Energy producers look to rail as drilling outpaces pipelines

Jun 12, 2012 | 06:06 PM | Michael Cowden

Tags  Kinder Morgan, Gordon Heppell, Watco, Allan Roach, AEP River Operations, Terrence Moore, pipeline, Michael Cowden

TORONTO — As drilling activity ramps up outside of traditional energy-producing states, producers are considering rail and other alternatives to pipelines.

That’s because in some cases, oil and natural gas are being pumped out of the ground more quickly than pipelines can be built to transport it, according to a panel of executives from energy and logistics companies.

Kinder Morgan Inc., for one, wants to expand its pipeline infrastructure to boost transmission capacity from hot shale regions like the Bakken Shale in North Dakota. But the cost would run into the billions of dollars for a capacity expansion, Gordon Heppell, the company’s director of business development, said.

To justify such big investments, Kinder Morgan would need commitments from pipeline users or refineries in the 10- to 15-year range, he said. But potential pipeline users often balk at such long-term commitments, even given current strong oil prices and enthusiasm about oil shales.....

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