Watchdog Group: Pipeline Will Boost Midwest Gas Prices

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Consumer Watchdog upped the ante on Tuesday on previous claims that construction of the Keystone XL pipeline will drive up the cost of gasoline in Nebraska and the rest of the Midwest.

Price increases of 25-40 cents are likely if the pipeline is built between oil deposits in Alberta and refineries along the U.S. Gulf Coast, warned the nonprofit public interest group in a new report that also called the controversial project “an oil industry cash machine.”

More than two years ago, a University of Calgary business professor offered a similar rationale in predicting that gas prices in the Midwest would go up at least 7 cents.

The pipeline would eliminate a surplus of Canadian crude in Nebraska’s region, disrupt the oil-gasoline price structure, and create an equivalent amount of pain at the pump, said Philip Verleger in 2011.

In a Tuesday media conference call, Consumer Watchdog researcher Judy Dugan said Keystone XL would carry away both Canadian oil and a $30 a barrel discount for crude oil made into finished fuel at Midwest refineries.

“That is the fastest way to raise gasoline prices,” Dugan said.

The net effect, she said, is moving “$3 billion to $4 billion out of the pockets of U.S. consumers and into the pockets of a large Canadian oil company.”

The report is the latest attempt to stop construction on the northern leg of a $7 billion project that crosses Nebraska on its way to Cushing, Okla.

TransCanada unveiled plans for a second pipeline through Nebraska more than four years ago. But it remains under review by the U.S. State Department and under attack by critics at both the state and national level.

The Calgary-based company recently suggested that the earliest it would be in service, because of the pace of federal oversight, would be the second half of 2015.

On Tuesday, TransCanada spokesman Shawn Howard and Michael Whatley of the pro-pipeline Consumer Energy Alliance said the Consumer Watchdog assertions have no factual basis.

“This is not a peer-reviewed study and there’s really nothing new here,” Howard said in a statement released Tuesday afternoon.

“The professional opponents of Keystone XL first made these claims in early 2011, then again in 2012 and now, here we go again in 2013.”

Whatley was equally dismissive of claims of negative impact from pumping 830,000 barrels of oil per day into the United States.

“You can’t add this volume of discounted oil into the U.S. market and expect that we’re going to have more expensive fuel,” he said.

But Consumer Watchdog also disputed how much of it will get into the fuel tanks of customers at U.S. service stations.

“They’re very anxious to get that pipeline,” Dugan said. “The only way they can get that pipeline is to get a larger market. The only way they can get to a larger market is through export.”

She called gulf refineries “the export center for the U.S. for finished fuel.”

Whatley and Howard said otherwise.

“To suppose that folks out of Houston, the Gulf Coast complex, are going to export cheap oil to overseas markets and replace it with more expensive oil coming in on boats from the Middle East is crazy,” Whatley said.

Howard said Consumer Watchdog’s motives aren’t what they appear. “These professional activists are not really concerned about the price of gasoline in the U.S. Midwest. They are just trying to generate concern and opposition to Keystone XL.”

But Dugan said export capability is the real point of building a pipeline through the U.S. and any government attempts to rein in that plan on this side of the border won’t go far. That’s because oil transport agreements involve a private carrier and customers in the private sector.

“There’s not much the U.S. has done or can do,” she said.

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