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Energy & Environment

With Keystone In Limbo, Enbridge Pipelines Carry Oil Sands Crude To Houston Refineries

The new link does little to relieve shipping constraints on Canadian oil producers or U.S. farmers.

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This article was updated at 10:16 a.m.

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At the Seaway Jones Creek terminal, Friday, Jan. 16, for the official opening of the Flanagan South and Seaway Twin Pipelines. From left to right, Al Monaco, president and CEO, Enbridge; the Hon. Jim Prentice, Premier of Alberta; the Hon. Greg Rickford, Canada’s Minister of Natural Resources; A.J. (Jim) Teague, executive VP and COO, Enterprise Products Partners

 

The town of Hardesty sits in the heart of Alberta’s oil sands. Since 2010, the Alberta Clipper Pipeline has linked the town to the Great Lakes port of Superior, Wisconsin. Enbridge Energy, which owns the Alberta Clipper, has been steadily adding to its network inside the U.S., in collaboration with Houston-based Enterprise Products Partners. The latest additions are the Flanagan South and Seaway Twin Pipelines, which together run from Illinois to Jones Creek, Texas, near Freeport, an hour’s drive south of Houston.

Al Monaco, Enbridge’s president and CEO, spoke at the Jones Creek terminal late last week, at a ceremony marking the official start of operations for the new pipelines. “With the completion of Flanagan South and Seaway, and we also have a huge storage position at Cushing, [Oklahoma] and with our upstream expansions, we’re now literally ‘flanged up,’ as they say in the pipeline business, the first large-volume solution for Canadian crude to the Gulf,” Monaco said.

The first oil from Hardesty arrived at Jones Creek just before Christmas, two weeks before Congress passed legislation authorizing construction of the Keystone XL Pipeline and President Obama threatened to veto the measure. The irony? If Keystone’s construction were approved, it too would start in Hardesty.

But with crude already flowing directly between Alberta’s oil sands and the Texas Gulf Coast through the Enbridge-Enterprise network, just how much of a difference would Keystone make anyway?

“Collaboration between Enbridge and Enterprise Products Partners is expected to more than double the amount of Canadian crude delivered to the U.S. Gulf Coast each day from over 200,000 barrels to more than 400,000 by the end of the year,” said Canadian Natural Resources Minister Greg Rickford, at the same event.

That’s an increase of roughly 200,000 barrels per day. According to documents from TransCanada, the company that would build and operate the Keystone XL, its pipeline would carry more than four times that amount.

“When you see a constraint emerge, which is exactly what’s beginning to happen with Keystone not in service, you actually see bigger discounts at the wellhead, and that can actually impact in a negative way the oil production activity that’s occurring in western Canada,” says Kenneth Medlock, senior director of the Center for Energy Studies at Rice University’s Baker Institute.

In other words, there’s a bottleneck that’s causing a supply glut in Canadian oil markets. Build the Keystone and you relieve the bottleneck. That allows Alberta’s oil producers to sell to the U.S. market — particularly, to Houston-area refineries that are designed to process extra-heavy crude — and earn more money.

Plenty of that oil is still finding its way over the border, Keystone or no Keystone. Much of it is traveling by rail, in tanker cars. Every tanker car on the tracks leaves room for one less car to carry corn, wheat, or soybeans.

“Crude oil is going to move,” says Jim Teague, chief operating officer for Enterprise Products Partners. “It’s either going to move by pipe, or it’s going to move by rail, but it’s too much in demand. Crude oil will move. Now, there’s a lot of farmers that are getting a little upset that they can’t move their grain, as I read, so something’s got to give.”

Just ahead of the State of Union address, ABC News and the Washington Post released a poll, asking respondents whether they’d prefer President Obama approve Keystone’s construction immediately. More than 60 percent of those polled said they supported the White House’s position that more time for review is needed. 

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Andrew Schneider

Andrew Schneider

Politics and Government Reporter

Andrew heads Houston Public Media's coverage of national, state, and local elections. He also reports on major policy issues before the Texas Legislature and county and city governments across Greater Houston. Before taking up his current post, Andrew spent five years as Houston Public Media's business reporter, covering the oil...

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