Wyoming independents try to block Express line completion

Wyoming independent producers have taken a last-ditch stand to block completion of the Express Pipeline, which could carry as much as 172,000 b/d of Canadian crude from Hardisty, Alta., 785 miles to Casper, Wyo.

Alberta Energy Co. Ltd. and TransCanada PipeLines Ltd. report their 24-in. line is nearly completed (see map, OGJ, June 19, 1995, p. 32).

The line has been laid and is being hydrostatically tested. Work is continuing on pump stations. Express plans to begin line fill in February and be in full service Apr. 1.

Market depressant?

The Independent Petroleum Association of Mountain States (Ipams) has said Express could flood the Wyoming market with crude and depress prices there by as much as $4/bbl.

Ipams, Wyoming Independent Petroleum Association (WIPA), and others urged the Bureau of Land Management not to grant Express rights-of-way across federal lands in Montana and Wyoming. After it did, they took the case to the Interior Department's Board of Land Appeals and lost.

Ipams, WIPA, and the Independent Petroleum Association of America also opposed the pipeline's proposed rate structure, but the Federal Energy Regulatory Commission approved it in September.

On Sept. 18, Ipams and WIPA asked a Federal District Court at Cheyenne to issue a preliminary injunction to block the pipeline. A ruling is expected on that motion this month.

They alleged BLM's environmental impact statement failed to consider the line's socioeconomic impact. The Campbell County, Wyo., Board of Commissioners has intervened in the case on the side of producers.

An independent's view

George Fancher, owner of Fancher Oil Co., said, "Crude purchasers say the bonus being paid for Wyoming sour will decrease $0.75-1.25/bbl by Jan. 1, and many believe the bonus on all grades of crude will be eliminated as soon as the Express pipeline is operational. Current bonuses are about $2/bbl for Wyoming sweet and $3.75/bbl for Wyoming sour."

He said the price for sour has dropped $1.10/bbl within the last month.

"The pipeline isn't built yet, and it's already having an effect because the existing lines are discounting in order to establish market share."

Fancher said Express is unnecessary because three existing lines into the area have 80,000 b/d of available capacity.

Express also will tie into the Platte pipeline, which moves Wyoming crude east to refineries at Wood River, Ill., and beyond. Platte has spare capacity, but Fancher said, "It's not enough capacity to take all of the Express crude through to the Wood River market. A lot of that crude is going to back up into the Rockies. And we don't need any more crude right now."

He said Express is paying Wyoming $15 million to cross 10 miles of state lands, and the deal provides that if Express depresses Wyoming crude prices (and thus state royalties), the state could receive as much as another $15 million.

Government policy lacking?

Fancher said, "Our other concern is that our government doesn't have a policy to review these projects to determine whether or not they're needed or good for the domestic industry.

"The U.S. policy seems to be: 'As long as it will reduce the price of crude, it's a good thing.' But the real question should be: 'What will these imports do to the domestic oil and gas industry?'"

Another producer said, "It has been amazing to watch the progress of Express Pipeline, how it was pushed through the system so quickly when we producers often have to wait 8 months to 2 years to get a federal permit to drill a well in Wyoming."

Fancher admitted, "It's going to be difficult to keep Express out forever, but they need to address these economic issues and provide for a more orderly transition. And they should be required to show that they have a market here."