AOPL cites need for more pipelines as Obama visits Cushing

More pipeline capacity will be needed to handle changing US crude oil and refining markets, the Association of Oil Pipe Lines said as US President Barack Obama prepared to visit a major pipeline project at Cushing, Okla.

“The project the president will visit today—the TransCanada Keystone XL Gulf Coast Project—addresses only part of the problem,” AOPL Pres. Andrew J. Black said on Mar. 22. “Expanding crude oil production in North Dakota, Montana, Western Canada, and other US producing regions cannot reach the Gulf Coast in sufficient amounts by pipeline,” he said.

Black added, “Additional pipeline capacity is also needed from these areas into Cushing and beyond. These projects would generate greater consumer benefits by moving more crude oil to Gulf Coast refineries that serve millions of American gasoline consumers.”

Cushing is the main collection and sales point for crude produced from Alberta’s oil sands and North Dakota’s Bakken shale as well as other mid-North American sources, Black observed.

West Texas Intermediate crude delivered to Cushing sells for $18/bbl less than crude represented on international markets by the North Sea Brent price, he said. “Adding southward pipeline capacity from Cushing to the Gulf Coast will give the Gulf Coast refinery hub more crude oil supply options,” Black noted.

Changes in US refining capacity, including closures of some refineries, are creating the need for additional refined product pipeline capacity too, he said, adding that the Federal Trade Commission has noted that product prices in an area tend to fall when pipelines into it are expanded.

‘A bottleneck here’

In his remarks at Cushing, Obama said while the US has added enough pipelines “to encircle the earth, and then some,” there’s still not enough capacity to deliver crude that is being produced, and “there’s a bottleneck right here.”

TransCanada Corp. is trying to move ahead with the southern portion of its proposed Keystone XL system, he continued, and the president said he is directing his administration “to break through the red tape and clear the hurdles” so it can get done.

“You would not know this by what some of the media have reported because another part of this project’s original route passed through an area in Nebraska which raised concerns about drinking water supplies there,” Obama said. His administration needed more time to address those concerns, but Congress wouldn’t allow it so the project’s cross-border permit had to be rejected, he indicated.

“Getting the southern part of this pipeline done is a priority, and we will get it done,” Obama said at Cushing. “And we’ll work hard on resolving questions about the northern part, too.”

More oil and gas associations responded to Obama’s speech by urging him to approve the entire Keystone XL project. “The benefits of this project are just as real today as they were when the State Department finished its comprehensive, 3-year review last fall,” said American Petroleum Institute Executive Vice-Pres. Marty Durbin.

‘A strong signal’

“Approving the full project could help put downward pressure on prices at the pump by sending a strong signal to the markets that more supply is on the way, and it will create tens of thousands of jobs for the safest, most highly trained and productive workforce in the world,” Durbin said on Mar. 22.

Construction of the Keystone segment from Cushing to Gulf Coast refineries is certainly needed, but it will do nothing to move to nearly 1 million b/d of crude south from North Dakota, Montana, and Canada, American Fuel & Petrochemical Manufacturers Pres. Charles T. Drevna said on Mar. 21.

“After more than 3 years of waging war on fossil fuels, it’s long past time for President Obama to declare a cease-fire and approve construction of the entire Keystone XL pipeline to serve American consumers,” he declared. “He doesn’t need to travel across the country for an elaborately staged and costly media event to do this—he can do it immediately with the stroke of a pen.”

Other oil and gas groups criticized the president’s continued calls to increase regulations and repeal federal tax deductions that companies in the industry take. “[He] cannot have it both ways,” American Exploration & Production Council Pres. Bruce Thompson said on Mar. 21. “The president cannot claim credit for independent producers’ success in increasing domestic oil and gas regulation while zealously advocating duplicative and burdensome regulation as well as significantly higher taxes.”

Obama concluded, “I want us to determine our own destiny. I want us to determine our own course. Yes, we’ll continue to drill and try to get more oil where it’s needed. But we’ll also continue to look at alternative and renewable energy sources and becoming more efficient in how we use energy.”

Contact Nick Snow at nicks@pennwell.com.

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