If you’ve ever read the news you’ve surely seen the controversy surrounding our industrial circulatory system: pipelines. When was the first pipeline built? Are pipelines safe? Is there a better transportation method than pipelines? Find out in this episode Hydrocarbon History!
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Alrighty everyone, welcome back to another episode of Hydrocarbon History. As always, you’ll wanna go ahead and frac that subscribe button if you are watching on YouTube, or follow us on whatever platform you are listening to. While it is definitely fine to listen, the YouTube channel is getting much much better. But enough self-promo, we have lots of content to get into today.
Today’s topic is one that has garnered plenty of attention, especially at the start of this year. Cue the flashback. Back in 2005, a small company called TransCanada Corporation proposed a project known as the Keystone pipeline project. It went well, and connected parts of Canada with Midwestern states, and by 2016, completed one of the last expansions that extended it fully into Texas. About that time, the TransCanada Corporation (who is soon to be known as TC Energy) is mulling over another expansion idea known as Phase 4, the Keystone XL. You see, this new expansion would serve as a more direct route from Canada to Montana, all the way to Steele City in Nebraska where an existing hub of operations for the pipeline existed. The resulting expansion would result in a much larger amount of hydrocarbons to be transported, but some definitely viewed it as redundant. The project was highly controversial through its lifespan and stretched across three presidential campaigns. In February of 2013, 35,000-50,000 people gathered in DC to hold one of the largest climate rallies in US history. Still, congress ignored the rally and in November of 2014, the House of Representatives voted on the issue. The project had officially made it through. January 2015, Obama vetoes the project. January 2017, Trump takes action to permit the operation of the pipeline. January 2021, Biden revokes the permit on his first day in office, and the project dies… for now at least. I walked you through a brief history of one of the most recent pipeline fiascos, and you can see just how strongly people feel about it. We only looked at the political conflicts, because if we revisited the entire history of disagreement around the project, we would be here for hours simply listing all of the stakeholders affected. People have many different concerns over the pipeline. Is it environmentally friendly? Is it safe? Will it create jobs? Will people be paid royalties for allowing the pipeline on their land? No matter who you are, it is likely there are some uncertainties surrounding pipelines, so this episode of Hydrocarbon History will be focused on the implementation and subsequent development of pipelines in the United States.
We will pick up where we left off in the last episode of Hydrocarbon History which you can find on our channel, but if you have forgotten, Colonel Edwin Drake had just closed out the 1850s by pioneering a crude method of oil drilling. The following decade, everyone was producing oil, and subsequently transporting it. Since we don’t have tanker trucks, most people were transporting their oil out of the rural Pennsylvania area by horse or flat boat so that they could load it onto a train. They were using old wooden barrels to transport their oil because it was about the only storage container large enough and common enough to do so. Got an old fish barrel? Fill it with oil! Got an old whisky barrel? Fill it with oil! The barrels were initially intended to hold 42 gallons of oil, but people started building them to hold 44 so that 2 gallons could leak in transit, and the purchaser of the oil would still have their expected 42 gallons. Environmental regulations were a bit more relaxed back then. Eventually, so much oil was exiting the Oil Creek area that the road was full of “teamsters” taking oil to the train terminal. These teamsters had cornered the market on oil deliveries and would charge as much as $4 a barrel for delivery. This wasn’t too bad a deal when oil was $12 a barrel in 1864, but the lack of pipelines meant pricing was incredibly sensitive to supply and demand. $4 a barrel is a bit unreasonable when oil is less than 10 cents a barrel and the barrel itself is $3.
One man named Samuel Van Syckel grew tired of being taken advantage of by the teamsters. After the discovery of the Pithole oilfield, teamsters pounced on the opportunity to make more money. The oilfield was 5 miles out from the train station in the middle of the overgrown wilderness with absolutely no roads. Unfortunately for the teamsters, Van Syckel refused to pay their ridiculous rates and decided that it could be done with pipelines. In 1865, he laid out 5 miles of 2 inch wrought iron pipe in 15 foot joints from the station to the field. According to a historian, the finished pipeline was tested at a pressure of 900 barrels per square inch, and partially buried. From there, 3 steam pumps were looped in allowing the transfer of about 81 barrels per hour. Eventually, Van Syckel’s team was able to get to 2500 barrels. His next biggest problem was hiring enough bodyguards to fight off the teamsters attempting to sabotage his wells in order to protect their profitable monopoly. Soon, more and more people began to imitate Van Syckel’s successful project. By 1871, there were a few midstream companies that owned around 500 miles of pipelines connecting producing fields to storage and transportation centers. Samuel Van Syckel was one of the dozens to attempt to build a pipeline, but his successful method spread like wildfire until it caught the attention of America’s greatest oil baron: John D. Rockefeller.
You see, Rockefeller came from very humble beginnings in the oil industry. He caught his first big break when he secured a deal with the king of transportation, Cornelius Vanderbilt. Vanderbilt would allow Rockefeller to transport his oil by train at a discounted price as long as Rockefeller could fill all of his cars with oil. They agreed, but there was one big problem… Rockefeller didn’t have the production capacity to fill much more than half of Vanderbilt’s trains. He worked hard to acquire more properties, refineries, and wells so that his business grew into what we know as Standard oil. Once his influence reached more than just the northwest, he made use of other railroads run by Vanderbilt’s competitors in order to put them against each other to fight for his business. Rockefeller had grown to the point of near monopolizing the oil industry, and railroads were not pleased with how Rockefeller had used them. They responded by pulling all of their rebates and discounts. Rockefeller controls a large portion of the country’s oil and refined products, but it will now cost him much more to transport everything by railroad. His solution? Make his own network of pipelines. He already dominated the upstream and downstream sectors, why not venture into midstream? Rockefeller decided to assume a huge financial risk and hired crews to lay 1.5 miles of pipe everyday, establishing the groundwork of his pipeline stretching through Ohio, Pennsylvania, and West Virginia. Remember the companies that only a couple years prior laid claim to 500 miles of pipeline? Rockefeller dwarfed them with this new 4,000 mile network connecting pipelines directly to factories. The railroad was now totally unnecessary in most crude transportation situations. Unfortunately, crude was responsible for 40% of railroad capacity, and removing the crude triggered a bubble and subsequent burst which was the groundwork for the Panic of 1873, or America’s first depression. From there, Rockefeller continues to buy up any oil related business he can afford, which is pretty much each and every one of them. He now controls 90% of oil in the US, and the railroads are fuming. Still, Rockefeller did rely on a few railroads to transport oil to Pittsburg. In order to prevent Rockefeller from taking everything, railroad mogul Tom Scott decides to build his own pipeline as a safety precaution. If he can transport crude himself, he can protect himself from Rockefeller’s savage business tactics. Rockefeller does not appreciate this one bit, so he closes all refineries on Scott’s railroad and stops shipping oil on his trains altogether. Scott’s hand is forced, and he has to lay off thousands of railroad workers. Those workers soon begin to riot and burn Tom Scott’s trainyard. The following morning, 39 buildings and 1200 trains have been destroyed. This leaves Rockefeller controlling 98% of the world’s kerosene and oil and worth more than $230 billion in today’s money.
From there the American oil industry continues to evolve (eventually preventing monopolies like that of Rockefeller’s Standard Oil), and by 1920 the API estimates there are 40,000 miles of pipeline in the country alive and racing with oil. This pipeline network connected lots of the US to oil and gas that would otherwise have been regionally inaccessible. It was instrumental in war efforts, and established the groundwork for fracking today. The rest of the oil producing world is definitely envious of the incredibly superior and efficient American pipeline network.
Today, the US pipeline network contains about 3 million miles of mainline and other pipelines that link natural gas production areas and storage facilities with consumers. In 2019, the natural gas transportation network serviced 77 million customers by delivering 28.3 trillion cubic feet of gas. It may sound surprising that there is that large of a transportation network because you likely haven’t even seen it. Here is a map from the EIA showing just how expansive both the interstate and intrastate systems are. You drive over these things frequently, yet can’t even tell. Groups like the center for biological diversity are quick to point out that between 1986 to 2013 pipelines have spilled an average of 76,000 barrels of hydrocarbons per year. According to the EIA, refineries alone received 4.4 billion barrels of just crude. If you compare that to the 76,000 barrels of spilled hydrocarbons, it is 0.0017% of the total. That’s just crude oil that was received by refineries, or in other words, a fraction of what is transported annually. Now, I’m not arguing that 76,000 barrels is insignificant. We should be good stewards of our environment, but when compared to the sheer magnitude of everything transported, it is statistically insignificant. Other arguments arise from the method of transportation, but even then pipelines are usually not the worst of the worst. There’s a Forbes article from 2018 that breaks down the hierarchy very well. What is the best transportation method when considering human death and property destruction? Truck is worse than train, which is worse than pipeline, which is worse than boat. Well, why don’t we just use more boats to ship oil around the coast? Let’s consider the best transportation method for minimizing environmental impact? Boat is worse than pipeline, which is worse than truck, which is worse than rail, mainly because aquatic environments are so easily impacted. What if perhaps we look at it from the amount of oil spilled per billion-ton-miles? Truck is worse than pipeline, which is worse than rail, which is worse than boat. We could go all day redefining criteria, and the positions would continue to shift. Thankfully, pipeline technology continues to improve. 100% of natural gas in the United States is moved by pipeline, so that is why you and I can turn on the heat in the winter or use gas stoves should we have the luxury to afford them.
Pipelines have been easily vilified for over a century, and it is unlikely that the trend will stop anytime soon. If we consider just how much hydrocarbons pipelines are moving on a day-to-day basis, the few accidents here and there are truly minimal. As technology continues to improve, we also get better methods of coping with leak detection. Sure people are making use of control rooms to monitor pressure and volume, but did you know the industry also makes use of satellites and drones to detect leaks even faster than they ever have? Our everyday life demands the use of hydrocarbons, and we have developed a system that makes sure it is delivered wherever it is demanded, and in case we encounter a surplus, we can quickly mobilize it to the coasts where it can be shipped to other countries to service their energy needs. To think that it was all a result of a man who was too cheap to pay a horse and buggy to cart his oil is baffling.
But that is all the time we have got! I hope you learned something from our history of pipeline use. This episode has already run long, so I gotta stop, but If you want to learn more please check in the description for links taking you directly to where I sourced my information. If you enjoyed the video, please comment about what aspects of the oil and gas industry’s history you would like us to break down next. Otherwise, you can find plenty of other content, news, podcasts, and periodicals on our YouTube channel or www.rarepetro.com remember to frac that subscribe button and while you are at it, drill through that like button if you learned something. Thanks again for tuning in, and until we see you next time, take care, everybody!