Clarification: Tesoro operates refineries in the Mid-Continent and West Coast.
NEW YORK ( TheStreet) -- With the newly empowered Congressional Republicans saying they now have the numbers to pass a bill that would lead to presidential approval of the long-delayed Keystone XL Pipeline project, there is a renewed focus on the energy industry and the companies that could win, or lose, if the pipeline is approved, allowing Canadian crude to be transported to the U.S. Gulf states.
The Keystone XL Pipeline is expected to boost profits for refiners, take market share from overseas suppliers of heavy crude, and force railroads that currently transport heavy crude from Alberta’s oil sands to the U.S. Gulf Coast to look for new sources of revenue, analysts said.
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Keystone XL, if approved by U.S. authorities, will run 1,179 miles from Alberta, through Montana and South Dakota to Steele City, Neb., before connecting with an existing pipeline that runs through Kansas and Oklahoma to the Gulf Coast of Texas. The planned pipeline will be owned and operated by TransCanada, which operates oil and gas pipelines and renewable energy facilities in the U.S. and Canada.
The U.S. State Department has to approve the pipeline because it crosses an international border between Canada and the U.S. And although the State Department determined in 2013 that it would have "no significant impact" if approved, Pres. Obama has yet to give his blessing on the project.
Gulf Coast refiners, such as Valero Energy (VLO) , are expected to benefit from the lower cost of transporting the Canadian crude compared with what they currently pay to ship it by rail, analysts said. Refiners like Tesoro (TSO) also may also reap cheaper transportation costs, given the Keystone XL Pipeline will feed into Nebraska before connecting to another Keystone pipeline that takes it to the Gulf Coast. Tesoro operates refineries in the Mid-Continent and West Coast.
Fadel Gheit, an energy analyst at Oppenheimer and Co., estimates that refiners will save $2 to $3 a barrel for piping in crude oil than sending it across the country by rail.
"If we do the math, we’re talking half a million to a million dollars a day of cost advantage,” Gheit said. “The pipeline will cut the transportation cost by more than half."