News Feature | June 23, 2014

Clash Of The Titans? Water Utilities Vs. Energy Industry

By Sara Jerome
@sarmje

pipeline

A major battle may be percolating between water utilities and the energy industry. 

There appears to be a "growing conflict between some water systems and pipeline companies," the Wall Street Journal recently reported

One example is in Mobile, AL, where the water utility has "spent decades buying 8,000 acres of land to protect drinking water for around 200,000 people," the report said. 

In Mobile, "alarms went off" when Plains All American Pipeline proposed to build a line transporting up to "8 million gallons of crude oil a day through the property," the report said. 

Mobile Area Water And Sewer System went to court over the issue. 

The pipeline opened this year, "but that was after the utility unsuccessfully fought Plains in court and settled the case in February rather than appeal," the report said. 

Water contamination has long been a concern about fracking, but environmentalists and municipalities have traditionally brought the issue to the public eye, rather than water utilities. 

For instance, in Vermont, "opponents of a proposed natural gas pipeline extension through Addison County want to see the project put on hold until concerns over water contamination are addressed," VTDigger reported this month. An environmental group known as Rising Tide Vermont is helping lead the opposition. 

And in Massachusetts, "a proposal to build a new pipeline carrying natural gas is stirring criticism...where more than a dozen towns near the potential path of the 250-mile line have passed resolutions against the project," the Associated Press recently reported

But fracking is no longer a pet issue for environmental activists. Similar concerns are simmering in the water industry. 

"In the past few years, utilities have begun voicing similar worries too—in lawsuits and regulatory comments, with the media and on the Web. Officials say they have been motivated by recent high-profile spills in Arkansas, Michigan, and elsewhere, as well as by the race to build and upgrade pipelines to accommodate the U.S. oil-and-gas boom brought on by hydraulic fracturing," the Wall Street Journal reported. 

Some analysts say fracking poses a threat to water utilities' profitability. 

Fitch Ratings said in a recent report that if water is contaminated by fracking chemicals, the agency "would expect a serious blow to a utility's revenues, with losses concurrent with other growing direct and indirect costs. This would lead to debt service coverage reductions, liquidity strains and possibly the need for additional leverage."

For more oil and gas news, check out Water Online's Produced Water Solution Center.

Image credit: "Orvis State oil well and gas tanks and natural gas flare - Evanson Place - Arnegard North Dakota - 2013-07-04," Tim Evanson © 2013, used under an Attribution 2.0 Generic license: https://creativecommons.org/licenses/by/2.0/

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