Canadian Oil Sands Production Finds a New Outlet to the U.S. Gulf Coast

The Capline pipeline, connecting Patoka, Illinois to St. James, Louisiana, is now fully operational, transporting heavy crude oil produced in Canada’s tar sands to refiners along the U.S. Gulf of Mexico.

The 632-mile, 40-inch pipeline system historically moved crude from the Louisiana Gulf Coast to Midwestern refiners, but was recently reversed to allow the delivery of oil from Canadian tar or oil sands to Gulf Coast refineries and shipping terminals.

The pipeline began interim service on December 18, 2021 and went fully operational on January 1, 2022. It is currently transporting 200,000 barrels a day, with a little excess capacity to spare.

The pipeline marks a significant shift for the Canadian petroleum industry, allowing Canada’s oil sands producers to export a record amount of crude to overseas markets.

Canadian crude is a lower grade petroleum than the lighter Bakken shale, being similar to Venezuelan crude, whose production has significantly slipped in recent years.

Helps Domestic Refiners

The pipeline is a boon to Gulf Coast refiners, says Bette Grande, president of the Roughrider Policy Center.

“The Capline reversal will provide heavy/sour Canadian crude to the gulf coast primarily for the refineries located there,” said Grande. “Much of the Gulf Coast refinery infrastructure is set up to process heavy/sour crude oil, much of which used to come from Venezuela.

“The oil produced in New Mexico, North Dakota, and Texas is light, sweet crude, which many Gulf Coast refineries were not developed to refine,” Grande said. “Before the Capline reversal Canadian crude was shipped to the Gulf Coast by rail and barge, much more environmentally risky modes or oil transport.”

Although the Capline reversal does not directly benefit domestic oil producers, it does benefit domestic refineries, Grande says.

“If we are to import any oil it is preferable that it comes from our neighbor to the north rather than somewhere else,” said Grande. “Capeline’s reversal benefits the United States in general, providing the country with additional energy security.”

Reduces Reliance on Russia

Although the Capline reversal does not replace all the oil that would have flowed through the Keystone XL pipeline President Joe Biden arbitrarily cancelled, it does reduce the amount of oil America needs to import from geopolitical rivals such as Russia, says Dan Kish, senior vice president for policy at the American Energy Alliance.

“The volumes of the Capline pipeline initially will not make up for the disastrous cancellation of the Keystone extension by President Biden on his first day in office, but it will help feed refiners in the Gulf Coast with the heavier grades of oil they are built to take,” Kish said. “Any increase in the efficiency of the circulation system for energy in the United States helps our producers.

“Access to more secure supplies of oil to displace the enormous increase in Russian oil imports that has occurred under President Biden is good for our economy and our national security,” Kish said. “Moving less oil through surface transport, which is less safe and more environmentally challenging than pipelines, is an additional advantage.”

Kevin Stone (kevin.s.stone@gmail.com) writes from Arlington, Texas