Pipeline Projects Eye Arizona as California Refinery Closures Signal Major West Coast Energy Shift

Washington, D.C. – As California prepares to shutter nearly a fifth of its oil refining capacity, two major U.S. midstream energy companies are advancing plans to expand vital fuel pipelines into Arizona, setting the stage for a complex interplay of regulatory approvals, contractual negotiations, and potential environmental litigation. The moves by Oneok and Kinder Morgan highlight a looming energy security challenge for the landlocked Southwest and present a significant legal and logistical puzzle for regulators, energy producers, and consumers.

The impending closures of two major California refineries—the Phillips 66 facility in Los Angeles and Valero's plant in Benicia—are creating a predictable yet significant supply gap. Arizona, which has no refineries of its own, has long depended on pipelines from California and Texas to meet its demand for gasoline, diesel, and jet fuel. With California's supply set to contract sharply by 2026, the legal and commercial frameworks governing interstate fuel transport are under immense pressure to adapt.

The Proposed Projects: A Two-Pronged Approach

In response to this anticipated shortfall, two distinct infrastructure projects are gaining momentum, each carrying its own set of legal and regulatory hurdles.

Oneok's Sun Belt Connector: The more ambitious of the two proposals is from Oneok, which is gauging shipper interest in a new 440-mile pipeline, the "Sun Belt Connector." This proposed 200,000 barrel-per-day (b/d) line would transport refined products from the refining hub of El Paso, Texas, to Phoenix, Arizona. The project's "open season," a critical phase for securing commercial backing and demonstrating market need to regulators, is currently underway.

"Oneok is considering building a 200,000 b/d pipeline — the Sun Belt Connector — to carry gasoline, diesel and jet fuel from El Paso, Texas, to Phoenix, Arizona."

For legal practitioners in the energy sector, a project of this scale triggers a cascade of requirements under federal and state law. The pipeline's interstate nature places it squarely within the jurisdiction of the Federal Energy Regulatory Commission (FERC) concerning tariffs and economic regulation. Furthermore, construction will require an exhaustive environmental review process under the National Environmental Policy Act (NEPA), which has become a frequent battleground for legal challenges from environmental organizations and affected communities. Issues of land acquisition, including the potential use of eminent domain, will also necessitate sophisticated legal counsel for both the company and landowners along the proposed route.

Kinder Morgan's Incremental Expansion: Taking a more conservative approach, pipeline giant Kinder Morgan is planning to expand its existing SFPP East Line. The company has launched a binding open season for a 3,250 b/d capacity boost from El Paso to Tucson, Arizona. This follows a recent 2,500 b/d expansion that went into service in July, demonstrating a strategy of scalable, demand-driven growth.

"The total amount of the expansion capacity available is scalable and will depend on customer interest, Kinder Morgan said."

While less complex than building a new pipeline, this expansion is not without its legal dimensions. The "binding" nature of the open season creates firm contractual commitments from shippers, which are essential for project financing and regulatory filings. Any modifications to the existing pipeline right-of-way or pumping stations would still require state and local permits and could trigger supplemental environmental reviews. The project also aims to move diesel that meets Mexican export standards, adding a layer of international commerce law to the regulatory mix.

Legal Implications of a Shifting Energy Map

The planned closures in California, driven by the state's stringent environmental regulations and strategic shift toward renewable fuels, are the primary catalyst for these infrastructure proposals. This dynamic creates a fascinating legal tension between state-level climate policy and the federal government's mandate under the Commerce Clause to ensure the free flow of goods—including fossil fuels—between states.

Regulatory and Permitting Labyrinth: The foremost legal challenge for the Sun Belt Connector will be navigating the multi-agency permitting process. Beyond FERC and NEPA, the project will need approvals from the Bureau of Land Management if it crosses federal lands, the Army Corps of Engineers for any water crossings, and a host of state-level environmental and land-use agencies in Texas, New Mexico, and Arizona. The Biden administration's focus on environmental justice could add another layer of scrutiny, requiring developers to demonstrate that the pipeline's route and construction do not disproportionately impact disadvantaged communities.

Antitrust and Competition: FERC will closely examine the "open season" results and proposed tariffs for both projects to ensure they comply with the Interstate Commerce Act's requirements for non-discriminatory access. Oneok's proposed joint tariff, allowing shippers to move products from as far as Houston and Oklahoma to Phoenix, will be analyzed to ensure it does not create anti-competitive conditions or give Oneok an unfair market advantage in the Southwest.

The Inevitability of Litigation: Given the current legal climate surrounding fossil fuel infrastructure, litigation is almost a certainty. Environmental groups are likely to challenge the projects' NEPA reviews, arguing that the federal government failed to adequately consider the pipeline's climate impacts, including the lifecycle emissions of the fuels being transported. These legal challenges, which have successfully delayed or derailed other major pipeline projects, represent a significant risk factor that legal teams for Oneok and Kinder Morgan must proactively manage.

Conclusion: A Test of Infrastructure and Law

The proposed pipeline expansions into Arizona are more than just a reaction to market changes; they are a critical test of the nation's ability to adapt its energy infrastructure in an era of accelerating energy transition. The projects underscore the persistent demand for traditional fuels even as states like California aggressively pursue a carbon-neutral future.

For the legal community, these developments signal a coming wave of high-stakes work in regulatory compliance, project finance, contract negotiation, and environmental litigation. The success or failure of these pipelines will not only determine how Arizonans fuel their cars and planes in the coming decade but will also set important precedents for how energy infrastructure projects are permitted, financed, and built in a deeply polarized America. The path from El Paso to Phoenix is fraught with legal and regulatory obstacles, and the journey has just begun.