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Jodi Peterson | Mar 06, 2012 06:00 AM

How do you move a fluid natural resource from where it's extracted to where it's needed? The obvious answer is a pipeline. Here in the West, pipelines move oil, gas and water – but perhaps we should take a cue from Germany, where in Munich, a 300-meter pipeline carries beer. A few years ago in Russia, smugglers built a one-mile-long pipeline called the "Vodka Galore" to send hooch into Estonia.

Visions of liquid refreshment aside, pipelines of the natural-resource variety are perenially controversial. Here's an update on two of the big proposals in the West.

Cushing Oklahoma

Back in January, President Obama put a halt to the Keystone XL pipeline, which would carry Alberta crude 1,700 miles to the Gulf Coast, through Montana, South Dakota and Nebraska and points south. Last week, the company proposing the pipeline, TransCanada, announced it would proceed with the southern extension, which it called a standalone project to connect oil storage facilities in Cushing, Okla. with refineries in Port Arthur, Tex. The Obama administration says it supports the extension, but environmentalists worry that TransCanada's splitting of the project means more of it can dodge close review. Since it doesn't cross an international border, the southern section won't be included in the environmental impact statement analyzing the portion running from Canada south to Nebraska. The company says it will file a new application for that northern section.

Republican presidential hopefuls have been proclaiming that the Keystone pipeline will lower gas prices (and to that end, they're pushing an amendment to a transportation bill that would greenlight the project). But building this section could have the opposite effect for Westerners. Bloomberg reports:

TransCanada Corp. (TRP)’s Keystone XL oil pipeline … risks raising prices as much as 20 cents a gallon in the Midwest, Great Plains and Rocky Mountains.  The line would create a new way to carry Canadian imports outside the Midwest and reduce an oil surplus that’s depressing prices in the central U.S.  ….

Consumers in Colorado and Wyoming currently pay less for gasoline than anywhere in the nation because of the supply glut in the Rocky Mountains caused by stranded Canadian imports and growing oil production from onshore fields. Denver’s average price of $3.13 a gallon (on Feb. 29) was 43 cents lower, or 12 percent, than Houston’s $3.56 average, according to AAA.

Meanwhile, a Texas appeals court has decided that to build that southern section, TransCanada cannot enter land belonging to Texas rancher Julia Trigg Crawford, until Caddo Indian artifacts on the land can be documented. Critics view it as a victory for landowner rights, but the restraining order against the company is temporary; a hearing on whether TransCanada can use eminent domain to condemn Crawford's land is scheduled for April.

In North Dakota, energy companies have found a way to move crude without a pipeline – the Canadian Pacific Railway.  The Financial Post reports:

On any given week, three to seven CP Rail trains laden with crude oil from the North Dakota Bakken field whisk across North America, bypassing the pipeline bottlenecks in mid-continent that are depressing oil prices and unaffected by the noise in Washington, D.C., that is holding back the Keystone XL pipeline.

Last year, its oil trains carried 13,000 cars and soon CP could be moving 70,000 cars or more a year out of the North Dakota Bakken tight-oil field alone.

With each tank car containing 650 barrels of oil, that’s 126,000 barrels a day — a significant pipeline on rail.

Rail transportation can be scaled up quickly, unlike the years-long process of building pipelines, but industry experts don't expect rails to ever replace pipes. And building the Cushing pipeline could, in addition to increasing gas prices, also make rail less attractive:

The main driver for the recent increase in rail use is the steep discount for mid-continent crudes caused by the pipeline bottleneck at Cushing, Okla., he said. While carriers keep costs confidential, it’s estimated that it costs $10 to $12 a barrel to transport it by rail, and about $5 for pipeline, making the option attractive when the discount is in the $30 or more range, as it has been recently.

In Colorado, a high-profile water pipeline proposal has been rejected. In 2009, rancher-turned-entrepreneur Aaron Million proposed pulling 250,000 acre-feet of water annually out of Wyoming's Green River and Flaming Gorge Reservoir and piping it 500 miles to Pueblo, Colo., to supply the growing Front Range (see our story "Wild Turkey, gunfire and big pipelines"). The potential economic and environmental impacts sparked outrage, as did later news that Million had been arrested for stalking a former girlfriend. The Army Corps of Engineers began reviewing his permit application, but last summer, Million changed the project's purpose to supplying up to 1,000 megawatts of hydropower, and filed for a new permit from the Federal Energy Regulatory Commission (FERC).

In late February, FERC dismissed Million's preliminary application because the route information was insufficient – the submitted map showed just a "single line" drawn from near Flaming Gorge to near Pueblo. Although the Denver suburb of Parker is proposing a rival project to divert water from Wyoming, Million remains determined to forge ahead with his quest. Stacy Tellinghuisen, energy policy analyst with Western Resource Advocates, told the Denver Post, "The Flaming Gorge Pipeline is a zombie. It's just staggering around looking for anything to latch onto to keep it alive."

The author is High Country News's managing editor.

Image of Cushing, Okla., Pipeline Crossroads of the World, courtesy Flickr users Thomas & Dianne Jones.

Bruce Smithhammer
Bruce Smithhammer Subscriber
Mar 06, 2012 07:50 PM
Please let us not fall for the red herring that projects like Keystone will lower gas prices, or that it is about "national security." The US is currently a net EXPORTER of gas and diesel. Translation - we export more than we import. Would we be doing that if our national security was truly at stake? Not to mention that oil prices are set on a speculative, international futures market - not by pipelines like this one. Plus, Canadian tar sands oil is heavy crude - very resource-intensive, and costly to refine. Don't let fear and politician's lies shove these projects down our throats.
yew yew
yew yew Subscriber
Mar 08, 2012 02:26 PM
 In 2011 a Reuter news stream carried a
report of $7.00 per barrel for delivery
to Gulf refiner in a discussion about
overall barrel price from ND.

Pipeline construction and maintenance, with various storage tank-properties
seem bound to be sweetheart relations in
Board of Director memberships among the oil and gas field service Inc's and producers.
Rail does the job, tank car structure
and material probably could be improved
for overall reduced costs. Water might
find a new spot in the lineup carried by composite fabrications.

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