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Will the Keystone XL Pipeline Make Canadian Oil More Expensive?

January 24, 2010

Last week, TransCanada filed a brief with the South Dakota Public Utilities Commission laying out exactly how the company wants the PUC to rule in the Keystone XL proceedings. It’s the kind of document that can be hard for non-lawyers to understand because it looks almost exactly like a ruling the SD PUC would make, minus the signatures of the Commissioners.

If you take a look at it, bear in mind that it is NOT the Commission’s ruling, but instead is TransCanada’s wish list.

It will be interesting to see how much the PUC’s final ruling follows TransCanada’s script.

In the meantime, shippers of Canadian crude oil continue to debate in the press how much need there is for additional new oil pipelines. One of the concerns is that if excess pipeline capacity is built, there may not be enough product (oil) to fill up all the new pipelines and all the old ones. As the article explains, oil production in the tar sands has not increased as was previously predicted before the new pipelines were built.

Why does this matter? In simplest terms, if new pipelines mean existing pipelines move less product, that can result in a need to charge the customers for the oil more to make up for lost revenue because the pipeline companies still have big fixed costs to operate the pipelines. If it costs more to ship Canadian oil and its price rises, it makes it harder for that oil to compete on the global market.

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