Transportation Deployment Casebook/2018/Natural Gas Pipeline in the US

Qualitative Analysis

Data

Data for this analysis were the natural gas pipeline mileage found from the U.S Department of Transportation Bureau of Transportation Statistics in tabulated Natural Gas Pipeline Profile. Early data were found online. Raw data were converted into kilometers (km), and tabulated in Table 1 below.

Table 1. Raw Data Used for Analysis

Year	Meliage	(km)
1872	5	8.04672
1879	110	177.02784
1920	115000	185074.56
1930	225000	362102.4
1960	630900	1015335.13
1965	767500	1235171.52
1970	913300	1469813.88
1975	979300	1576030.58
1980	1051800	1692708.02
1985	1110785	1787635.18
1990	1270295	2044341.64
1991	1217451	1959297.46
1992	1216081	1957092.66
1993	1276303.4	2054011.22
1994	1335530	2149327.19
1995	1331788.2	2143305.35
1996	1290163.19	2076316.39
1997	1331606.12	2143012.32
1998	1372638.76	2209047.95
1999	1364281	2195597.44
2000	1377320	2216581.68
2001	1412876	2273803.51
2002	1462213.49	2353204.5
2003	1432045.52	2304653.87
2004	1470290.23	2366202.76
2005	1489242.32	2396703.19
2006	1509306.74	2428993.75
2007	1524438.69	2453346.25
2008	1533876.04	2468534.2
2009	1545475.58	2487201.86
2010	1554290.38	2501387.89
2011	1563510.83	2516226.78
2012	1567309.38	2522339.95
2013	1575538.5	2535583.42
2014	1585638.44	2551837.71
2015	1595674.4	2567989.03
2016	1604165.43	2581654.01

Model

A three-parameter logistic function was used for quantitative analysis.

$S(t)=K/(1+\exp(-b\times (t-t_{0}))$

where S(t) is the status measure,  (e.g. Passenger-km traveled, t is time (usually in years), $t_{0}$ is the inflection time (year in which 1/2 K is achieved, calculated using Intercept/(-b)), K is saturation status level and b is a coefficient.  

K was found when value of R square is closest to 1, as shown in table below.

K	2609000	2609100	2609200	2609300	2609400	2609500	2609600	2609700	2609800	2609900	2610000
Intercept	-183.91821	-183.89933	-183.88048	-183.86167	-183.84289	-183.82416	-183.80545	-183.78679	-183.76816	-183.74956	-183.73101
b	0.09308879	0.09307901	0.09306926	0.09305952	0.0930498	0.0930401	0.09303042	0.09302075	0.09301111	0.09300148	0.09299187
RSQ	0.9289918	0.92899203	0.92899215	0.92899217	0.92899208	0.92899188	0.92899158	0.92899118	0.92899068	0.92899007	0.92898936

Regression analysis was then conducted using Data Analysis tool in Microsoft Excel. Result is shown below.

	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	-183.86167	8.64218688	-21.274901	1.3238E-21	-201.40624	-166.3171	-201.40624	-166.3171
b	0.09305952	0.00434884	21.3986769	1.0959E-21	0.08423089	0.10188814	0.08423089	0.10188814

$t_{0}$ obtained in this analysis is year 1975.

S-Curve

S-curve for nature gas pipeline transport in the US

S-curve of the model was plotted and shown as above. The blue line indicates the actual length of pipeline network, and the orange line is the predicted S-curve for pipeline transport.

It can be observed from the graph that the birthing, growth, and mature phases are clearly indicated. Birthing phase is from 1870s to 1920s. From 1920s to 1990s pipeline transport experienced a rapid growth, and from 1990s mature stage began. Hence currently pipeline transport in the U.S. is in mature stage. It can also be observed that the predicted length is significantly lower than the actual curve in birthing and growth stage. This could be the result of not having enough data from birthing and growth phase of the life cycle. With more data from mature stage, the curves are more smooth, and provided a better prediction of the life cycle.

Pipeline Transport

Technological Characteristics of Pipelines

Pipeline is widely used to for transportation for materials and goods. It is an integration of fluids mechanics, GIS technology, sophisticated coating for protection, and environmental engineering.

Advantages of Pipelines

Pipelines are suitable to transport goods over long distances. Advantages of pipeline transport can be concluded as follows:

1.    Transport capacity

Pipelines are widely used for its significant capacity. Data has shown that in Canada, daily amount of pipeline transport is approximately 2.5 million barrels, which is equivalent to over one million of rail cars or 14,000 trains .

2.    Small amount of engineering required

Construction of pipeline requires far less earthworks than constructing railways. Moreover, since most pipelines are buried underground, they do not occupy farmland.

3.    Low energy consumption

Pipelines are considered as the most efficient way of transporting oil and natural gas over land. They require less fuel to operate, hence reduces pollution and greenhouse gases emission.

4.    High safety level & environmentally friendly

Statistical data has shown that more than 99.999% of petroleum product can be transported to its destination safely. Moreover, most incidents do not harm the public or the environment, and data in 2015 has shown that 71% of incidents were contained entirely within an operator’s facility .

5.    Cost effectiveness

Over long distances, it has been proved that pipelines are usually the only feasible way of transporting significant volumes of energy resources.

Main Market of Pipelines

Goods transported by pipelines can be categorized into four groups, which is tabulated below.

Main Market of Pipelines

Transportation Industry	Heating Resource	Refiners & Manufactures	Agriculture Industry
Gasoline Diesel Jet fuel Kerosene	Home heating oil Natural gas Propane	Crude oil (for refiners) Raw natural gas liquids Propylene (for headlights, foam insulation, hoses and more)	Anhydrous ammonia (for fertilizer)

Pipelines are mainly used to transport oil and natural gas. Prior to the economic crisis in 2008, the market size for oil and natural gas has seen a significant growth [5]. By 2016, over 1.6 million miles of natural gas pipelines has been built for distribution, transmission and gathering purpose. Other usage of pipelines including transporting coal, water, and chemicals such as ammonia and hydrogen. District heating can be accomplished through pipelines.

Prior to Pipelines

Transportation Mode Prior to Pipelines

Natural gas industry began in the 1820’s in the U.S. Before pipelines, it was not feasible to transport natural gas over long distance. Local workers produced synthetic, manufactured gas from goal or oil as fuel . Later on trains and trucks were the major mode used for transporting energy resources such as oil and nature gas prior to pipelines. There are some limitations associated to theses transportation modes. First of all, these old transportation modes are expensive and ineffective, especially in long-distance transportation. The maximum load of trucks and trains are limited, therefore the maximum profit that can be obtained from each delivery is limited as well. Since natural gas has very low density, it is more convenient to store and transport natural gas in liquid state, which substantially increased the cost in transporting. Secondly, tanks used to contain the energy resources are exposed in air for trucks and trains. This is a potential environmental threat because if there is a leakage, the goods will be directly flow to the surrounding environment.

Evolving of Transportation Market and Incentive of New Possibilities

Transportation market evolved from manual to more mechanical, and the low efficiency and high cost are the incentives of developing new transportation modes. The development of technology also allows the invention of new transportation mode. Consequently, pipeline transport was born.

Invention of Pipeline Transport

Invention of Pipelines

Invention of pipelines can be dated back to as early as the Roman times when those masters of engineering used canals and rolled lead piping to fed water from rivers and lakes to the network of towns, cities and garrisons . Modern pipeline development in the relates closely to the usage of oil and natural gas. These two fuels have been known since ancient times when Chinese reportedly used natural gas for evaporating water to produce salt. Since 1760 oil and gas lamps were generally installed on the streets in the U.S. In 1816, Rembrandt Peal organized the first gas company in Baltimore. The widely use of natural gas and oil enhanced the problem of transporting a significant amount of fuels to ensure supply. Idea of pipes was adopted as an alternative for trucks and trains transporting energy resources .

Technological Expertise Used in Pipelines

Multidisciplinary technologies were developed prior to the invention of pipelines, and these technologies were continuously improved to fit the developing market niche. In fluids mechanics, Darcy’s law is published in 1855 and Reynolds number was introduced in 1883, which allows a thorough understanding of fluids behavior in a closed pipe. Bessemer process was developed for mass-producing steel in 1856 . Development in welding techniques since 1897 also promote growth of pipelines because it allows larger and stronger pipes to be built, and in 1925, large dimeter seamless pipe was made. Standardize metering for gas started since 1863 along with the formation of the American Metering Company, allowing accurately measuring and regulating natural gas . Quality assurance test was adopted in 1869 with hydraulic testing of pipes.

Design of pipes did not change its round shape, but material has evolved with the technology development in metallurgy, metal manufacturing and the expertise in other materials. Roman pipes were made of lead, and later on ceramic pipes were used in Medieval times . In the 19^th century, pipes were made of woods, then with the development of welding technology metal pipes were used. The first U.S. cast iron pipe was made at Millvillle, New Jersey in 1834.

Technology for connection of the pipes was evolving as well. In 1863, pipelines were joined by screwed couplings. In 1897, the first 30 inches diameter lap-welded pipe was made. First large diameter seamless pipe was made only two years afterwards.

Early Market Development

The Early Natural Gas Market and the Birth of the Pipeline Industry

After the drilling of the first commercial oil well in 1859 by Colonel Edwin Drake in Titusville, Pennsylvania, pipelines were first used for oil transportation in the U.S. By the 1880s, the commercial potentialities of oil were just beginning to be realized. In two decades, oil production grew to the point where more than 80 percent of the world’s petroleum consumption was supplied by Pennsylvania oil fields. The earliest pipes were short and basic, only to transport oil from drill holes to nearby tanks or refineries. With the rapid increase in demand for useful petroleum products, more wells were drilled and a larger demand for transporting the product from factories to the market was developed. This consequently resulted in the development of better and longer pipeline networks.   

Functional Enhancement

The efficient pipeline system encourages the further development in oil and natural gas exploration, which consequently promoted the local economy.

Functional Discovery

Maintaining and leakage preventing required in pipeline systems encourages the development in chemical engineering and material engineering in terms of developing more durable and environmental friendly materials.

Policy in Different Phases of Pipeline Transport

Birthing Phase

Birthing phase is recognized as the 50-year span from 1870s to 1920s, as shown in the S-curve.

In the birthing phase, construction of pipeline was slow. Starting from 1872, over the next 50 years, no more than long-distance transportation lines were build connecting the suppliers with urban markets . Innovation on gas appliances designed to exploit the fuel’s thermal capabilities was conducted by local distribution companies inspired by the advent of electric light. The idea of having standardized pipe diameter between the suppliers and the market was developed. This policy was borrowed from railways where standardized gauge was required for more convenient commute, and was gradually locked in among operators later on. Moreover, it was regulated that the pipeline operators must file an application for approval before operating, which also became a locked in policy.

Growth Phase

It can be observed from the S-curve that the growth phase is from 1920 to 1990, during which federal government played an important role in the growth phase of pipeline transport. Private companies own pipelines and construct and operate their pipelines according to the rules and regulations established by provincial and federal regulators.

Two important federal regulations are introduced below.

Natural Gas Act, 1938

Policy of gas pipeline in birthing phase relates to regulation of natural gas. In 1938 with the growing importance of natural gas, concern over the heavy concentration of the natural gas industry, and the monopolistic tendencies of interstate pipelines to charge higher than competitive prices due to their market power, the U.S. government began regulating the interstate natural gas industry with passage of the Natural Gas Act . After this act, the interstate transportation market expanded rapidly and steadily, fulfilling the aim and scope of Natural Gas Act.

FERC Order No. 436

In the 1980s, a movement toward deregulation of the natural gas industry began. In 1985, FERC issued Order No. 436, which prevented pipelines from discriminating against transportation requests based on protecting their own merchant services. Hence to provide all customers with the same right to pipeline transportation that industrial fuel-switching customers had enjoyed since the early 1980s.

Policy Environment

During growth phase of pipeline transport, regulations from the U.S. federal government tended to be more strict, with less subsidies.

Mature Phase

It can be observed from the S-curve that the mature phase of pipeline transport is from 1990 onward, during which an important order was issued.

FERC Order No. 636

The central objective of this order emphasizes the central role played by the regulation of interstate pipelines. There are two goals that this order sought to accomplish. The first goal was “to ensure that all shippers have meaningful access to the pipeline transportation grid so that willing buyers and sellers can meet in a competitive, national market to transact the most efficient deals possible,” and the second was “to accomplish the first goal in a way that continues to ensure consumers access to an adequate supply of gas at a reasonable price.” Moreover, Order 636 requires all interstate pipelines to maintain publicly accessible and provide customers with timely information on operations . This order provides consumers with real-time data on gas flows, and system map etc, which allows their better understanding on the consumption of natural gas.