It didn’t take long for the oil industry to go to Plan B to get the massive new supplies of Bakken Formation oil in North Dakota and the Canadian Oil Sands to the remaining refineries at the Gulf Coast. It may not overcome the closing of refineries on the US east and west coasts, but the nation will get its own oil and its good neighbour’s supplies refined and off to market. It’s likely a more expensive alternative, but the current administration has made it clear the citizens, the neighbours and the economy are not important in the political calculation.
It’s also a boon to environmentalists. For the ones still thinking about the world we live in and means to a better future keeping the crude oil off the roads and rails is a great relief. While some extremists avidly look for a future freed of carbon based energy stores, the Plan B might come as a shock, but banking one’s dreams on the CO2 idea has always been doomed.
The trigger for the announcement yesterday was Enbridge Inc. and Enterprise Products Partners L.P. have secured pipeline capacity commitments from oil shippers. There hasn’t been any doubt the oil could flow, the documents needed to be signed and put on file to secure the financing and get underway with construction.
The various phases are going to go around both the political barrier of the President and the contentious Nebraska territory over the massive Ogallala Aquifer. Nebraska had its arrangement over the aquifer for the Keystone worked out long ago, a fact the administration and major media simply didn’t care to see. The bad news is the jobs, construction and investment is getting moved 4 –500 miles away. South Dakota, Nebraska and Kansas folks might see this as a betrayal, but the oil needs moved and no one needs crude oil in trucks and rail cars going hundreds of miles.
Enbridge Plan B for Crude Oil to the Gulf Coast.
What is planned is a 512-mile, 30-inch diameter twin (a parallel line) along the route of the Seaway Pipeline from the big hub at Cushing Oklahoma to the Gulf Coast refining centre, adding 450,000 bpd of capacity to the existing system (for a total 850,000 bpd).
Heading to the north via the northeast, Enbridge announced plans to proceed with an expansion of its Flanagan South Project. This pipeline is named as it starts from Flanagan, Illinois and goes to Cushing, Oklahoma. The line will be upsized to a 36-inch diameter line with an initial capacity of 585,000 barrels per day (bpd). The Flanagan South Pipeline project will be constructed along the route of Enbridge’s existing Spearhead Pipeline connecting the Flanagan Terminal, southwest of Chicago, to Enbridge’s Cushing Terminal in Oklahoma.
On to the north the Flanagan Terminal connects to the Enbridge pipeline system reaching up to the Bakken Oil formation field of North Dakota and Canada, on to Edmonton and finally up to Fort McMurray in the centre of the oil sands field.
Enbridge Plan B Route to the Gulf of Mexico.
This means a lot more oil can get to the US refineries at the Gulf Coast by pipeline. The refineries have been getting oil from pipelines to be sure, but the new pipeline capacities can displace some ocean going tanker traffic.
The new oil supplies are going to saturate the Gulf Coast refinery complex. The pipeline firms announced construction of a new 85-mile 30-inch diameter pipeline that will be built from Enterprise’s ECHO crude oil terminal southeast of Houston to the Port Arthur/Beaumont, Texas refining center, which will give shippers access to heavy oil refineries on the Gulf Coast, too.
On the money angle the total estimated cost of the Flanagan South Pipeline project has increased from the original $1.9 billion to $2.8 billion. In addition, Enbridge’s share of the cost of the Seaway Pipeline twin line and extension with TransCanada is expected to be approximately $1.0 billion.
Most of the major work is due to complete before mid-2014. It’s reasonable to expect interference from those special interests so entrancing the administration and stimulus for legal and bureaucratic activists. But the barriers are not at the top of the political power structure. The projects will very likely get done.
The consumer benefit will not be so good as the Keystone XL project could have been, but it’s still a badly needed win. There will not be much reduction in eat and west coast gasoline prices, but there will be crude oil to supply the gasoline. The North American Oil Industry will get to make some money in the world oil market as exporters of finished products.
This is good and very welcome news.
By. Brian Westenhaus