Expert: Shale Plays Cause Shift in Pipeline Industry

By Tuttle, D Ray | THE JOURNAL RECORD, April 8, 2013 | Go to article overview

Expert: Shale Plays Cause Shift in Pipeline Industry


Tuttle, D Ray, THE JOURNAL RECORD


The growth of shale gas plays in the United States is creating a ripple effect across the pipeline industry, said Berne L. Mosley, president of Energy Projects Consulting LLC.

Mosley addressed about 75 people during the University of Tulsa's Energy Law Conference on Monday. The conference, titled "Energy Issues in the Second Obama Administration," was held at the Price and Turpen Courtroom in TU's John Rogers Hall. The event was co- sponsored by the TU College of Law and the energy law firm Mogel & Sweet.

Shale gas is natural gas found in shale plays, or underground rock formations that contain significant amounts of gas. The traditional flows from the southwestern U.S. to the Northeast is changing, Mosley said.

"Marcellus and Utica shale plays are closer to the traditional market areas, displacing the Gulf of Mexico and Southwest production," Mosley said.

It means cheaper transportation and quicker access, Mosley said.

Natural gas discoveries have become common. Pipelines are getting approval from regulatory authorities in the U.S. to reverse pipeline flow to export gas to Canada.

"With low load factors in the central parts of the nationwide pipeline system, some pipelines are responding with rate and tariff reductions," Mosley said.

Pipelines are basing their transportation rates on so-called postage stamp rates to offset lost or diminished transportation services on their systems - owed to shale gas developments, Mosley said.

"Essentially, rates can be designed on numerous different scenarios like the U.S. postage system, where you pay the same postage whether you mail a letter next door to Hawaii," Mosley said. "So, if you have a postage stamp rate and you are shipping gas for the length of the system or last few miles, you pay the same rate."

The trend is likely to continue, Mosley said.

Mark E. Haedicke, a partner in the law firm of Mogel and Sweet, talked about the Dodd-Frank law. He said it is causing drastic changes in the Over The Counter energy markets. The bill, titled the "Dodd-Frank Wall Street Reform and Consumer Protection Act," was a federal statute passed in July 2010 that grew government oversight of trading in complex financial instruments such as derivatives. The Dodd-Frank bill was named after U.S. Sen. Christopher J. Dodd and U.S. Rep. Barney Frank. It restricts the types of proprietary trading activities that financial institutions will be allowed to practice.

"I have been in the profession since 1980 and have never seen anything like Dodd-Frank from a regulatory point-of-view," Haedicke said. "It is thousands of pages long. …

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