Well, the NEXT BIG THING is a focus (through a shootin' scope mounted on a 30-06) on pipelines and their behavior with producers. Legislators across our many Red-States gas supplier country will be seeing if producers really do have any right to cry. Personally, I know several independent producers who now look for oil, because, in the words of one Panhandle legend "I got tired of paying two royalties".
In Texas, Pat Nugent, Marty Allday, and Mr. Mann (I find it better to suck up to lawyers to avoid gettin' my you know what sued off) of the Pipeline lobby provide an extremely good defense of pipeline industry practices by expertly playing the You Ain't a Good American if You Support Regulations and Don't You Believe In Free Markets, You Communist? card. I admit to have been suckered by their brilliant little logical steps road that take you from outrage to REALLY seeing why killin' puppies is good for America. Complicating the mix, half the pipeliners are also producers! One of them told me "When I realized that these pipeliners were in effect buying a cost-free royalty over a ton of minerals, and, that instead of a fixed royalty, I could double it by telling my stranded operators that the cost is now 2x, I became a pipeliner. Don't tell my friends, though, I don't wan to to get shot!"
What are producers complaining about? Negotiated line loss instead of real line loss.... up to 10% or more in some cases (doesn't that sound like the definition of "environmental disaster"?). Line tap charges that are sometimes 10 times what they used to be. Egregious pricing ("Best I can do is Henry Hub minus $2.00"). Confidentiality agreements on contracts (you all should do a 'Market search' on Drillinginfo production to see how to get around THAT in Texas, it is my favorite tool, where I can see what everyone is getting paid for their crude and gas....). Transportation costs which are fixed when prices are low, and a percentage of gross when prices are high.
None of these complaints are new. In most cases, pipeline operators are highly ethical operators with a real concern about their longterm feedstock. On the other hand, in many cases, they have a regionally captive market. As a general rule monopolies seem to invite poor behavior. Because pipelines are often local monopolies (a monopsisy, or some such word, is the technical term), is it any wonder that bad behavior has crept in?
Thankfully, its not just us evil oilmen operators who get hurt by this. The State (including in the political vernacular its 'schoolchilruns, puppies, and ol' folks') is hit via lost severance tax, while the group every politician loves, the royalty owner, is hit with lost royalty revenue. Isn't this a great Free Market?
If you think so, let ol' Uncle Openchoke tell you a story:
Imagine you live in a town where there is only one hamburger stand and no other source of food. The town is 30 miles away from the nearest other town. The cost for building a new burger stand is $5 millon because of local ordinances. The burger stand is falling down and filthy dirty, but, since it is the only game in town, the owners could care less. The burger stand owners fight ordinances to clean up their stand by effective lobbying by claiming that the cost to the town in increased fees it would have to pass on to its customers to clean it up would hurt the town economy. Now, the cost of a burger changes depending on what the guy behind the counter thinks he can get from you, but you are forbidden to tell anyone what he charged you. Also, when you buy the burger, you have to agree that the counterman can have a couple of bites before he delivers it to you. By law, the owner gets to recover his investment in the burger stand, which cost the last guy $1 million, so there is a surcharge on the burger. If you have a car, the burger is cheaper than of you walk, because it is easier for the guy in a car to go to the next town. Also, you have to agree that if you get food poisoning or a social disease from eating that burger (remember the couple of bites taken out of it), you will indemnify the burger stand from any responsibility.
Now doesn't thant sound like a free market paradise? Our regulators do. Lets take this one step further...
Although indemnified, 3/4 of the town dies of botulism and a weird virulent strain of spit-transfered (we hope) chlymidia. Revenues for the burger stand are hit hard, because people are dying, and others are not moving in to take their place, because WHO THE HELL WOULD MOVE TO THIS TOWN? Bad business in the long run.
Remember that Pipelines are a Parasitic business. They cannot exist without old and new production. In nature, parasitic-host relationships work well when both sides get value in exchange. When the parasites kill the host, the cycle stops unless the parasites can find another host. Water maybe?
I have realized over time that "Nuanced" situations become simple when deconstructed into their individual components and looked at from an overall systems approach.
What can be done about this? Don't expect help from the RRC. Word from very high up has all three commissioners bought and paid for by Nugent et al. However, a high-level staffer for Matthews insists his man is clean...
Personally, I look forward to a needed technological advance that will allow those of us with gas production to have a cost-effective alternative to pipelines, such as well-head LNG or gas to liquids. Let's see how valuable a bunch of rusty, 50 year old unmaintained pipe REALLY is then.
Maybe someday we will be blessed by regulators that really give a damn about the host that provides so much to oil and gas producing states, but I am not holding MY breath.