Comments on the Western Gateway Pipeline Benefitting California, Arizona

The Western Gateway Pipeline Project is an exciting and much-needed energy project for Arizona and California. California has no east-to-west crude oil or finished fuel product pipelines entering the state, and it has never had any. America builds the most sophisticated, safest, and most cost-effective crude and fuel pipelines in the world. Phillips 66, HF Sinclair, and Kinder Morgan, the joint venture partners, are elite operators, and I have full confidence in their abilities and those of their subcontractors. I anticipate that Phillips 66, HF Sinclair, and Kinder Morgan will build a great pipeline and be responsible, responsive operators. The Western Gateway Pipeline will benefit Californians, Arizonans, and shareholders, and further strengthen U.S. national security through energy dominance.

Why The Western Gateway Is Needed…Comments

The Western Gateway project is the first of its kind for California and the Southwest and comes at a time when it is badly needed. Through its legislative actions, California has engineered its own gasoline and jet fuel crisis. Here are some facts:

1. California consumes 36 million gallons, or 857,000 barrels of gasoline per day and is the second-highest consumer of gasoline in the U.S. 

2. California consumes around 12 million gallons, or  285,000 barrels of jet fuel per day, making it the largest consumer of jet fuel in the U.S.

3. Over 90% of all registered vehicles in California use liquid fossil fuels (private, commercial, recreational, and agricultural use gasoline, diesel, and aviation fuel).

4. Over the years, California has lost valuable in-state crude and gasoline production. The two most recent and prominent instances occurred under the Newsom Administration, with Phillips 66’s voluntary withdrawal from the California market and Valero’s refinery closures and cessation of gasoline production.

5. California was once home to over 40 refineries; today, only 6 major refiners survive to produce California-compliant gasoline. 

6. Since assuming office in January 2019, California refinery production under Governor Gavin Newsom has dropped by nearly 30%, with a 16% loss occurring just in the last two years.

7. Since assuming office in January 2019, California in-state crude oil production under Governor Gavin Newsom has fallen by 44.5%

8. Since Gavin Newsom assumed office in January 2019, California retail AAA gasoline prices have increased 71.25%, the state excise tax has increased 33.32%, and cap-and-trade (now cap and Invest) has climbed 100%, all of which have added to the retail price of gasoline in the state.

9. Despite having some of the largest crude oil reserves in the U.S., California imports over 61% of its crude oil needs and roughly 32% (about 250,000 barrels or 10.5 million gallons) of its gasoline needs from foreign sources, including Iraq, Brazil, Guyana, India, South Korea, and the Bahamas, and it is the most dependent of all states on foreign powers.

10. Californians pay $1.40 to $1.42 in state-mandated taxes, fees, and program costs per gallon of gasoline…the highest in the U.S.

11. California’s state excise tax on gasoline is the highest in the U.S. and automatically increases on July 1 of each year based on inflation and not gasoline consumption, miles driven, or road usage. 

12. California is home to major military installations and assets that require immediate access to fuels in the event of mobilization… under current conditions, access is compromised by California’s dependency on fuel imports… especially jet fuel from South Korea. 

Western Gateway Project…Comments

1. Very ambitious, badly needed, and highly technical project.
2. Has a theoretical capacity of 230,000 barrels a day. For comparison, the San Pablo Pipeline (Crimson) has a capacity of 210,000 barrels a day.
3. All the new construction occurs out of state.
4. Technically, there is no significant increase in “footprint” or “new” construction in CA, as the proposed route will lie along the existing west-to-east Kinder Morgan SFPP route. 
5. Finished fuel pipelines flow in one direction, and it is not as simple as “turning a valve” to reverse flow direction.
6. The product velocity, flow rates, specific gravity, and hydraulic gradients must all be factored into the new pipeline and into reversing the California directional flow. 
7. To achieve east-to-west liquid fuel flow to CA using Kinder Morgan’s SFPP line, significant reverse engineering, bypass construction, pump station refitting, and other engineering and reengineering will be required in CA. Generally, pump stations spaced 40 to 60 miles apart require substantial, if not complete, retooling and re-piping.
8. All new flowmeters will be necessary to accommodate the east-to-west flow and increased daily volume (capacity). 
9. Backflow valves are one-directional (west to east) and must be replaced with new valves that operate east to west. 
10. Seven refineries will feed the proposed pipeline, with a combined capacity of 885,000 barrels per day of finished fuel products. 
11. No crude oil is planned for the pipeline; thus, it does little to help the surviving CA refineries. 
12. It does not provide any direct linkage to Nevada, which receives over 80% of its gasoline from CA. 
13. Fortunately, the elevation from Phoenix to Los Angeles decreases by about 950 feet, making the east-to-west flow a bit easier and less dependent on pump strength. 
14. Ultimately, the complete pipeline will undergo exhaustive unit and integrated testing using a combination of robotic devices (pigs), unit and valve testing, pump pressure testing, and hydrostatic testing. 
15. Final certification of use will be a function of multiple federal agencies, such as the EPA, USDOT-PHMSA, DoE, and the various states.

Concerns and Opinions

1. Technically, I have few engineering or construction concerns. With the geology and geography, it will be a challenge, but nothing that these companies cannot overcome. 
2. California will not benefit from all 230,000 barrels a day. 
   1. Of the planned 230,000 barrels a day of product, 125,000 will be directed to Arizona, and some will be directed to Nevada (20,000 to 50,000 barrels). 
   2. California will most likely receive 55,000 to 100,000 barrels a day of product…far below its daily reliance on foreign nations for imports of 250,000 barrels a day.
   3. Finished fuels flowing into California because of the pipeline will not materially affect consumer prices at the pump. 
3. The project provides some moderation and insulation for Nevada and Arizona against California’s legislative “War on Gas and Oil,” but does not, by itself, provide sufficient fuel or fuel security for Nevada.
4. The project is scheduled for completion in 2029…that’s ambitious…and wishful. 
5. Pipeline projects, as we see in California, are often contentious, attract significant public attention, and are generally plagued by litigation. The litigation common to these projects can slow construction, testing, and certification.
6. California has a unique gasoline blend, so the fuel produced in refineries in New Mexico, Missouri, Oklahoma, and Texas that feed the 1,300-mile pipeline must be California-compliant.
7. The proposed pipeline will positively influence national security and U.S. force readiness, especially for military installations in Arizona. 
8. The project does little, if anything, to support California’s in-state crude production and refinery operators. 
9. Pipeline construction is a long, complex process, and anything can disrupt the planned 2029 completion date…one only needs to look at California’s high-speed rail project, which is 15 years behind schedule, billions of dollars over budget, and has yet to complete a mile of track.
10. Given legislative and compliance pressures, along with the political sentiment directed at the industry, California could very easily face the withdrawal of other refiners and producers, placing additional pressure on pipeline plans and schedules.  

Michael A. Mische

Email: communications@marshall.usc.edu

mische@marshall.usc.edu