West Coast Fuel Lifeline: Pipeline Project Expands Amid Supply Crunch

HOUSTON, TX – January 16, 2026 – Energy infrastructure giants Phillips 66 and Kinder Morgan, Inc. today announced a significant expansion of their proposed Western Gateway Pipeline, launching a second public offering for capacity on a project designed to pump a new artery of refined fuels from the American heartland to the supply-strained Southwest and California.

Following a successful initial “open season” in late 2025 that saw significant interest and binding commitments from fuel shippers, the partners are now offering remaining capacity and expanding the pipeline’s reach. The second open season, running until March 31, notably adds direct access to the Los Angeles market and incorporates new supply origins, a strategic move to bolster what analysts call an increasingly fragile West Coast energy market.

The project involves a combination of new construction and clever repurposing of existing infrastructure. A new pipeline will be built from Borger, Texas, to Phoenix, Arizona. This will link with existing Kinder Morgan pipes that will be reversed to flow westward, creating a seamless corridor from the refinery-rich Midcontinent and Gulf Coast to the high-demand markets of Arizona, Nevada, and, for the first time via pipeline, California.

A Response to a Looming Supply Crisis

The Western Gateway Pipeline is not being built in a vacuum. It is a direct response to a seismic shift in the West Coast’s energy landscape. California, a region historically self-reliant for its specialized fuel blends, is facing a critical reduction in its refining capabilities. By the end of 2025, Phillips 66 had already phased down its Los Angeles refinery, and Valero Energy is on track to close its 150,000 barrel-per-day (b/d) Benicia plant by April 2026. Together, these closures will erase nearly 20% of the state's total refining capacity.

This decline has left the region, known as PADD 5 in energy circles, increasingly dependent on expensive and logistically complex marine imports to meet demand. In 2025, gasoline imports to the West Coast nearly doubled compared to the previous year. The situation has prompted stark warnings from market experts, with some forecasting California gasoline prices could surge past $8 per gallon by the end of 2026 due to the supply squeeze.

The ripple effects extend far beyond California's borders. Arizona and Nevada, which rely on California for approximately 33% and 88% of their gasoline respectively, are now urgently seeking to diversify their supply chains. “The old model of relying on California is no longer sustainable,” one regional energy analyst noted. “States like Arizona and Nevada must find new, reliable sources to fuel their growing economies.”

The Western Gateway project is designed to be that new source. By reversing the flow of the Phillips 66-operated Gold Pipeline, which currently runs from Texas to St. Louis, the system will pull gasoline, diesel, and jet fuel from efficient Midwest and Gulf Coast refineries. It will then deliver up to 200,000 b/d of these products into Phoenix, with onward connections to Las Vegas and now, crucially, the Los Angeles basin.

The Race to Reshape Western Fuel Logistics

Phillips 66 and Kinder Morgan are not the only companies eyeing the lucrative opportunity to supply the West. A new pipeline race is underway. ONEOK, having recently acquired midstream competitor Magellan, has proposed its own Sun Belt Connector pipeline. This project also aims to connect Texas refineries to the Phoenix market with a similar capacity and a target completion date of mid-2029, setting up a direct competition for the Arizona market.

However, the Western Gateway project's strategic advantage may lie in its integrated approach and broader reach. By reversing existing pipelines, including a key segment of Kinder Morgan’s SFPP system, the project minimizes new construction footprints and leverages billions of dollars in established assets. The newly announced connection to Los Angeles represents what one industry expert called a “pivotal shift” in U.S. fuel logistics, potentially breaking California’s historical market isolation.

This new westward flow offers a vital outlet for refiners in the Midcontinent and Gulf Coast (PADD 3), a region that boasts over half of the nation's refining capacity and produces far more fuel than it consumes. Access to the premium-priced markets in California and the Southwest provides these producers with an attractive alternative to volatile international export markets, which have recently been hampered by issues like transit restrictions in the Panama Canal.

For the remaining refiners in California, the pipeline could offer indirect relief. By supplying Arizona and Nevada with fuel from Texas, the Western Gateway could free up California-produced gasoline to serve its own massive in-state market, potentially easing some of the pressure caused by recent plant closures.

Navigating a Complex Path to Completion

While the commercial logic appears sound, the path to the pipeline’s targeted 2029 completion is lined with significant regulatory and social hurdles. Large-scale energy projects require a complex patchwork of federal, state, and local permits. The project will face scrutiny under the National Environmental Policy Act (NEPA), which now requires a thorough assessment of a project's cumulative climate impacts, including greenhouse gas emissions.

Navigating California’s stringent regulatory environment, governed by the California Environmental Quality Act (CEQA), will be particularly challenging. Even projects involving the reversal of existing pipelines can face lengthy reviews and intense opposition from environmental groups and local communities concerned about safety and environmental justice. Precedent shows that restarting idled pipelines in the state can become mired in years of legal and political battles.

Beyond the regulatory process, the project must manage its impact on communities and landowners along its route from Texas to Arizona. While proponents highlight the substantial economic benefits—including thousands of construction jobs, long-term operational employment, and significant tax revenue for local counties—concerns over land use, habitat disruption, and the potential for leaks are inevitable. To mitigate this, the companies have emphasized their strategy of co-locating the new pipeline within existing utility and infrastructure corridors wherever possible to minimize new environmental disturbance.

The strong shipper commitments from the first open season signal powerful market confidence that these challenges can be overcome. For motorists and businesses across the Southwest, the project represents a tangible hope for a more stable and resilient fuel supply. The success of this second open season will be a critical indicator of whether this ambitious plan to re-plumb America's energy infrastructure can fulfill its promise to keep the West's economic engine running.