Cindy Gubler / 15 September, 2014

 

By Nick Snow, Oil & Gas Journal

Utah’s crude oil transportation options-which include Tesoro Refining & Marketing Co. LLC’s proposed Uinta Express Pipeline-typify the broader US challenge in several ways.

Production has climbed dramatically in Duchesne and Uintah counties, and producers are searching for ways to transport crude to refiners. Four Salt Lake-area refineries are ideal destinations for much of it, but no existing pipeline capacity is available. While surface transportation-specifically, tanker trucks-is providing some immediate relief, government and industry leaders are seeking better long-term solutions.

“There’s a need to address a modern matrix of transportation alternatives,” said Laura Nelson, who directs Utah’s Energy Development Office. “Our crude oil resources are abundant in specific areas. We have to be able to transport those commodities to places where they’re refined and used. We need to look at the full slate of transportation options. It could increase not just the amount of production, but also its value.”

In a Feb. 8, 2013, presentation to a state legislature Infrastructure and General Government Appropriations subcommittee, Utah Department of Transportation Program Development Director Cory Pope said the Uinta basin produces about 70% of the state’s oil and gas. The industry is directly or indirectly responsible for nearly half of the area’s employment, Pope noted.

Crude produced there is higher quality and comes from shallower wells than many parts of the US, Pope said, adding that yearly production could reach 20 million bbl by 2022 if the necessary transportation is available. If it isn’t, he said, more than $29 billion of production could be lost by 2028.

Range of choices

“It certainly would seem to be the case that production would support another pipeline [in addition to Chevron Corp.’s from Rangely, Colo., which was built in the late 1940s], and there’s capacity in the basin for even more production,” Nelson told OGJ. “But it would probably have to include trucking and rail to provide access to additional markets as well as to the Salt Lake-area refineries.”

Some crude already leaves the state. California Energy Commission statistics show imports by rail from Utah rose to 82,115 bbl in June from 21,490 bbl in January. Noting that UDOT has been involved in a broader-based Uinta basin transportation study, Nelson said, “I believe a location around Price [in nearby Carbon County] would be a natural destination for a rail line.”

But most of the Uinta basin’s crude production now moves out by truck, Utah Petroleum Association Pres. Lee Peacock said. “That creates air emissions, safety, and other issues,” he told OGJ. “That’s actually going to increase because of expansions at the Salt Lake-area refineries. There’s clearly an appetite for an alternative plan, and this pipeline would go a long way toward that goal.”

Tesoro proposed constructing a 135-mile, 12-in. carbon steel pipeline and ancillary facilities with 60,000 b/d of capacity originating near the town of Duchesne. Its preferred route would parallel Chevron’s line northwest across 9,000 ft elevation Wolf Creek Pass through Uinta National Forest and across private land to the Kamas Valley. It would then head north across the Weber River to Morgan County, where it would turn west paralleling the Kern River gas pipeline over the Wasatch Mountains into Davis County before turning south toward the refineries.

About 14 miles would be on US Forest Service acreage, the US Department of Agriculture agency said in a Jan. 29 Federal Register notice of its intent to prepare a draft environmental impact statement that it anticipates completing in mid-2015. The line would include an origin station covering about 20 acres and 4 intermediate stations covering 5 acres each, all on private property. There also would be 7 main line block valves locations and other minor above-ground appurtenances, also on private land.

Tesoro said the project, which would be a minimum 3 ft below the surface and operate at pressures of 1,200-1,400 psi, would take 250 tanker trucks off highways between the Uinta basin and Salt Lake, but not eliminate that option completely. It hopes the line will be built and operating as early as 2016.

Portfolio of projects

Tesoro’s Uinta Express system is not the only transportation project the firm is developing. The San Antonio independent refiner-marketer also is working on a 360,000-b/d Port of Vancouver, Wash., rail-to-ship terminal and the Trans-Foreland pipeline in Alaska, Chief Executive Officer Gregory J. Goff told investment analysts in a July 31 conference call.

“We have a portfolio of logistics projects as well as a pretty extensive amount of work going on in North Dakota to build out our pipeline and storage system up there,” he said. “One of the things you just heard us mention is that we intend to spend $200 million in [Tesoro Logistics LP] this year to build out that system. So there’s a number of things that we have going on.”

The company already has a substantial Utah presence with its 58,000-b/d Salt Lake City refinery, a products pipeline to eastern Washington and jet fuel pipeline to Salt Lake International Airport it bought from Chevron in 2013, and a trucking operation in Roosevelt. “We have been in this market for a long time and hope to be here for a lot longer,” said Michael Gebhardt, Tesoro’s vice-president, strategy and business development.

The three other refineries are Chevron’s 45,000-b/d plant and Big West Oil’s 35,000-b/d facility in North Salt Lake, and Holly-Frontier’s refinery in Woods Cross, which is due to expand to 45,000 b/d from 31,000 b/d in a $300 million first phase, and ultimately to 60,000 b/d. Tesoro applied for a permit in 2013 to increase its refinery’s capacity to 62,000 b/d and reduce its sulfur dioxide emissions 1% by yearend. Chevron completed a project at midyear that it said made its plant more flexible but did not increase its capacity.

The Uinta basin crude is cleaner to process than other crude grades because it’s lower in sulfur, which reduces SO2 emissions further, and in metals, Tesoro said. It’s harder to move by pipeline because its high-paraffin content can make it solidify at lower temperatures and block the system. “To accommodate its waxy properties, the crude oil will be heated at the origin station and the pipeline will be insulated,” said Gebhardt. “We are looking at using a closed cell polyurethane insulation. Enserca Engineering is heading up the engineering design work.”

Specific technology

“We are planning to use skin affect heat trace technology,” Gebhardt said. “This technology places heating elements along the length of the pipeline that can be turned on remotely as needed. To induce the current along the pipeline, we are still determining if we will build special stations for them or have them incorporated within the pump stations.”

Tesoro has three complementary “work streams” under way for the project that it said feed off each other. The first is providing information necessary for the Forest Service to complete its EIS. The second is working with stakeholders along the proposed route, and a third is engineering the project’s final design. Gebhardt said stakeholder engagement has always been a major priority.

“I am also part of the team responsible for this along with key members of our corporate communications staff and a local communications agency with experience engaging stakeholders in energy and infrastructure projects,” he said. “Many other key Tesoro subject matter experts and I have engaged stakeholders during briefings and meetings, and were at all four of the open houses which were held. Our job is to provide good information, listen, answer questions, and find solutions when necessary.”

One property owner who came away from an early public meeting uneasy told OGJ he feels somewhat better now. “After an ugly start where I thought their public hearing process was so badly handled and I wrote the Forest Service to complain, [Tesoro] restarted and rebooted it,” said Tom Clyde, whose family has owned land along the upper Provo River since the 1950s. “From the alignment through my property, it looks as if they’re shifting out of the river bottoms, which a lot of people were concerned about. But it’s not clear sailing for them yet.”

When he told the company of his concern that the pipeline would go through a spring that provides drinking water for several homes in the neighborhood, “they had someone out within 2 days to visit the site,” Clyde said. “He came, looked at the situation, and returned with an alternative reasonably quickly‚Ķ. Bottom-line, they’ve made a good-faith effort in responding to legitimate community and statewide concerns. I think Tesoro finally got the message that people were concerned and tried to respond.”

Meetings with communities and stakeholders along the project’s proposed route have been valuable, Gebhardt said. “For example, in Summit County, we have been meeting with county staff and officials and area water purveyors to identify areas of concern, possible route variations, and construction considerations,” he said. “Although we are still in the midst of these discussions, things are looking promising. In this area, we are now looking at a possible change we are calling the East Rockport Variation.”

Article credit: Oil & Gas Journal