Although part of the latest oil boom is away from inland waterways routes, the rising tide of the domestic industry is lifting many boats.
Whether referring to oil in North Dakota or natural gas in the Marcellus Formation region (covering parts of Maryland, Ohio, New York, Pennsylvania and West Virginia), oil and gas exploration is in the midst of a major upswing in the United States.
These newer regions are getting much of the exploration and extraction attention, but the boosting of the U.S. petroleum and petro-chemical industry has not left traditional regions like Texas and its neighboring states behind.
According to a study commissioned by the American Petroleum Institute (API) and carried out by PricewaterhouseCoopers LLP, the U.S. oil and natural gas industry currently supports 2 million jobs in Texas, equivalent to 24 percent of the state’s economy.
Oil products extracted, refined or blended in that region provide a steady source of traffic along the Gulf Intracoastal Waterway and other waterways in the Gulf Coast region. Oil produced in Oklahoma, Kansas and other states is being shipped by barge from a massive oil storage area near Tulsa, Okla., to refineries along the Gulf Coast, and one recent agreement involves shipping Canadian oil via the Mississippi River during the later stages of its journey.
Meanwhile, to what extent the rich harvest of natural gas products in the Marcellus shale region might make their way down the Ohio and Mississippi Rivers to export markets remains an intriguing question for the inland waterways industry along those rivers.
Closer to Home
The term “energy security” is used by proponents of both alternative energy and traditional oil and gas exploration to describe one of the motives behind the energy boom in the United States.
Whether it’s a fear of future shortages or traditional market forces (tight supply, growing demand and high value), the fundamentals have been in place for several years to prompt increased domestic production of oil, natural gas and other fuel and energy sources.
Breakthroughs in extraction technology and the perceived new price floor for oil and gas have been credited for making that new production a reality in both the Dakotas and the Marcellus region.
As of early 2013, that growth is on a steady pace. Mark Green, a blogger for the Washington, D.C.-based API, in a post written in January, cites the “Short-Term Energy Outlook” released earlier the same week by the U.S. Energy Information Administration (EIA) as containing “two important crude oil statistics.”
The two noteworthy statistics, according to Green:
“U.S. domestic [oil] production is expected to continue growing rapidly over the next two years, from an average of 6.4 million barrels per day (bbl/d) in 2012 to 7.3 million bbl/d in 2013 and 7.9 million bbl/d in 2014. Much of the production growth will come from drilling [in the] Williston (North Dakota and Montana), Western Gulf and Permian basins (Texas).
“U.S. liquid fuel imports, including crude oil, are expected to decline to an average of 6 million bbl/d by 2014. EIA says the net import share will average 32 percent in 2014 ‘because of continued substantial increases in domestic crude oil production.’”
Some of this domestic crude oil ultimately makes its way to a massive oil tank storage area about 50 miles from Tulsa, Okla. In a September 2012 article for Bloomberg BusinessWeek (www.businessweek.com), writer Matthew Philips portrays the work done by tugboat pilots like Barry Meredith.
Meredith starts a typical journey by “guiding his boat and two empty 300-foot barges into the Port of Catoosa, outside Tulsa,” writes Philips, heading toward “seven storage tanks brimming with crude that’s been trucked in from wells in Oklahoma and Kansas.”
The barges towed by Meredith take in 43,000 barrels of oil from the Port of Catoosa storage facility, which itself is much smaller than the “hundreds of storage tanks” located in Cushing, Okla., a small town about 50 miles west of the port. As of September 2012, some 44 million barrels of crude oil were being housed in Cushing, according to the BusinessWeek article.
Meredith’s trip moves on from the Port of Catoosa out the Arkansas River to the Mississippi River. After passing through locks in and around New Orleans, his journey continues to a Hunt Oil blending facility in Mobile, Ala.
Meredith completes the final leg of his journey hauling a newly blended product to a Hunt Oil refinery in Tuscaloosa, Ala., where his cargo is refined into gasoline, diesel fuel, jet fuel and asphalt additive.
The trip made by Meredith and many more like it provide a key transportation link to a major industry in the Southeast. A website write-up by the Texas Comptroller of Public Accounts notes that “a significant portion of the oil and gas industry’s economy refines crude oil into fuels (diesel, home heating oil, gasoline, jet fuel, propane, butane and natural gas) and chemical feedstocks, the essential building blocks of products such as waxes, lubricants, plastics and nylon.”
As of this 2008 write-up, some 30 refineries in the Texas Gulf Coast region were processing up to 2.3 million barrels of crude oil per day, “almost half of the state’s total daily output of 4.7 million barrels.” The Baytown, Texas, ExxonMobil refinery is described by the Comptroller as “the nation’s largest, [accounting for] 24.5 percent of the region’s refinery capacity.”
Although the 2009 downturn may have harmed those numbers, a bounce back is evident looking at the Lone Star State’s 2012 oil production figures.
A news release issued in late December 2012 by the Railroad Commission of Texas, which issues drilling permits, “Texas preliminary October 2012 crude oil production averaged 1.328 million barrels daily, up from the 997,000 barrels daily average of October 2011.”
That daily increase amounted to 41.2 million barrels produced in October 2012, up 33 percent from the 30.9 million barrels produced in October 2011.
Away from the Gulf Coast, oil products extracted in the Dakotas and even from the Canadian tar sands also are being transported via routes that involved the inland waterways.
In December 2012, American Commercial Lines (ACL), Jeffersonville, Ind., announced that it would begin transporting crude oil by barge on the U.S. inland waterways for MEG Energy (U.S.) Inc., a subsidiary of the Canadian oil company MEG Energy Corp.
MEG Energy extracts oil from fields in the province of Alberta. Crude oil will travel initially via pipeline to be transferred to barges “at storage terminals located on the inland waterways for transport by ACL to the Gulf Coast,” according to the two companies.
According to its website, ACL has terminals in Cairo and Lemont, Ill.; Memphis, Tenn.; and St. Louis. The Memphis facility has more than 100,000 barrels of liquid tank storage capacity ACL says it is “dedicating new tank barges built by its manufacturing division, Jeffboat, into service for MEG Energy, as well as towboats newly repowered and refurbished for maximum efficiency and reliability.
The LNG Prospects
While west of the Mississippi River and along the Gulf Coast, oil is contributing to the vitality of the inland shipping sector, the waterways sector in the Northeast has its eye on natural gas.
Natural gas exploration and extraction have ramped up in the Marcellus shale region in part because estimates have changed as to how much natural gas is located there and in part because states have been more willing to let energy companies use extraction methods such as hydraulic fracturing (fracking).
As recently as 2000, the U.S. Geological Survey (USGS) estimated that the Marcellus Formation held just 1.9 trillion cubic feet (TCF) of natural gas that could be considered recoverable. By April 2009, however, the U.S. Department of Energy had revised that figure upward to 262 TCF of what it terms recoverable gas.
Pennsylvania’s natural gas production points to the dramatic growth created by this confluence of circumstances. In 2006, according to the EIA, the Keystone State produced just 175.1 million cubic feet of natural gas. Five years later, in 2001, that figure had grown more than seven-fold to 1.3 billion cubic feet.
Much of the natural gas produced is replacing Appalachian coal as an energy source, which has had a negative impact on the inland waterways sector in the Ohio River Valley region.
Liquefied natural gas (LNG) is shipped around the world by vessel operators, including in trans-oceanic tankers. Denmark’s Maersk line has been working with Argent Marine Cos., Incline Village, Nev., to develop “state-of-the-art articulated tug/barges for the safe and economical distribution of small-scale quantities of LNG.”
On its website, www.maerskline.com, Maersk says the “small-scale LNG AT/B resembles a hybrid version of a gas carrier and container vessel” and can “operate reliably in any weather condition and are capable of service speeds ranging from 11 to 14 knots.”
If some regional economic development plans come to fruition, such vessels could help LNG and liquid chemical products start their export journeys by barge via the inland waterways system. (Read about one such Ohio River shipment on p. 13 of this issue.)
In early 2012, Shell Oil announced that it had selected a site in Monaca, Pa., along the northern portion of the Ohio River, as its preferred site for a $1 billion ethane cracking plant that would create plastic and chemical products from material extracted from the Marcellus and Utica shale regions.
Development officials in Pennsylvania, Ohio and West Virginia have been courting petro-chemical companies to locate such facilities in their states.
The Monaca location, a former steel mill site with Ohio River access, provides hope within the Ohio River Valley inland shipping community that a new contributor to their economic sector may be on the near horizon.
The author is editorial director of Waterways Today and can be contacted at firstname.lastname@example.org.