The original capacity of the pipeline will be 150,000 barrels/day, with expansion planned to exceed 400,000 barrels/day by the first part of next year. If a “loop” or second, parallel pipeline is added, the total capacity of Seaway will reach 850,000 barrels/day by 2014. The Seaway pipeline is one of several proposed crude oil pipelines that would carry crude from North Dakota, Montana, and Alberta to the US Gulf Coast, where crude prices are higher.

Transcanada Corp. (NYSE: TRP) has filed a new proposal for its Keystone XL pipeline, while Oneok Inc. (NYSE: OKE) and Oneok Partners LP (NYSE: OKS) have proposed a 1,300 mile route from North Dakota to Cushing, while Enbridge Energy Partners LP (NYSE: EEP) and parent Enbridge are proposing new and reversed pipelines to move crude to Cushing.

Crude from the Bakken oil play and the Canadian oil sands sells at a steep discount to Brent crude, which sets the price benchmark on the Gulf Coast. Producers hope to boost the price they get for their crude if they can just get the black stuff to more liquid market. For consumers, closing the price differential will very likely mean higher prices.

Paul Ausick

The unofficial closing bells put the DJIA down nearly 15 points to 13,213.63 (-0.11%), the NASDAQ fell nearly 23 points (-0.74%) to 3,046.36, and the S&P 500 fell -0.39% or more than 5 points to 1,397.91.

There were several analyst upgrades and downgrades today, including Demand Media Inc. (NYSE: DMD) cut to ‘equal weight’ at Evercore; TransCanada Corp. (NYSE: TRP) cut to ‘hold’ at Desjardins; American Railcar Industries Inc. (NASDAQ: ARII) raised to ‘neutral’ at UBS; Chesapeake Energy Corp. (NYSE: CHK) raised to ‘outperform’ at BMO Capital; Kraft Foods Inc. (NYSE: KFT) raised to ‘overweight’ at JPMorgan; Dollar General Corp. (NYSE: DG) raised to ‘strong buy’ at Raymond James; and Kaiser Aluminum Corp. (NASDAQ: KALU) raised to ‘buy’ at Dahlman Rose.

Earnings reports since markets closed last Friday have led to some price changes as of the last half hour of trading today: LDK Solar Co. Ltd. (NYSE: LDK) is up 10.8% at $3.28 (our coverage here); Humana Inc. (NYSE: HUM) is down -8.4% at $80.49; Senior Housing Properties Trust (NYSE: SNH) is up 0.32% at $22.09; and Sohu.com Inc. (NASDAQ: SOHU) is down -7.4% at $51.62.

Tomorrow we get earnings from Arch Coal Inc. (NYSE: ACI), Archer Daniels Midland Co. (NYSE: ADM), Bankrate Inc. (NASDAQ: RATE), Broadcom Corp. (NASDAQ: BRCM), Chesapeake Energy Corp., Domino’s Pizza Inc. (NYSE: DPZ); Office Depot Inc. (NYSE: ODP); Pfizer Inc. (NYSE: PFE); Sirius XM Radio Inc. (NASDAQ: SIRI); and Valero Energy Corp. (NYSE: VLO).

Other standouts from today include the following stocks:

Barnes & Noble Inc. (NYSE: BKS) is up about 54% at $21.07 after posting a new 52-week high of $26.00 earlier today. The company has created a joint venture with Microsoft Corp. (NASDAQ: MSFT). More coverage here.

Sunoco Inc. (NYSE: SUN) is up 19.5% at $48.89 after posting a new 52-week high of $49.50 earlier today. The company is merging with Energy Transfer Partners L.P. in a deal worth about $5.3 billion. More coverage here.

VeriFone Systems Inc. (NYSE: PAY) is down -12.7% at $47.52. The company’s stock was downgraded at Deutsche Bank, along with comments that the company was inflating its organic growth estimates.

Stay tuned for Tuesday. Richmond Fed President Jeffrey Lacker, Minneapolis Fed President Naryana Kocherlakota, San Francisco Fed President John Williams, and Philadelphia Fed President Charles Plosser are all giving speeches. Motor vehicle sales are expected to be reported throughout the day. We have noted the following events on the schedule (all times Eastern):

• 10:00 a.m. – Institute for Supply Management manufacturing index
• 10:00 a.m. – Construction spending
• 11:30 a.m. – 4- and 52-week bill auctions

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Paul Ausick

In addition to blasting the current development plans, the report also attacks plans to export the oil by pipeline either to the West Coast, the US Gulf Coast, or the East Coast. In the US, the most well-known of the proposed pipelines is the Keystone XL being proposed by TransCanada Corp. (NYSE: TRP). Kinder Morgan Inc. (NYSE: KMI) has also proposed to reverse the flow of its Trans Mountain pipeline system to transport crude from Edmonton to near Vancouver and Enbridge Inc. (NYSE: ENB) has proposed a new pipeline (the Northern Gateway) that would transport crude to Kitimat, British Columbia. From either destination, crude would be loaded on ships for distribution to buyers.

Enbridge is also proposing to reverse the flow of its Trailbreaker pipeline system to transport Albertan oil that currently arrives at the terminus of the system in Sarnia, Ontario, to Enbridge’s terminal in Portland, Maine, where the crude would be either put on ships for global export.

A report at CNBC.com details some of the objections that the environmental groups have raised related to the proposed pipelines, most thoroughly in a February 2011 report called “Tar Sands Pipelines Safety Risks.” These objections include claims that the crude is more acidic than conventional crude and therefore more corrosive, threatening the integrity of the pipelines. The oil industry disputes these claims, and neither side appears to have the high ground here. The Sierra Club and other authors of the report claim that the 218 spills/10,000 miles of pipeline in Alberta between 2002 and 2010 compare unfavorably with 13.6 spills/10,000 miles of US pipelines and are due to the corrosive nature of crude derived from the oil sands.

The US Department of Transportation is currently conducting a study on transporting Alberta’s crude to try to determine if in fact it is more dangerous to transport than conventional crude. The study was mandated by Congress in January and is due by July 2013. The study is not likely to close the book completely on the safe transportation of Alberta’s crude, but it marks the first time the subject has come under any independent scrutiny.

The “Dirty Oil Diplomacy” report is available here.

The “Tar Sands Pipelines Safety Risks” report is available here.

Paul Ausick

The unofficial closing bells put the DJIA up nearly 24 points to 13,228.24 (0.18%), the NASDAQ rose nearly 19 points (0.61%) to 3,069.20, and the S&P 500 rose 0.24% or more than 3 points to 1,403.37.

There were several analyst upgrades and downgrades today, including Philip Morris International Inc. (NYSE: PM) reiterated as ‘buy’ and target price raised to $94 at Argus; SanDisk Corp. (NASDAQ: SNDK) raised to ‘buy’ at Jefferies; Baidu Inc. (NASDAQ: BIDU) maintained as ‘neutral’ but target price cut at Credit Suisse; Amazon.com Inc. (NASDAQ: AMZN) raised to ‘buy’ at BofA/ML, Nomura, and Goldman Sachs; and Alcatel-Lucent SA (NYSE: ALU) maintained as ‘underperform’ and estimates cut at Jefferies.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Amazon.com is up 15.6% at $226.64; Callaway Golf Co. (NYSE: ELY) is down -14.9% at $5.94 (our coverage here); Clearwire Corp. (NASDAQ: CLWR) is down -2.7% at $1.43; Deckers Outdoor Corp. (NASDAQ: DECK) is down -25.5% at $51.78 after posting a new 52-week low of $51.03 (our coverage here); Weyerhaeuser Corp. (NYSE: WY) is down -0.3% at $20.81 (more coverage here); TransCanada Corp. (NYSE: TRP) is up 0.5% at $44.01; The Goodyear Tire & Rubber Co. (NYSE: GT) is down -5.1% at $11.32; Procter & Gamble Co. (NYSE: PG) is down -4% at $64.18 (our coverage here); Newell Rubbermaid Inc. (NYSE: NWL) is up 3.6% at $18.61; Merck & Co. (NYSE: MRK) is down -0.2% at $38.38; Helen of Troy Ltd. (NASDAQ: HELE) is up 4.4% at $35.33; Ford Motor Co. (NYSE: F) is down -2.1% at $11.62 (our coverage here); and Covidien plc (NYSE: COV) is up 0.5% at $55.32.

Be sure to look at our list of next week’s big earnings.

Other standouts from today include the following stocks:

Chevron Corp. (NYSE: CVX) is up 0.2% at $106.44. The supermajor oil company reported earnings in line, but production was down. More coverage here.

Allscripts Healthcare Solutions Inc. (NASDAQ: MDRX) is down -36% at $10.25 after posting a new 52-week low of $9.00. The healthcare services provider fired its chairman, and the list of woes goes on. More coverage here.

Expedia Inc. (NASDAQ: EXPE) is up 24.4% at $40.59. The Internet travel company posted better-than-expected quarterly results. More coverage here.

Western Digital Corp. (NYSE: WDC) is down -14.2% at $37.83. The disk drive maker had solid earnings, but worries abound about next quarter. More coverage here.

Stay tuned for Monday. We have noted the following events on the schedule (all times Eastern):

• 8:30 a.m. – Personal income and spending
• 9:45 a.m. – Chicago PMI
• 10:30 a.m. – Dallas Fed manufacturing survey
• 11:30 a.m. – 3- and 6-month bill auctions
• 3:00 p.m. – Farm Prices

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Paul Ausick

Oneok Partners is 43.5% owned by Oneok Inc. (NYSE: OKE), which also owns the general partner interest in Oneok Partners. Both companies have been focused on natural gas transportation and production and this marks their first foray into the crude oil transportation business.

A competing pipeline, proposed by Canada’s Enbridge Energy Partners LP (NYSE: EEP) and parent Enbridge Inc. (NYSE: ENB), would move the oil directly east out of the Bakken or north into Saskatchewan before being sent to eastern Canada or Chicago.

Neither of these plans is as grand as the 1,700-mile, 1.1 million barrel/day TransCanada Corp. (NYSE: TRP) proposal for the Keystone XL pipeline. However both follow existing rights of way and neither transports oil from Canada into the US, a major sticking point on the Keystone XL project. And the Oneok plan is the first major US pipeline to plan on hauling a substantial amount of Bakken crude to the major US trading hub.

A large map showing the route of the Oneok Partners’ Bakken Crude Express Pipeline is available here.

Paul Ausick

Two major energy companies are planning to build new pipelines that will move as much as 850,000 barrels of crude oil a day from Canada to refineries along the Gulf Coast by mid-2014, in the latest effort to cope with a surge of oil production in North America.

The separate projects, planned by Houston-based Enterprise Products Partners (NYSE: EPD) and Enbridge (NYSE: ENB) of Calgary, will compete with TransCanada’s (NYSE: TRP) proposed Keystone XL pipeline, a massive project to move crude from the oil sands of Alberta to U.S. refineries.

What is not clear is how the new enterprise plans to get over the environmental objections to Keystone. The Obama Administration has blocked the construction of the northern leg of the pipeline, despite persuasive arguments that the project could push down oil prices and add tens of thousands of jobs to the U.S. economy. The answer appears to be that the new, rival pipeline will be made up of sections already approved by federal and state authorities. That may not stop environmentalists from objections that a new flow of oil will endanger regions through which the pipeline carries crude.

The Journal points out that the new pipeline does not negate the need for one that moves crude from some regions in Canada.

Douglas A. McIntyre

We’re making this new pipeline from Cushing to the Gulf a priority. We’re going to go ahead and get that done.

At the end of February, Transcanada Corp. (NYSE: TRP) said that it planned to complete the 423-mile long section of the pipeline by mid-2013 to carry 700,000 barrels/day. The company also plans to re-apply for permits to construct the longer portion of the pipeline from Alberta to Cushing once the pipe has been re-routed.

Obama is in a difficult spot, having gotten a lot of kudos from environmentalists for killing the Keystone XL in January, but now forced to admit what he knew all along — that the pipeline needs to be built. His other major problem is that the Keystone XL pipeline is not going to reduce gasoline prices in the US, unless by a small amount. The purpose of the pipeline is to raise the price of crude from Canada’s oil sands and the oil fields of North Dakota and Montana. His Republican opponents avoid talking about that even more than Obama does.

The President’s political opponents are hammering him for not taking steps to lower gasoline prices, so he has to do something. And building the southern leg of the Keystone XL pipeline qualifies as something.

Paul Ausick

There are significant changes that are going to occur over the next few years. Export markets are growing and they are a huge opportunity for the refining industry, not just Valero but for the entire industry.

This would be a good thing for Valero, especially, which owns eight refineries along the Gulf Coast, but may not be such good news for Tesoro Corp. (NYSE: TSO), Marathon Petroleum Corp. (NYSE: MPC), or HollyFrontier Corp. (NYSE: HFC), which own refineries that do not have ready access to seaborne transportation. We wrote about this last week.

In a report from the Toronto’s The Globe and Mail, Klesse also said that he expects the 1,700-mile Keystone XL pipeline from Alberta to the Gulf Coast to be approved in early 2013, regardless of who wins the presidency in the November elections. President Obama killed the pipeline, proposed by TransCanada Corp. (NYSE: TRP) late last year, but left the door open for a revised proposal, which TransCanada is readying for submission.

Klesse also expects imports of light, sweet crude to disappear completely from the Gulf Coast by 2014-2016 as the light, sweet crudes from the Bakken shale play in North Dakota and the Eagle Ford shale play in south Texas boost production. He expects the price of Louisiana Light Sweet (LLS) to fall from a current premium to WTI of around $18/barrel to a “structural premium” of about $2/barrel or less.

The Keystone XL pipeline, with its projected delivery of 800,000 barrels/day of heavy, sour crude from Canada, figures prominently in Valero’s plans to boost its profits. The higher volume of Canadian crude will widen the differential between Brent and other imported heavy, sour crudes by pushing prices down on imports.

For US drivers, this scenario does not mean that gasoline will be cheaper. It does mean that Valero will be able to capture bigger profits even as US demand for gasoline falls. The only thing that will push down pump prices is for Brent crude to fall significantly with respect to WTI. That is not part of either TransCanada’s or Valero’s plan.

Valero’s investor presentation is available here.

Paul Ausick

Drivers won’t be the only ones affected. Canadian producers like Exxon Mobil Corp. (NYSE: XOM), Suncor Energy Inc. (NYSE: SU), Cenovus Energy Inc. (NYSE: CVE), and others will gain a substantial price hike on Canadian crude. We noted this when TransCanada announced a couple of days ago that it would go ahead with a plan to build a 423-mile section of the pipeline from Cushing, Oklahoma, to Port Arthur, Texas.

Refiners like Marathon Petroleum Corp. (NYSE: MPC) and HollyFrontier Corp. (NYSE: HFC), which currently benefit from their ability to get the cheaper oil from Canada, will take a substantial hit on prices. We wrote about this yesterday.

The reason for the higher prices is pretty basic: the Canadian oil is curretnly essentially stranded and was priced at an average discount to Brent crude of about $23.50/barrel in 2011. Moving Canadian oil to the Gulf Coast where prices are higher will not lower the price of Brent crude unless the new oil more than replaces the existing supply. The Gulf Coast imports around 5 million barrels/day and the Keystone XL pipeline and a couple of other pipelines proposed to move oil south from Cushing to the coast will transport less than 1.5 million barrels/day if and when all the current plans are realized.

The effect will be to raise the price of Canadian crude everywhere, including the Midwest and the Rocky Mountain regions, where Marathon and HollyFrontier do their refining. Their feedstock costs will rise and the price for their refined products will also rise.

Energy industry consultant Philip Verleger told Bloomberg News:

The Canadian plan [for the Keystone XL pipeline] was to use their market power to raise prices in the United States and get more money from consumers.

Verleger estimates that gasoline prices will rise $0.10-$0.20 a gallon in the Midwest and Rocky Mountain regions.

The Keystone XL pipeline is far from a free lunch. It will not make the US any more energy independent and it certainly will not lower gasoline prices. If US drivers continue to drive less, then Canadian oil will reduce the amount of oil imported to the US and help with the US trade balance. That’s a good thing, but is it enough?

Paul Ausick

Another Canadian pipeline company, Enbridge Inc. (NYSE: ENB) has purchased a majority share in the existing Seaway pipeline, and the company plans to reverse the flow of crude in that pipeline to transport oil from Cushing to Port Arthur and Houston. The plan would move 150,000 barrels/day to begin with, but added compression would boost the total to 400,000 barrels/day by next year.

Enbridge has also announced plans to build a new pipeline from Flanagan, Illinois, to Cushing along the existing right-of-way of its 650-mile Spearhead pipeline. Capacity has not yet been announced, but the original plan called for a 30-inch line but that is likely to get larger as demand for transportation grows.

None of these lines is going to have much effect on gasoline prices. The purpose for building them is to move the crude from the oil sands of Alberta and the Bakken shale to the Gulf Coast, where the price of crude is much higher.

Right now crude from the oil sands and the Bakken are heavily discounted to the price of Brent — as much as $40/barrel. If that nearly-stranded crude can get to the major US refining area along the Gulf Coast, it will be worth a lot more. The Gulf Coast currently receives just over half of the 9 million barrels/day of crude that is imported into the US. Getting 1.1 million barrels/day — or potentially more — will cut down on the amount of oil imports, particularly because demand for transportation fuel in the US is stable or falling.

What happens to prices? Well, they could fall a little, but the whole purpose of the Keystone XL and the other pipelines aimed at the Gulf Coast is to increase the price of North American oil. It is true that by not exporting dollars in exchange for oil the US trade balance will improve, but an average American is not likely to see any sudden drop in pump prices.

The recent run-up in crude prices is mostly due to an improving US economy, the appearance of a solution to the Greek debt crisis, some signs that China’s economic activity will increase, and, not least, the tensions over Iran’s nuclear development program. These factors are real, but they are also temporary. Oil is, after all, just another commodity, and commodity prices react quickly to events and rumors.

Paul Ausick