By Bryan Livingston
Managing Director and CEO
Bipartisan legislation to modernize the Pipeline Safety Act to enhance pipeline safety has advanced out of a House committee amid a dynamic period for the U.S. oil & gas industry.
Reauthorization of the 2011 act is expected to improve safety and economic security amid what could eventually become a growing network of oil & gas pipelines.
In late April, the U.S. House Energy and Commerce Committee passed HR 5050, the pipeline safety reauthorization bill. The Senate approved a similar bill in March. The act has yet to be taken up by the full House or Senate and little has been said about its chances for passage.
Act would improve transparency of pipeline regulations
The bipartisan legislation includes spending authorizations for the Pipeline and Hazardous Materials Safety Administration (PHMSA), which regulates the nation’s pipelines. Besides improving safety, the legislation is designed to increase transparency and accountability, modernize the act, and complete overdue regulations.
Efforts to extract natural gas from U.S. shale rock formations via “fracking” has ramped up in the past decade as technology has improved and costs have declined, leading to renewed vigor in the domestic oil & gas industry, although the price downturn which began in late 2014 has tamped activity.
Canada has also seen increased production in recent years in its Alberta oil sands region, which contains some of the largest oil reserves in the world, and it also needs pipelines to transport the oil it is extracting, in some cases, into the United States.
Overcoming pipeline opposition
With increased North American production comes a demand for new pipelines, but opposition to pipelines has been a major issue for the industry.
The infamous Keystone pipeline battle seems to have promoted opposition to every new pipeline proposed. Most recently, Canadian energy company Enbridge has said it will decide soon whether to go forward with a Northern Gateway pipeline that has faced opposition. The new pipeline would carry oil sands crude from Alberta to a deepwater port in British Columbia. From there, the crude would be exported to markets in Asia.
Enbridge also has delayed until 2019 pipelines that would go from Canada into Wisconsin. While low oil prices played a part in the delay, the Wisconsin pipelines have also faced opposition.
Act has widespread support
CAC has a strong presence in the oil & gas midstream, where common sense practices like increased frequency of non-destructive testing are already being adopted by the majority of pipeline operators. In our view, pipelines remain the safest method of transportation for oil & gas, and the Pipeline Safety Act reauthorization is vital to helping to allay concerns over safety, while providing a vehicle for the oil & gas industry to move forward constructively with much-needed infrastructure.
The reauthorization bill has received widespread support from both the Democratic and Republican sides of the aisle, and we are hopeful that it will receive full congressional backing.
Capital Alliance Corporation is a Dallas-based investment banking firm with an extensive international reach and a 40-year history of providing trustworthy advice to private company shareholders who want to sell their businesses. Our team has deep operational and M&A experience across many sectors, including energy.