A General Overview of The Keystone Pipeline System
July 16, 2013
The Keystone Pipeline has been making news on the national level and is one of the most talked about developments in the oil and gas industry. However, while there have been no shortage of headlines, many people are relatively unaware of the purpose and impact of this large project. The Keystone pipeline is such a political hot topic because of its extensive reach across multiple states, the environmental implications, and the economic influence. The overall impact is equally as far-reaching and very critical to the Gulf Coast as a final destination point.
What Is The Keystone Pipeline
The Keystone Pipeline refers to a four phase pipeline project that originates in Hardisty, Alberta and is designed to transport oil sands bitumen, which is a type of heavy crude oil, from Canada into the US where it can be refined. The first two phases are already complete and operational and connect Hardisty to refineries in the Midwest. They currently have the capacity to deliver 590,000 barrels per day to these Midwest markets. The third and fourth phases, referred to as The Keystone XL, would connect the pipeline to the much higher capacity region of the Gulf Coast. These two phases would add another 510,000 barrels per day, making the Keystone’s total distribution to an estimated 1.1 million barrels per day.
Phase One - The first phase of the Keystone Pipeline runs 2,147 miles from Hardisty, Alberta to the Wood River, Illinois and Patoka, Illinois in the United States.
Phase Two - The second phase is only 291 miles long picking up in Steele City, Nebraska and connecting to Cushing, Oklahoma. This was added due to Cushing being a centralized oil hub for the South.
Phase Three - The third phrase is part of the Keystone XL proposal and it is often referred to as the Cushing MarketLink. This pipeline would be routed from Cushing, Oklahoma to delivery terminals near Nederland, Texas in order to serve the Port Arthur marketplace. This pipeline would also carry some American-produced oil from the Midwest down to these southern locations. This pipeline would extend for 435 miles.
There is a secondary part of the proposal which would travel an additional 47 miles in Liberty County, Texas to the Houston area in order to connect to the major oil industry resources present there. This would enable much of the oil to be distributed from the centers in Cushing, Oklahoma.
Phase Four - The fourth phase is also part of the Keystone XL pipeline. It would add a second starting point in the same area of origin in Alberta Canada, and would travel down to Steele City, Nebraska where it would join the rest of the pipeline. In the process it would go through Baker, Montana where there is a crude oil reserve, enabling much more American produced oil to be added to the pipeline. This is the most controversial part of the project because of concerns over the environmental impact as it travels over the Ogallala Aquifer.
How Will The Keystone Impact North American Energy Independence?
Thanks to significant advances in drilling technology such as hydraulic fracking and horizontal drilling, there has been a major oil boom in the United States. When combined with the over one million barrels of crude oil that would be delivered by the full Keystone and Keystone XL pipeline, that makes the goal of North American energy independence more attainable than ever. Energy independence would have a far reaching, positive effect on the country in many ways. It would remove the need to import oil from more volatile, less reliable sources. This would help stabilize oil prices and bolster the economy.
How Will The Keystone Impact The Economy
While it is a hotly debated topic in terms of exactly how many new jobs construction of the Keystone XL would create, it is undeniable that some would be created. Additionally the Keystone XL pipeline would bring in revenue in terms of taxes and by stimulating the associated industries feeding off of the increased oil output. Finally the oil itself brought in by the pipeline could either be used here in the United States for cheaper fuel, sold for a profit, or more likely a combination of both.
One major way in which the Keystone would positively affect the economy is in terms of trade. It is estimated that if running at full capacity, the Keystone could essentially replace the need to import foreign oil from sources such as Venezuela. Because we have a much smaller trade deficit with Canada than with Venezuela, this means that we would see a much greater return on our money. Since we can also purchase the crude oil more affordably from Canada it is estimated by some sources that US refineries could save up to $9.1 billion a year on their crude oil bill.
The final takeaway message from all of this, is that the existing operational Keystone pipeline is having a major impact on the US oil and gas industry. As the final decision is made on whether or not the Keystone XL will also be approved and built, we are in a very pivotal period. The future of the oil and gas industry as well as the goal of North American energy independence will be in large part determined based on whether or not the Keystone XL gets approved and constructed.