Oklahoma oil and natural gas producers are hoping for the best, despite the Obama administration's rejection on Tuesday of the proposed Keystone XL pipeline.
The transcontinental project is stalled once again, but producers hope developer TransCanada Corp. will proceed with a segment that would link the oil storage hub at Cushing with refineries along the Gulf of Mexico.
“We need the pipeline, whether it brings Canadian oil or not,” said Mike Cantrell, president of Domestic Energy Producers Alliance.
Cantrell said domestic oil production is increasing, but there is not enough pipeline capacity to get it to refiners.
Oklahoma Independent Petroleum Association President Mike Terry said there is a glut of crude oil at Cushing because there is not enough pipeline capacity to move it away from the storage hub.
“The result is Oklahoma Sweet crude oil has become less valuable,” he said. “Today, Oklahoma Sweet trades for $10 less, and has traded for as much as $28 less, than crude oil produced on the Louisiana coast or in the North Sea.”
Terry said that can add up to significant losses for oil producers, royalty owners and state government.
“If Oklahoma oil is selling on average for $10 per barrel less than crude oil from other parts of the globe, the price differential costs Oklahoma oil producers and royalty owners approximately $1.5 million per day,” he said. “In one year, the state would lose $75 million in gross production and income taxes.
“If other miscellaneous taxes and fees paid by the oil industry are included, the economic impact on state finances is far greater.”
Terry said the southern segment of the Keystone XL pipeline would bring much-needed relief to local producers.
Keystone officials have been reluctant to commit to proceeding with only a portion of the proposed project.
Cantrell said there is nothing stopping Trans
“This argument's basically over 50 feet, where it crosses the border,” he said. “They don't need a presidential permit to build pipelines in the United States of America.
“They just need a presidential permit to build an international line from Canada.”
He said the company might choose to build the U.S. portion of the pipeline to capitalize on its investment then proceed with the border crossing at a later date.
Cantrell said the full Keystone XL pipeline is a needed project.
“It is good public policy to have that pipeline into Canada, to bring Canadian crude down to the Gulf,” he said. “It just means that consumers pay less per gallon of gasoline because it's a more efficient delivery of crude oil to the refinery.”
President Barack Obama pledged to keep working on a way to address the issues the Keystone XL project is meant to solve.
This argument's basically over 50 feet, where it crosses the border. They don't need a presidential permit to build pipelines in the United States of America. They just need a presidential permit to build an international line from Canada.”