Williams delays gas plant expansion

Sluggish market stalls $200 million project, firm says

gas_plant_expand

Williams has suspended construction on a $200 million addition to its natural gas processing facility outside Parachute, in a move it says has nothing to do with a leak from a pipeline there and everything to do with sluggish local drilling levels.

The Tulsa-based company says the project’s completion is now scheduled for mid-2016. It had begun work on the project last fall and had planned to put it in operation next year.

The company estimates the project would have employed about 80 contract workers during peak construction. The company didn’t plan to increase plant employment due to the expansion.

The delay comes as Williams is in the throes of trying to contain and clean up a leak that it estimates resulted in about 10,000 gallons of natural gas liquids leaking into soil and groundwater from a pressure gauge for a pipeline leaving the plant. The contamination has included benzene reaching nearby Parachute Creek. Tuesday’s top benzene reading in the creek was 4.5 parts per billion, just shy of the state drinking water maximum standard of 5 ppb, although that standard doesn’t apply to the creek.

Williams has suspended use of the 4-inch-diameter pipeline from which the liquids leaked. It has planned to install a 6-inch-diameter natural gas liquids line in the same corridor going beneath Parachute Creek for the plant expansion. Williams previously has indicated that it was possible, but unlikely, that the leak cleanup might force rerouting of the 6-inch line.

But Williams spokesman Tom Droege said Wednesday the expansion delay “has nothing to do with our current clean-up activities related to the hydrocarbon spill.”

Rather, the local drilling slowdown drove the decision, and Williams will be monitoring “market dynamics” to determine whether it might make sense to further delay the project, or speed up construction, he said.

Garfield County’s drilling rig count had fallen to just seven as of the end of last year, compared to a peak of 64 in 2008. Drilling started on fewer than 500 wells in the county last year, well under a third of 2008’s peak activity.

Natural gas prices have begun recovering recently, and local drilling has picked up a bit this year. According to the Community Counts industry-based group, 14 rigs are now operating in western Colorado’s Piceance Basin, with most of those located in Garfield County, and WPX Energy and Encana USA being responsible for most of the drilling.

However, 2013 well starts in the county as of April 26 were 131, putting the county behind pace for equaling last year’s total. So far this year, 309 drilling permits have been approved in the county by the Colorado Oil and Gas Conservation Commission, compared to 1,247 statewide, and 1,046 in the county for all of last year.

Williams’ expansion is to consist of a cryogenic facility that will chill natural gas to remove more ethane, propane, butane and other liquids that can be sold separately from gas. The new facility would allow Williams to remove another 18,000 barrels a day of liquids, compared to 6,000 barrels a day now.

WPX Energy owns the plant property and is its primary customer. WPX is a new company formed when Williams spun off its exploration and production business to focus on gas processing and pipelines.

Asked about any potential impact from the project’s delay, WPX spokeswoman Susan Alvillar said Wednesday that its Piceance gas production “is not constrained by processing at this time.”

Droege said the majority of the planned investment in the expansion was to have consisted of the cost of materials and equipment from outside the state.

“We are looking at ways to optimize what has already been installed or built, to preserve it for the time when we choose to continue construction. At the same time, we will look for ways to repurpose some of the modules that have been developed, potentially sending them to other areas of the country that are expanding,” he said.

Parachute Town Administrator Robert Knight said the construction project would likely have had a noticeable economic benefit for the town. He said he doesn’t doubt that the drilling slowdown was the reason for Williams’ decision, noting that the town has seen a dramatic reduction in sales tax revenue related to energy due to that slowdown.

Droege said Williams continues “to have a very substantial business” in the Piceance Basin that generates tax revenue for Parachute and Garfield County.

Battlement Mesa resident Bob Arrington, a retired engineer who has been closely monitoring the leak situation, said natural gas liquids are going to be removed and profited from at some point in the gas transportation process. He said he’s “kind of resigned” to the idea of pipelines being in the corridor where the leak occurred, but hopes Williams has learned from the leak in terms of maintenance and operations.

“I don’t like the idea of unskilled people handling those (pipelines) and not knowing what they’re dealing with,” he said.

Droege said when Williams finalizes its timeline for the expansion, “we’ll work closely with Garfield County to determine what approval process may be required going forward.”



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