May 22 (Bloomberg) -- TransCanada Corp.’s proposed pipeline to carry crude from the oil sands of Canada to the U.S. Gulf Coast would increase gasoline prices, according to a report from an environmental group that opposes the project.
The Keystone XL pipeline would divert crude oil from the U.S. Midwest to refineries along the Gulf Coast geared to producing diesel fuel for export, the Natural Resources Defense Council said in a report today. That will decrease the amount of gasoline produced for U.S. consumers and raise production costs, making the fuel more expensive, according to Anthony Swift, author of the report and an attorney with the environmental group.
President Barack Obama rejected the project in January saying that more environmental study is needed. The NRDC findings contradict a report last year from IHS CERA, which provides business advice and analysis to energy companies, that said the pipeline would help lower fuel prices.
“This requires President Obama and his administration and the Congress to take a real look at the impact of tar sands to the environment and not have to worry about the political issue of gas prices,” Swift said on a conference call with reporters.
The original project, estimated to cost $7.6 billion, would’ve expanded TransCanada’s existing Keystone pipeline to carry as much as 830,000 barrels a day from Canada’s oil sands and North Dakota’s Bakken Shale along a 1,661-mile (2,672- kilometer) path to Gulf Coast refineries. The NRDC and other environmental groups oppose the expansion of Canadian oil sands production, which they say creates more greenhouse gases than conventional crude.
Following Obama’s denial, TransCanada split the project and reapplied for separate segments from the Canadian border to Steele City, Nebraska, and from Cushing, Oklahoma, to Texas refineries on the Gulf Coast. The segments would be connected by existing pipeline.
The U.S. State Department has jurisdiction over the section that crosses the international border.
“Yes, it does pull up the Midwest crude price because it equalizes the market, but on the other hand it introduces additional supply to an already fairly saturated region,” Sander Cohan, a global transportation fuels analyst and principal with Energy Security Analysis Inc. in Wakefield, Massachusetts, said in an interview. “It might have a small impact.”
Friends of the Earth, a Washington-based environmental group, has said the Keystone XL pipeline will increase air pollution and the amount of greenhouse gases associated with the production of crude from the oil-sands region. Crude from the oil sands is 5 percent to 15 percent more carbon intensive than the average crude used in the U.S., according to IHS CERA.
API Job Estimate
The American Petroleum Institute, the Washington-based group that represents more than 470 oil and natural gas companies, said the project will add 20,000 U.S. jobs and lower dependence on oil from the Middle East.
“The Keystone XL tar sands pipeline is not a solution to rising gas prices,” according to today’s report. “By decreasing the supply of gasoline in the United States and increasing the price refineries pay to produce it, Keystone XL will add to America’s pain at the pump.”
The U.S. imports 8 million to 9 million barrels of oil a day, according to Shawn Howard, a spokesman for Calgary-based TransCanada.
“To somehow suggest that helping offset current imports from Mexico and Venezuela with this Canadian and American crude is going to drive prices up, because what we’re doing is helping replace some of the current feedstock, doesn’t make sense,” Howard said in an interview.