Pipeline delay causes surge in US gas futures

Following a decision by the Federal Energy Regulatory Commission (FERC) to limit construction on the Rover pipeline, US gas futures have surged.

An order posted on 10 May has barred Energy Transfer Partners from carrying out any new drilling on certain sections of its new, $4.2 billion Rover pipeline. The limit comes after horizontal directional drilling (HDD) on the pipeline inadvertently led to the deposition of approximately 2 million gallons of bentonite-based drilling fluid into a state-designated category 3 wetland on the Tuscarawas River. The release covered an area of approximately 6.5 acres, coating wetland soils and vegetation with bentonite clay and bore-hole cuttings.

“Rover may not conduct activities related to any of the remaining Rover Pipeline Project HDDs where drilling activity has not yet commenced until it complies with the measures outlined below and receives authorisation from Commission staff.” The order from FERC states.

Among the conditions outlined are for Rover to double the number of environmental inspectors working on the project, and to “immediately” obtain third party contractor proposals to analyse all drilling activity on the Tuscarawas River.

Potentially unlocking a new wave of supply from the US’ largest gas producing region, the Marcellus Formation, the Rover Pipeline Project has attracted the attention of gas markets. According to Bloomberg, the Marcellus is displacing traditional gas supplies out of the Gulf Coast, helping put the US on track to become a net gas exporter by 2018.

When completed, the Rover pipeline would transfer gas from the Marcellus formation, located in the Appalachian Basin in the east of North America, to the Mid-West. The initial stage of the pipeline is scheduled to come online in July, with the full start up scheduled for November. Energy Transfer claims their scheduling has not been affected by the FERC limitation on drilling.

Nevertheless, according to the Bloomberg article, gas futures jumped to a 14 week high following the issuing of the federal order restricting construction on the pipeline.

 

This article was written by Daryl Worthington, editor of Fluid Handling International