Are pipelines safe?
Unless you’ve been living under a rock, you know about Energy Transfer Partners’ (ETP) Dakota Access Pipeline and its related trail of drama. To summarize, it was approved, then put on hold by the Obama Administration. It has now been given the green light by the Trump Administration and is expected to be moving oil any week now (line fill has already begun). There have been massive protests against this pipeline. One of the biggest concerns is potential drinking water contamination since the pipeline will run under multiple bodies of water.
Because of these headlines, we’ve received a few questions about pipeline maintenance and safety. No matter what side of this issue you’re on, everyone agrees that pipeline leakage is a bad thing. Pipeline companies go to great lengths to ensure this doesn’t happen. Here are the top four ways companies guard against accidents:
- Construction – Companies must meet strict regulation and design guidelines when constructing pipelines. These regulations are set forth by the Pipeline Hazardous Materials Safety Administration (PHMSA). The Interstate Natural Gas Association of America (INGAA) also provides additional construction safety guidelines for natural gas pipelines to “complement applicable regulatory requirements.”
- Testing – Once constructed, tests are run using water. Water is pushed through the pipelines at pressures far beyond what they will be using to move oil and gas.
- Regular Inspection – Through the use of Pipeline Intervention Gadgets (PIGs), pipeline operators are able to gather all kinds of data about strength of the pipes, possible corrosion, and blockages. There are also “SmartBalls” that roll along pipelines. These balls use a microphone to identify leaks as small as a pinhole. If a PIG or SmartBall detects an issue, physical inspection and repair will ensue. The goal is to fix a minor issue before it becomes a major problem. As a further measure, PHMSA and other state agencies hold inspections of their own to ensure that pipelines are operating as they should. PHMSA checks that companies are complying with all laws, verifies pipeline integrity, and investigates reports of leakage.
- Monitoring – There are control room operators constantly monitoring the pipelines. With detection devices set up along the length of each pipeline, operators can tell if something is not quite right based on flow rate and amount of pressure.
Unfortunately, try as they might, these measures don’t work 100% of the time. Serious leaks and other pipeline incidents occur every year for a variety of reasons. Sometimes it’s because a landowner or construction team fails to “call before they dig” and they end up cutting into a pipeline. Or, sometimes worse, they hit and weaken the pipeline. Since there is no immediate spill, the incident goes unreported and the pipeline operator does not know to inspect for safety. Other times it’s because of a welding failure or internal corrosion that operators and technology missed.
Like many things, it’s not a perfect system, but it is continually evolving. According to the PHMSA, there were 328 significant pipeline incidents in 2015. Jumping back a decade ago, there were 309 significant incidents reported. Since more pipeline miles have been built since 2005, to normalize these results, we looked at these on a per pipeline mile basis. A small decrease is noted: 0.000167 incidents per pipeline mile in 2005 versus 0.000145 in 2015. As can be observed by the size of these numbers, while zero accidents is ideal, they are rather infrequent. Additionally, pipelines are much safer than moving crude by rail or truck.
Transporting oil and gas in pipelines can be compared to transporting people in cars. Automakers have improved vehicle safety dramatically as technology has improved. Car accidents still occur but have generally trended down. Pipeline operators, like automakers, do all in their power to continually improve safety. Just as the use of cars is critical to our nation’s transportation needs, so is the oil and gas moved through our pipelines. In other words, most people sitting in a heated or an air-conditioned office reading this on their computer would agree the benefits are worth the risks.
Maintenance is a prominent line item on MLP financial statements. Next week, we’ll look at maintenance expenses in more detail and talk about how to keep track of how much the MLPs you follow are spending to maintain their assets.