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Crude Crossing

Planned Cook Inlet subsea pipeline could eliminate risky oil tanker runs

SOURCE: Michael Baker Jr., Inc., “Trans—Foreland Pipeline Project Description and Figures”

One of Alaska’s biggest planned construction projects in 2014 will be largely out of sight. That’s because it’ll be on the bottom of turbulent Cook Inlet.

The project is called the Trans-Foreland Pipeline. It’s a subsea pipeline to carry crude oil produced on the remote west side of the inlet to Tesoro’s Nikiski refinery on the east side.

It’s an ambitious and costly project. The main backer, Tesoro, has told regulators the cost of the cross-inlet pipeline, including materials and installation, totals $50 million.

As the magazine went to press, Tesoro was pursuing a number of government authorizations for building the pipeline. One of these was a right of way from the Department of Natural Resources to lay the pipe across state submerged lands.

 

Why Build It?

Several factors play into the decision to build the pipeline. They can be summed up with three words: safety, reliability, and cost.

Pipeline backers believe a subsea pipeline would be a safer means of moving oil across the inlet. The job currently is done with tankers that fill up at the Drift River oil terminal on the west side and then sail to the refinery on the east.

Oil tankers always carry the risk of catastrophic spills, and this concern is heightened in Cook Inlet because of the prevalence of ice in wintertime. The drifting ice, coupled with the inlet’s extreme tides, can be extremely powerful. It has even been known to rip ships from their moorings.

The Trans-Foreland Pipeline could also make oil transportation across the inlet more reliable.

Westside crude currently feeds through an onshore pipeline system to the Drift River terminal, which includes a tank farm and the Christy Lee offshore platform where ships dock to take on oil.

The terminal has worked since it was built in the 1960s, but a big threat looms nearby: Mount Redoubt, an active volcano.

In March 2009, Redoubt erupted, sending mud flows known as lahars down the Drift River. Protective berms built around the terminal saved it from a potentially disastrous inundation. But the event forced a terminal shutdown, idling west inlet oil production for months.

To restore oil shipments, operators resorted to piping crude from producers directly onto tankers, bypassing the tank farm. The Drift River terminal owner, Hilcorp, has since resumed partial use of the tank farm after beefing up flood fortifications.

Going forward, proponents see the new subsea pipeline as a more reliable oil transportation option than the tanker terminal.

Finally, pipeline supporters see potential for lower oil transportation costs. This could be true especially if efforts to increase west inlet oil production pan out.

“This new pipeline would be a major achievement and would lower the transportation expenses and eliminate the risk of business interruptions due to the ice condition or volcanic activity,” David Hall, chief executive of Cook Inlet Energy, said during an investor conference call in December.

Cook Inlet Energy is a small but aggressive westside oil producer. Its properties include Osprey, the southernmost offshore oil and gas production platform in the inlet. The Anchorage-based company pioneered the subsea pipeline concept and brought it to Tesoro.

“After completing a feasibility study in 2011, we entered into an agreement with Tesoro where Tesoro would agree to fund all the development work for the line plus pay project management fees in exchange for an option to build the pipeline,” Hall said.

 

Technical Details

The steel pipeline, eight inches in diameter, would stretch a total of twenty-nine miles, with the underwater segment running twenty-two miles.

It wouldn’t cut straight across the inlet. Rather, beginning on the west side at Cook Inlet Energy’s Kustatan oil production facility, the line would loop south and then north again, coming ashore below Nikiski on the east side. From there the line would run, buried, along the Kenai Spur Highway to the Tesoro refinery tank farm.

The U-shaped configuration will “minimize tidal stresses on the pipeline and avoid water depths greater than two hundred feet, the maximum depth for safe operation by marine divers,” a project description said.

The pipeline generally will link two land masses on either side of Cook Inlet, the West Foreland and the East Foreland: thus the name Trans-Foreland Pipeline.

In the application for the state right of way, Tesoro said the pipeline will have a transportation capacity of 62,600 barrels of oil per day—a volume far above westside production today—and a design life of thirty years.

The pipeline will have a number of safety features, including a leak detection system. It will accommodate smart pigs, devices that slide through a pipeline to test for problems such as corrosion. An epoxy coating on the pipeline, plus cathodic protection, will provide further defense against corrosion. The pipeline wall will be half an inch thick.

The pipeline will be welded on the deck of a lay barge and then placed on the seafloor. The line will be anchored as necessary, or possibly buried where conditions allow subsea trenching.

Tesoro in January was expected to apply to the Regulatory Commission of Alaska for a certificate of public convenience and necessity.

The company indicated it wanted to commence pipeline operations by October of this year.

The project is expected to generate about 130 construction jobs, and about a dozen field and office workers will be required to operate and maintain the pipeline, Tesoro has said.

Care will be taken during construction to avoid disruption to commercial salmon fishermen, endangered Cook Inlet beluga whales, and fiberoptic cables, Jim Wentworth, capital projects manager for San Antonio-based Tesoro, told the commission in December.

Mixed Sentiment

The Trans-Foreland Pipeline has generated both enthusiasm and skepticism.

The Cook Inlet Regional Citizens Advisory Council, a congressionally sanctioned organization that monitors shipping activity in the inlet, has said it is “very supportive” of the project.

Environmental groups such as Cook Inletkeeper also have signaled support for a subsea pipeline over tankers for moving oil across the inlet.

But Hilcorp, the dominant oil producer in Cook Inlet, has yet to endorse the new pipeline. The Houston-based, privately held company operates most of the inlet’s offshore production platforms.

“There are far too many commercial and regulatory uncertainties surrounding the Trans-Foreland Pipeline project at this time,” said Hilcorp spokeswoman Lori Nelson by email January 22.

Among Hilcorp’s questions:

  • What hazards would the pipeline face?
  • Is the designated route the safest option?
  • Would the pipeline reduce the likelihood of an interruption in oil transportation from the west side?
  • Would it cost less to move a barrel of oil from production to the Tesoro refinery through the pipeline?
  • Would the pipeline affect Hilcorp’s ability to sell product into a competitive market?
  • What would happen to Hilcorp oil and the pipeline if the refinery closed?

 

More details about the tariff, or rate per barrel to move crude on the new pipeline, could emerge once Tesoro files with the regulatory commission for its certificate.

In its right-of-way application, submitted in late October, Tesoro said it believed it would need to attract shipping commitments of a fairly modest four thousand barrels per day to make the tariff competitive with the existing oil transportation system.

Journalist Wesley Loy writes from Anchorage.

This first appeared in the March 2014 print edition of Alaska Business Monthly magazine.

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