The aging pipeline infrastructure in the United States could present a boon for line pipe manufacturers as replacements are needed, spurred by greater enforcement through regulators such as the U.S. Transportation Departments Pipeline and Hazardous Materials Safety Administration (PHMSA), although analysts are questioning the urgency of the replacement drive.
We fully believe that the regulator is going to wade in and start demanding testing in order to allow pipelines to run at maximum allowable operating pressure, Piotr Galitzine, chairman of Houston-based TMK Ipsco, said at AMMs annual Steel Pipe and Tube Conference in Houston.
This could force older pipelines to run at below capacity and lead to replacements that likely will be made of higher grades of pipe. We cannot imagine that the regulator would get into this dramatic makeover of the market and not at the same time demand a higher-grade pipe. I dont think the regulator is going to come back and say its OK if you change it all for new (X)42. I think its going to be X70 and higher, Galitzine said.
Analysts, however, questioned how intense the replacement drive really is.
I havent seen that play out yet in any place except Canada, where theyre replacing some lines, Kurt Minnich, manager of Tulsa, Okla.-based Pipe Logix LLC, told AMM. Minnich added, however, that if replacement started happening in a big way, it could be pretty significant for the U.S. since we have a lot of old pipelines.
Paul Vivian, principal of St. Louis-based Preston Publishing Co., agreed that replacements are needed, but also said that enforcement was not as acute as it could or should be.
When you read about the age of some of these pipelines that were designed to last for 30 or 40 years its a tribute to the product that it lasted much longer than anticipated, but we seem to be under the mistaken impression that the pipe is going to last forever. We just dont seem to be motivated to replace, he told AMM, adding that a uniform replacement drive coordinated by the federal government would be a significant boon for the industry. We have a lot of line pipe thats pretty old and it would generate a nice multiplier, but that catalyst doesnt appear to be happening. There has to be some kind of uniform action coming down the line.
PHMSAs statistics indicate an increase in enforcement action over the past two years. The agency opened 276 cases in 2012 and 266 last year, far higher than the average number of cases opened toward the end of the last decade.
PHMSA granted $46 million to states late last year to carry out pipeline inspections, citing an increased need. These funds enable us to triple the number of inspectors that we have out in the field enforcing regulations, and a strong local presence is vital to effectively monitor pipelines and help protect the public from pipeline incidents, PHMSA administrator Cynthia Quarterman said in a statement at the time.
Recent events could spur replacements, at least on a city level. The explosion of an aging gas pipeline in Harlem, N.Y., in March killed eight people and sparked a debate about the pipeline infrastructure in the city. There are about 6,300 miles of pipe transporting natural gas under New York, according to the New York Times, lines that might have to be replaced if safety concerns mount. In 2012, Con Edison and National Grid, the other distributor of natural gas in the city, reported 9,906 leaks in their combined systems, according to the Times.
The blast also led to a renewed focus on replacing pipeline infrastructure in other cities, with Philadelphia Gas Works looking to boost its replacement program by 40 percent, according to National Public Radio.
A recent report also found that uninspected 10-inch pipe was the cause of a refinery blast in Utah in 2009 that damaged 100 homes, according to the Salt Lake Tribune. The U.S. Chemical Safety Board said the failed pipe had no record of ever being inspected for corrosion as it thinned over the years.
Washington Gas Light Co., a state utility company, recently said it received the green light to implement a $110-million, 40-year accelerated pipe replacement plan. The (plan) is designed to reduce risk and enhance safety by replacing aging, corroded or leaking pipe in the natural gas distribution system, the utility said in a statement announcing the approval.
If interstate pipelines see a similar drive, 60 percent of the countrys gas and liquid pipelines are at least 50 years old and might need to be replaced, according to one mill executive. Domestic mills are particularly likely to benefit from a replacement drive. A lot of these pipeline companies have a Buy America philosophy, he said.
A second line pipe mill executive, however, said he had heard talk of looming replacements before. Ive been hearing that its going to be a good thing, but historically theres a lot more patching than replacement. (The pipeline companies) are kicking and screaming against replacing old pipelines because of the cost, he said, but acknowledged that U.S. pipelines are not in the best shape. Id hate to have one of those old pipelines running beneath my house.
He agreed that stepped-up enforcement would be a significant boon to the industry. If that does takes place, you could see a pretty dramatic change, he said.