Dean Barber

Archive for September, 2016|Monthly archive page

No News is Good News for Pipelines

In Corporate Site Selection and Economic Development on September 25, 2016 at 10:53 am

Energy pipelines have been in the news lately and all for the wrong reasons if you are in the oil and gas business.

Colonial Pipeline Company’s main gasoline line was returned to service last week after its biggest leak in nearly two decades squeezed supply and led to long lines and increased prices at the pump in states across the Southeast.

The damaged section of the 1.3 million-barrel-a-day line that connects the refining hub of the Gulf Coast to the East Coast had been shut down for more than 12 days.

Also, Native American tribes took their fight to Washington last week to stop development of a $3.7 billion oil pipeline. U.S. Rep. Raul Grijalva, the senior Democrat on the House of Representatives Natural Resources Committee, called on the U.S. Army Corp of Engineers “to withdraw the existing permits for Dakota Access pipeline.”

Thousands of activists, including the Standing Rock Sioux of North Dakota, have been protesting the 1,100-mile project being developed by Energy Transfer Partners LP, arguing it poses an environmental risk to the tribe’s water supply and would violate sacred sites.

If completed, the underground pipeline would traverse both federally-managed and private lands in North Dakota, South Dakota, Iowa and Illinois. It is the largest Native American protest in decades.

Unseen and unknown by most, petroleum pipelines have a long history of making some people mad. Read this and, who knows, you just might get mad, too.

The U.S. Has the Most

There are about 2.5 million miles of oil, gas, and refined products pipelines crisscrossing the country, about 50 times the total length of the U.S. interstate highway system.

The best data, in 2014, gives a total of slightly less than 3.5 million km of pipeline in 120 countries of the world. The U.S. had 65 percent, Russia had 8 percent, and Canada had 3 percent. In short, 75 percent of all pipeline was in three countries, according to the CIA’s World FactBook.

In this country, energy pipeline comes in three types: gathering systems, crude oil pipeline systems, and refined products pipeline systems. Gathering pipeline systems gather crude oil from production wells.

Crude oil pipeline systems transport crude oil from the gathering systems to refineries. Crude oil systems can be tens to hundreds of miles in length and cross state and continental borders.

Refined products pipeline systems, which includes the Colonial Pipeline that failed in Alabama, transport refined products such as gasoline, kerosene and many industrial feedstock petrochemicals from refineries to the end user or to storage and distribution terminals.

Refined products pipelines can extend tens to thousands of miles and cross state and continental borders. The Colonial Pipeline runs from Houston to Linden, New Jersey, traversing 11 states. Colonial’s 5,500-mile system transports more than 100 million gallons per day of refined products, or approximately 50 percent of the fuel consumed on the East Coast.

To find out if a transmission pipeline is located near you, you can visit the National Pipeline Mapping System (NPMS) and search by your county or zip code.

Early Opponents

Soon after the first oil wells were drilled in Pennsylvania in the mid 19th century, the economic advantages to moving oil via pipeline was recognized. And early on, there were opponents to the construction of pipelines.

Principally, the aggrieved parties were angry because they were being cut out of making money in the burgeoning petroleum industry.

When the earliest oil wells were drilled in Pennsylvania, teamsters came by the thousands, hauling the oil in barrels to various destinations by wagons. A colorful and profane bunch, the teamsters not only carried the oil, but they were mostly independent business owners, their wagon seats serving as their offices.

An estimated 300 to 400 teamsters would abandon the oil region each time a new pipeline opened, many stayed on. Gone were the days of carrying oil by barrels, but the teamsters adapted, hauling pipe to the pipelines’ right-of-ways then being built.

Railroads, which initially controlled the shipment of oil and dictated prices to oil producers and shippers, also felt threatened by early oil pipelines, even if they started to build their own.

The railroads often refused to allow privately owned pipelines to cross their railroad rights-of-ways. Later, laws would come into being granting the power of eminent domain to common carrier pipelines. This led to the establishment of oil trunk lines connecting the wellhead areas to refineries, resulting in predictable, consistent and cost-effective delivery.

The point is, pipelines have a long history of irking people, for various reasons. They have just changed some over time.

Vulnerability Revealed

Now I will admit that I was surprised to learn how vulnerable we were to   the brief disruption to a single pipe, albeit it was a main artery that carried 1.3 million barrels per day of fuel.

The Colonial Pipeline breach south of Birmingham, Ala., in Shelby County, sure opened my eyes.

U.S. benchmark gasoline futures spiked nearly as much as 10 percent on the supply disruption, and prices at the pump jumped in Alabama, Georgia, and Tennessee, where states of emergency were declared in the wake of the fuel line’s rupture.

In Georgia, for example, gasoline rose by more than 30 cents a gallon in the wake of the leak, according to motorist advocacy group AAA.

Colonial currently supplies about a third of the 3.2 million bpd of gasoline consumed on the East Coast, according to the U.S. Energy Department. Colonial’s 5,500-mile system transports more than 100 million gallons per day of refined products, primarily gasoline, diesel and jet fuel, or approximately 50 percent of the fuel consumed on the East Coast.

“When you’re very dependent upon one source and that source has problems, it can lend itself to supply problems,” John Mays, director of special studies for Turner Mason & Co, a Dallas-based consultancy, told Reuters.

The East Coast has become increasingly dependent upon the Colonial pipeline as oil companies have shuttered refineries in New Jersey, Pennsylvania, Virginia, St. Croix and Aruba, cutting off more than  800,000 barrels per day of refining capacity that previously served the region.

Colonial has acknowledged that hundreds of thousands of gallons of gasoline poured out of the broken line since the leak was first discovered on Sept. 9. It’s fixed now, but serves as a reminder of just how dependent we are on this single pipeline.

Not sure I like that.

Work Halted in North Dakota

Completion of the Dakota Access oil pipeline was viewed by most industry analysts as a done deal. But the Obama administration threw a curve ball, offering a respite to the variety of groups that opposed it.

Work has halted on a pivotal section of the 1,172-mile pipeline in North Dakota as the Department of Justice, the Department of the Army and the Department of the Interior are all now questioning how the Army Corps of Engineers approved most of the project in July.

Critics, who say the pipeline could pollute drinking water from the Missouri River and destroy land that is culturally important to Native Americans, applauded the move. They contend the pipeline should have been vetted through a more rigorous environmental impact statement.

Many also object to the energy company acquiring land from family farmers in Iowa via eminent domain.

The controversy, which resulted in thousands of people demonstrating and dozens arrested near the Standing Rock Sioux’s reservation, stems from Dallas-based Energy Transfer Partners’ announced 2014 plan to carry 570,000 barrels of crude per day from the Bakken oil fields in North Dakota to existing infrastructure in Illinois.

Apart from a section near an encampment of hundreds of Native American protesters, the pipeline is about 60 percent complete, according to a memo from Energy Transfer Partners CEO Kelcy Warren to employees this month.

Warren wrote that multiple archaeological studies “found no sacred items along the route.” Environmental worries are likewise overhyped too, he wrote, as other pipelines crisscross the region. There are 25 crude oil and natural gas pipelines in North Dakota, according to the state’s pipeline authority.

President Barack Obama is set to meet with Native American tribal leaders this coming week at the White House. How this will all play out is anybody’s guess. But three federal agencies piling on the Corp and a White House meeting may indicate the opponents are getting traction.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at or at 972-890-3733. Mr. Barber is available as a keynote speaker.


A Tough Row to Hoe: Economic Growth in Rural America

In Corporate Site Selection and Economic Development on September 18, 2016 at 1:52 pm

A report released last week by the Census Bureau showing that Americans, rich, poor and middle class, saw their incomes rise last year was greeted gleefully by economists.

But in rural America, where I have spent much of my time of late doing economic development consulting work, the reaction will be more of a shrug. The government may say the economy is getting better, but many of the people in non-metropolitan counties aren’t feeling it.

Still, the report was eye opening. For the first time since 2007, the median U.S. household saw a healthy bump in income last year — up 5.2 percent to $56,500 from $53,700 in 2014. Much of that gain came from the drop in the unemployment rate that created more paychecks for American workers.

No doubt the economy has improved. Unemployment is at 4.9 percent, down from its October 2009 peak of 10 percent. Home foreclosures have eased dramatically, with 97 percent of major metropolitan areas logging rates below their Great Recession peaks in the first quarter of 2016, according to

By the end of 2015, net private business investment had recovered to pre-recession levels, according to the St. Louis Federal Reserve Bank.

A crucial takeaway from the Census report last week was that economic gains were not isolated to the rich. Poor Americans, those at the bottom 10th percentile of the income scale, saw the strongest gains, with 7.9 percent growth over the last year.

Yielding Fruit

The latest Census data confirms that the recovery, now in its eighth year, is finally yielding fruit to people other than the very rich. A Gallup poll in August found that 68 percent of workers said they are making more money than they did five years ago.

Correspondingly, the number of people living in poverty dropped by 3.5 million, falling from just under 15 percent in 2014 to 13.5 percent in 2015, the largest drop since 1967. More than 8 million families were in poverty last year, down from 9.5 million in 2014. And the number of children under 18 dropped by 1 million.

On the face of it, this is all very positive news. It would appear that we as a nation have recovered from the Great Recession — albeit far slower than anyone would have liked.

Worth reiterating is the fact that the Census Bureau report showed that income gains were spread across nearly all age groups, household types, regions and racial or ethnic groups.

One Big Exception

But there was one exception. Incomes didn’t rise for households outside metropolitan areas.

And that is where I have seen varying degrees of pessimism firsthand in recent months in Appalachia and in farming communities on the Great Plains. I will not name specific rural communities because that would be unfair.

But the pain is out there, even with full employment.

“There a huge urban-rural divide today in wage growth,” Andrew Chamberlain, chief economist at Glassdoor, a job-listing site that collects salary data, told CNBC. “It’s becoming harder to earn a living wage and have a fulfilling career in rural areas.”

Options are Limited

Advising economic development organizations on making transformation change that would go far in the creation of fulfilling jobs does not come easy in rural communities. The options are often very limited by geography, infrastructure, and the fact that skill sets are limited by little or no vocational training.

What’s more, these are typically places with older populations of a more conservative bent that are more resistant to change. And they have a bleak view of the nation’s economic future prospects.

The American public as a whole is significantly more confident about current economic conditions than about the future. Earlier this month, 26 percent of people surveyed in Gallup’s poll of Americans’ confidence in the economy rated current economic conditions as excellent or good, while 30 percent labeled them poor. Thirty-seven percent of those surveyed said their economic outlook was “getting better” compared with 57 percent who said it was “getting worse.”

I live in Dallas, where the poverty rate has dropped to 5.1 percent from 5.9 percent a year ago. Here the economic gains have been particularly strong for those with college degrees.

But press these same educated urbanites a little bit over cocktails, as I tend to do, and while they may be doing better financially than they were five years ago, they still see the recovery as fragile and not long lasting.

If I talked to their counterparts in rural, non-metro area communities, they might very well look at me cockeyed and say, “What recovery?”

Rural versus Metro Areas

And this might sound cockeyed, but most rural Americans actually reside within metropolitan areas. Nearly 54 percent of people living in areas classified by the Census Bureau as rural also live in a county that is part of one of the nation’s 383 metropolitan areas.

A metro area, or “metropolitan statistical area,” to use the formal term, has a core urban area of 50,000 or more people, and “consists of one or more counties and includes the counties containing the core urban area, as well as any adjacent counties that have a high degree of social and economic integration (as measured by commuting to work) with the urban core.”

The U.S. Department of Agriculture defines rural America simply as counties that aren’t in metropolitan areas.

About 32 million residents of rural communities are part of wider labor markets that cluster around one or more cities, and most of them live within a reasonable commuting distance of those cities. Of those 32 million, about half live within the confines of one of the nation’s 100 largest metropolitan areas, many of which have sprawled into the surrounding countryside.

The Great Emptying Out

Per capita income of people living in non-metro counties has been about 75-80 percent of metro dwellers since the early 1990s. No significant difference there. But what does look significant is the loss of population. In short, we appear to be seeing an emptying out of rural America.

The population in U.S. non-metropolitan counties stood at 46.2 million in July 2015—14 percent of U.S. residents spread across 72 percent of the nation’s land area.

According to the USDA, 2010-2014 is the first period of overall population decline on record for rural America as a whole. While there were 230,000 more births than deaths in non-metro counties over that period, 346,000 more people moved out than moved in.

Those who choose to remain in rural counties are more likely to be 65 or older, and receiving Social Security disability checks, than people in metro areas.

The painful truth is that economic growth has been largely limited to metro areas, where successive generations gather to pursue work. There has and there will continue to be an exodus of young people leaving rural areas to chase jobs in the cities.

That does not mean that we give up on rural America as a lost cause. It does mean that we come up with strategies to prevent it from becoming an economic desert. There are target industries, particularly related to valued-added products associated with agriculture that makes sense. But it will be a harder row to hoe.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at or at 972-890-3733. Mr. Barber is available as a keynote speaker.