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By James Hamilton on Mar 4, 2012 with 8 responses

Keystone Pipeline Moving Forward

In a development that should not have come as a surprise to Econbrowser readers, TransCanada announced on Monday that it would proceed with the portion of the controversial Keystone pipeline expansion that would connect Cushing, Oklahoma to the Gulf of Mexico. Because this part of the project does not cross the U.S.-Canadian border, it does not require approval from the U.S. State Department.

Existing Keystone Pipeline and proposed Keystone Gulf Coast Expansion Project.

The Wall Street Journal reports that the 435-mile segment could carry 700,000 barrels/day from Cushing down to the coast, and the company expects that segment of the pipeline to be in service by mid to late 2013. This would be in addition to the 400,000 barrels/day that Enbridge is hoping to send from Cushing to the coast through the Seaway Pipeline by the first quarter of next year, with 150,000 of that already flowing by the middle of this year. Even so, the Wall Street Journal reports:

Even the Gulf Coast leg and Enbridge’s project may not be enough to relieve the bottleneck at Cushing. Alex Pourbaix, president of TransCanada’s oil-pipelines division, said he believes at least two million barrels a day of oil will need to flow between Cushing and the Gulf Coast over the next decade to relieve the bottleneck there.

Confirmation of that assessment comes from the observation that, despite the news, the price of a January 2014 Brent futures contract is still selling at a $7 premium to Jan 2014 West Texas Intermediate.

TransCanada separately reported that it is also reapplying for permission to construct the rest of the original Keystone expansion, and the company seems hopeful that the objections to the original proposal have been resolved:

TransCanada will continue to work collaboratively with the State of Nebraska on determining an alternative route for Keystone XL that avoids the Sandhills. TransCanada has been working on assessing the routing in Nebraska since November 2011, following the State Department’s notice to delay a decision on a Presidential Permit until an adjusted route that avoids the Sandhills was developed….

Reapplying for the Keystone XL permit is supported by words used in President Obama’s statement January 18, 2012 when he said the denial of the permit was not based on the merits of the pipeline but rather on an imposed 60-day legislative timeline to make a decision on the project.

Perhaps more importantly, the White House appears to be on the same page:

TransCanada gave the State Department advance notice of its intention to submit a new application for the cross-border segment of the Keystone XL pipeline, from Canada to Steele City, Nebraska, once a route through Nebraska has been identified. House Republicans forced a rejection of the company’s earlier application in January, by not allowing sufficient time for important review or even the identification of a complete pipeline route. But as we made clear, the President’s decision in January in no way prejudged future applications. We will ensure any project receives the important assessment it deserves, and will base a decision to provide a permit on the completion of that review.

But even if the Canada-to-Steele-City segment continues to be blocked by regulatory delay, the Cushing-to-Texas segment alone can provide an important boost to the U.S. economy. The company expects the $2.3 billion project to provide employment for 4,000 people, and there are significant gains from constructing an efficient way to transport oil to where it is most economically valuable. Again quoting from the White House press release:

The President welcomes today’s news that TransCanada plans to build a pipeline to bring crude oil from Cushing, Oklahoma, to the Gulf of Mexico. As the President made clear in January, we support the company’s interest in proceeding with this project, which will help address the bottleneck of oil in Cushing that has resulted in large part from increased domestic oil production, currently at an eight year high. Moving oil from the Midwest to the world-class, state-of-the-art refineries on the Gulf Coast will modernize our infrastructure, create jobs, and encourage American energy production.

Who am I to argue with the President?

This article originally appeared on Econbrowser.

  1. By mac on March 4, 2012 at 7:07 pm

    Thank you James for giving us your opinion on how we might profit from the coming oil crisis. 

    Of course, outfits like BP and Shell see no crisis.

    Thank you for alerting us to that.   Oh. my…….Oh my…… Oh my……..

  2. By mac on March 4, 2012 at 7:28 pm


    You are not a roustabout on an oil rig,  You are not “creating wealth”   You are simply transferring the hard work and wealth created by others to  yourself.






  3. By Samuel R. Avro on March 4, 2012 at 7:47 pm

    Mac, besides for the fact that you’re not making much sense, you better start learning to be civil on here. Criticism is OK, but there’s no reason one can’t do it with civility. I’m serious.

  4. By mac on March 4, 2012 at 8:17 pm



    I have not lost a single dime in any stock market or mutual fund investment since since the mid 90′s.  I have made money on all of them.

    I thought about investing in Exxon-Mobile about 7 or 8 years ago.  Nice dividends and stock appreciation.  I missed that one.  Nevertheless,  investing in Exxon, while it might make you money in the short term, will not answer some of the larger energy questions.

  5. By mac on March 4, 2012 at 9:14 pm

    Sorry Sam.

    I just thought that some of the oil wealth was due to people who are actually involved in digging it out of the ground.   Apparently, this somehow touched a sore spot.

    • By Samuel R. Avro on March 4, 2012 at 10:35 pm

      The only “sore spot” you touched is the fact that your comment to James makes absolutely no sense. Where in this article do you see him “transferring the hard work and wealth created by others” to himself? Seriously, it almost seems like your imagination runs wild on many of your comments.

  6. By ben on March 5, 2012 at 9:12 am

    Thanks Dr. Hamilton for doing what my friends up in the woods of Northern New England advise: “Keep your eye on the donut and not on the hole.”    In explaining the likelihood that an insrumental segment of the Keystone Pipeline’s expansion will keep moving throught the permitting and construction process and pointing out the nuance that the president has identified in keeping the federal government’s options open on this project, you are showing us a production donut.  It may not be the favorite variety for some of the readers, but it will likely contribute to the energy security objectives that most of us share.   I dare say that many who raise strong–even damning– objections to the production of such “dirty” sources of energy are willing to acknowledge the benefits that they do provide to the American economy and the interests of consumers notwithstanding the ambitions of most to usher in a new era of sustainable growth that need not compromise the well-being of our planet or the health and safety of our children.

    Again, thanks for reporting on what is rather than what could be for want of say a little bit morep pixie dust.








  7. By Muchos Huevos on March 5, 2012 at 11:24 am

    Do it now!!! I would rather send my money to Canada than America haters, including Chavez’s CITGO and Petro Express. I only buy gas from Conoco, Sunoco, Sinclair, BP/Phillips, Hess, Maverick, Flying J, Valero, Murphy Oil USA sold at Wal-Mart  gas is from South Arkansas and fully USA owned and produced.

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