Double E Pipeline Project

From Global Energy Monitor
This article is part of the Global Fossil Infrastructure Tracker, a project of Global Energy Monitor.
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Double E Pipeline Project was a proposed oil pipeline in the United States that was ultimately cancelled.[1] However, in 2018 the project was re-proposed with new owners and a reduced length and capacity, and carrying natural gas instead of oil.[2]

Original Project

Original Project Location

The original pipeline would have originated in Cushing, Oklahoma and terminated in Houston, Texas.

Original Project Details

  • Commodity: Oil[1]
  • Operator: Enterprise GP Holdings, ETP Legacy LP[1]
  • Proposed capacity: 450,000 barrels per day[1]
  • Length: 584 miles[1]
  • Status: Cancelled[1]

Re-proposed Project

Re-proposed Project Location

The re-proposed pipeline will run from Eddy County in Southeastern New Mexico to Waha, Texas.[2]

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Re-proposed Project Details

  • Commodity: gas[2]
  • Operator: Summit Midstream (70%), ExxonMobil (30%)[2]
  • Proposed capacity: 1,350 million standard cubic feet per day (MMscfd)[2] (230,000 barrels per day equivalent)
  • Length: 217.6 kilometers / 135.2 miles[2]
  • Status: Proposed[2]
  • Start Year: 2021[2]
  • Financing: US$80 million equity investment from global alternative asset firm TPG Capital[3]

Original Project Background

Background

Enterprise Products Partners L.P. (a subsidiary of Enterprise GP Holdings) and Energy Transfer Partners, L.P. (a subsidiary of ETP Legacy), formed a 50-50 joint venture and launched a binding open commitment period for available capacity on the pipeline in May 2011.[4] The 584-mile pipeline with a planned capacity of 450,000 barrels per day would have provided transport from the Cushing hub to refineries in the Gulf Coast when placed in-service, which was expected at the time to be the fourth quarter of 2012.[4] The pipeline project would have included converting 230 miles of existing natural gas pipeline owned by Energy Transfer to crude oil service.[4]

In August 2011, Enterprise announced it was withdrawing from the project.[5]

Lawsuit

In 2011, Energy Transfer Partners L.P. filed a lawsuit against Enterprise Products Partners and Enbridge Inc. after the pipeline project was canceled.[6] Energy Transfer Partners alleged that Enterprise claimed the project was not economically viable, broke the terms of the joint venture by releasing a press release without ETP's consent stating that the Double E pipeline was canceled, and then announced a deal with Enbridge to build the Wrangler Pipeline.[6]

In March 2014, Energy Transfer Partners was awarded $319 million in damages by a Texas jury when it determined that it had been wrongfully dropped from the partnership.[5] However, the jury did not find that Enterprise and Enbridge had conspired to remove Energy Transfer Partners from the partnership.[5]

The jury's verdict was described as a "landmark decision for Texas business lawyers and their corporate clients by clarifying what constitutes a business partnership under state law."[5] Significantly, the jury found that Energy Transfer Partners and Enterprise Products Partners had formed a partnership despite the fact that specific preconditions not being satisfied that would have created binding partnership obligations, a situation likened to a common law marriage.[7]

Re-proposed Project Background

In 2018 the project was re-proposed with new owners, Summit Midstream (70%) and ExxonMobil (30%). The re-proposed pipeline will carry natural gas instead of oil, and will only run for 135 miles through New Mexico and Texas, or about a quarter of the length of the original proposal and half the capacity.[2] It will interconnect with Kinder Morgan's Gulf Coast Express Pipeline and Permian Highway Pipeline and Energy Transfer's Trans-Pecos Gas Pipeline, allowing for increased delivery to downstream demand markets of Permian supplies.[8]

The project was submitted to the Federal Energy Regulatory Commission (FERC) in 2018. In March 2020, FERC issued its environmental assessment, finding that the proposed project posed “minimal” environmental impact to the surrounding area. Local and national environmental organizations opposed this finding, citing air quality concerns. WildEarth Guardians, along with the Sierra Club and Center for Biological Diversity issued a motion to intervene in the proceedings on April 23, 2020, aiming to include their concerns in the conversation as to whether the pipeline could be built. A member of WildEarth accused FERC of failing to include an analysis on the climate impact of the combustion of natural gas from the pipeline planned to have a capacity of about 1.3 billion cubic feet per day, while emitting 35.7 million metric tons of carbon dioxide (CO2) per year.[9]

The Western Environmental Law Center (WELC), which submitted comments critical of FERC's environmental assessment on behalf of the Center for Biological Diversity, Sierra Club and WildEarth Guardians, has pointed out other deficiencies in FERC's approach. WELC representatives have pointed out that the pipeline's air quality impacts will have disproportionate impacts on minority communities living within a one mile buffer along the pipeline route. Further, FERC failed to properly consider possible water quality and endangered species concerns likely to arise as the proposed pipeline route involves crossing the Pecos River.[10]

FERC approved the project in October 2020, following which Summit Midstream said it expected to receive a FERC notice to proceed with construction within three months. The company was also aiming to secure third party financing for the majority of the project's development in the same timeframe. FERC Commissioner Richard Glick dissented on the approval due to FERC's failure to acknowledge the project's contribution to climate climate through its greenhouse gas emissions which, he said, had been quantified for the project's construction and operation. According to Commissioner Glick, due to its "refusal to assess" the potential harm of the project’s contribution to climate change, FERC had "misleadingly" stated it would not significantly harm the environment.[11]

In January 2021, FERC gave the go-ahead for general construction of the project to begin in all areas except for about two miles of the planned route. FERC advised the project promoters that work on the remaining route will need to be requested and approved separately.[8]

Financing

In December 2019, the project's majority partner Summit Midstream received equity financing of US$80 million from the global investment firm TPG as initial financing for the pipeline. Summit Midstream intends to raise the bulk of its share of the financing for the project from commercial banks.[3] In September 2020, Summit Midstream struck a finance restructuring deal with a group of creditors which holds two thirds of the company's outstanding US$155.2 million debt on a 2017 loan. The deal enabled Summit Midstream to avoid bankruptcy court.[12]

Articles and resources

References

  1. 1.0 1.1 1.2 1.3 1.4 1.5 Double E Pipeline Project, A Barrel Full, accessed September 2017
  2. 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 Double E Pipeline Double E Pipeline, accessed July 13, 2020
  3. 3.0 3.1 "Summit Midstream inks deal to finance Double E Pipeline", Kallanish Energy, Dec. 31, 2019
  4. 4.0 4.1 4.2 Enterprise and Energy Transfer Begin Open Commitment Period for Cushing to Houston Crude Oil Pipeline Capacity, Energy Transfer, 25 May 2011
  5. 5.0 5.1 5.2 5.3 Jury awards $319 million to Energy Transfer Partners in pipeline dispute, Dallas News, March 2014
  6. 6.0 6.1 ETP sues Enterprise, Enbridge over pipeline deal, Dallas Business Journal, 2011
  7. How Texas oil company won $319 million ‘common law’ partnership verdict, Reuters, 7 Mar. 2014.
  8. 8.0 8.1 Harry Weber, Double E Pipeline gets US FERC nod to begin work on most of 135-mile route, S&P Global, Jan. 13, 2021
  9. Adrian Hedden, Permian Basin natural gas pipeline opposed for air quality concerns, analysis questioned, Current Argus, Apr. 30, 2020
  10. Kendra Chamberlain, "With record methane emissions in Permian Basin, questions linger about necessity of the Double E pipeline", NM Political Report, Jul. 14, 2020
  11. Jeremiah Shelor, "Double E Pipe Given FERC OK to Move Permian Natural Gas", Natural Gas Intelligence, Oct. 20, 2020
  12. "Summit Midstream Partners, LP Announces Transaction Support Agreement with Ad Hoc Group to SMP Holdings' Term Loan and Plan for Settlement of DPPO", Summit Midstream Partners, Sep. 29, 2020

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