McPhersonSentinel - McPherson, KS
  • Keystone pipeline delivers oil to NCRA

  • Years after it was proposed, the Keystone XL pipeline continues to cause controversy locally and across the nation.

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  • Years after it was proposed, the Keystone XL pipeline continues to cause controversy locally and across the nation.
    The Canadian company that wants to build the pipeline, TransCanada, reapplied Friday to start construction on the contested section of pipeline. Its latest plan would skirt environmentally-sensitive lands in Nebraska, which TransCanada hopes will appease President Obama, who vetoed the previous plan in January.
    Although the neither existing nor proposed sections of Keystone pipeline pass through McPherson County, the fate of the XL expansion exerts reasonable influence on the local economy.
    Following the lines
    The majority of TransCanada’s Keystone pipeline network already is installed and in use. After stretching across Alberta, Saskatchewan and Manitoba provinces in Canada, sections of the pipeline dip south into North and South Dakota and Nebraska, with branches reaching into Missouri and Illinois to the east and Kansas and Oklahoma to the south. Regionally, portions of the pipeline run through both Dickinson and Marion counties and have been in use since February 2011.
    The Kansas section of the pipeline carries oil directly to Cushing, Okla., a major oil hub and storage facility that feeds crude oil to refineries throughout the southern and central parts of the country.
    First proposed in 2008, the contentious Keystone XL pipeline would reduce the distance between the pipeline’s head, near Hardisty, Alberta, to a central distribution point in Steele City, Neb, increasing the volume of oil passing into the U.S. through TransCanada lines. A second piece of the XL section would stretch from Cushing to Houston, providing a new outlet for oil to reach the gulf coast.
    If constructed, the Keystone XL pipeline would utilize existing infrastructure to move oil through Kansas, and while slight modifications might be made to move a higher volume of oil south from the Steele City hub, TransCanada has not asked to build any additional pipelines through Kansas.
    Locally refined
    Oil transported through the Keystone pipeline is pumped to Steele City, Neb, where it is routed either east to processing facilities in Illinois or south through Kansas to Cushing.
    From Cushing, some of the oil — currently about 20,000 barrels each day — is sent back north, first through the Osage and later through the Jayhawk pipelines, eventually arriving at the National Cooperative Refinery Association.
    As such, Canadian oil already is flowing into McPherson and likely will continue to do so, whether Keystone XL is built or not.
    “We’re basically already connected to Keystone,” said Galen Menard, vice president of supply and trading at NCRA. “The XL piece will have no bearing on how much we run at McPherson.”
    Regardless of the fate of Keystone XL, Menard said NCRA dramatically will increase its intake of Canadian oil during the next several years. Menard said the refinery plans to advance from processing 20,000 barrels of Canadian oil to as much as 50,000 each day.
    Page 2 of 2 - But Canadian heavy oil — the type extracted from tar sands at the head of TransCanada’s pipelines — have more impurities than many other kinds of oil. Before NCRA can process high volumes of the relatively dirty Canadian oil, it must first bring online a new coker that it plans to begin building next year. That project, which will cost an estimated $555 million, is scheduled be completed in August 2015.
    Once finished, the coker will allow NCRA to refine Canadian heavy oil into fuel oils and coke, a hardened substance that can be hauled away and used as a component in the creation of various metals.
    A growing market
    The proposed Keystone XL pipeline is a symptom of a rapidly changing global economy — one in which the demands of the rest of the world finally match up to those of the United States.
    “If you look in the past,” Menard said, “the oil could have come from all parts of the world, but in recent years, and especially in the next six months, all those pipelines from the Gulf Coast are basically being reversed and run in the other direction.”
    The reversal marks a major change. The Seaway pipeline that connects Cushing to Houston — which is partially owned by Enterprise Products Partners, a company with holdings in Conway — has historically brought in oil from foreign countries like Venezuela, Iraq and Ecuador into Oklahoma to be distributed across the country. On May 17, that pipeline will be reversed, sending crude oil from Canada and the United States to refineries on the Gulf Coast and, ultimately, overseas.
    “U.S. domestic production is on the increase,” Menard said, “so there’s a glut now in Cushing.”
    That glut has been stifling gasoline prices in Kansas and the central United States. An abundance of oil in the area surrounding Cushing has lowered demand, pulling prices down locally.
    By reversing pipelines connected to the coast, oil prices likely will normalize and pull gasoline prices in the Great Plains upward.
    Exactly how far prices will bound is unclear. Menard said there is no telling before reversals begin happening, but some estimates show that taking steps to relieve pressure in Cushing — perhaps through the southern Keystone XL extension or through reversals — could create significant gasoline price spikes in Kansas and the region. Market analyst Philip Verleger has suggested these spikes could be more than .25 cents a gallon locally.
    Decision time
    The true implications of the Keystone XL pipeline and other developments in the industry cannot be known until changes are made. Obama said earlier this year he wanted to fast-track the southern-most portion of the project, but has not yet commented on TransCanada’s Friday announcement.
    Comments on TransCanada’s website state the company expects a decision to be made in early 2013, with Keystone XL in use by 2015.
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