Operating a Sustainable Oil & Gas Supply Chain in North America

When Wed, Oct 7, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.

register:WEBCAST


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected