Friday, May 31, 2013
DALLAS (AP) -- Kinder Morgan Energy Partners LP said Friday that it has shelved plans for a pipeline carrying crude oil from Texas to California because refineries weren't interested enough.
At an estimated cost of $2 billion, the Freedom pipeline would have been a mix of converted natural gas pipelines and new construction. The company said it could have carried up to 277,000 barrels of oil per day.
But key refiners such as Valero Energy Corp. and Tesoro Corp. preferred to continue getting crude delivered by railcar. The refiners feared being locked into long-term commitments to take pipeline oil from West Texas. Taking deliveries by rail gives them the flexibility to shop among crude oil supplies from different places including the Bakken oil field in North Dakota.
Kinder Morgan Energy Partners said its plan drew interest from some people, including state and federal officials, but that wasn't enough.
"We don't believe in the concept of build it and they will come," said the company's president of West region gas pipelines, Mark Kissel.
"We stated at the outset that we would not move forward with the project without customer support, and we did not receive enough interest for us to commit to building the project at this time," he said.
Kissel said that the pipeline idea could be revived if the market expresses more interest. But in the meantime, he said, the company will focus on delivering crude by rail at West Coast and Texas locations.
The company proposed the pipeline plan in April and a bidding period ended Thursday evening. Company officials decided overnight not to proceed.
The pipeline would have started in Midland, Texas, in the middle of the Permian Basin oil field, gone through southern New Mexico and Arizona and split in Barstow, Calif., with one branch extending to a terminal south of Bakersfield and another to the Los Angeles area and local refineries.
Houston-based Kinder Morgan Energy Partners owns or operates 51,000 miles of pipeline. Its general partner is owned by Kinder Morgan Inc.
Units of the energy partnership fell $1.43, or 1.7 percent, to close at $83.40.