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Keystone XL inches closer to reality: TransCanada

Keywords: Tags  TransCanada, Keystone XL pipeline, John Kerry, Sen. Mark Pryor, Alex Pourbaix, Russ Girling, FirstEnergy Capital Corp., Societe Generale


A resolution for TransCanada Corp.’s proposed Keystone XL pipeline is drawing closer, with the U.S. government and company executives recently taking steps to address outstanding issues.

TransCanada expects the proposed pipeline to be in operation by late 2014 or early 2015 “subject to regulatory approvals,” according to the company’s most recent earnings report.

The Obama administration denied the initial permit for the Keystone XL pipeline in January last year on environmental grounds, but TransCanada reapplied in May 2012 using a different route and in early March the State Department released a draft supplemental environmental impact statement for the proposed new route. Construction of the pipeline could generate as many as 42,100 jobs and $2.05 billion in domestic earnings, according to the draft report.

The Calgary, Alberta-based company has already invested $1.8 billion in the project, which in January received state approval for its route through Nebraska. The total cost of the 830,000-barrel-per-day lineÑintended to transport oil to Texas’ Gulf Coast from Calgary--is expected to reach $5.3 billion.

The Keystone XL would be a 1,179-mile, 36-inch-diameter crude oil pipeline beginning in Hardisty, Alberta, and extending south to Steele City, Neb. Advocates of the pipeline say it is a critical infrastructure project for the energy security of the United States and to strengthen the American economy. Opponents argue that the economic benefits don’t outweigh potential environmental risks.

Along with transporting crude oil from Canada, the Keystone XL pipeline also would support the significant growth of crude oil production in the United States by allowing American oil producers more access to the large refining markets found in the American Midwest and along the U.S. Gulf Coast, TransCanada said.

Even though TransCanada has proposed rerouting the Keystone XL project, those changes won’t result in any excess pipe left over despite the fact that its new route is 509 miles shorter than the original, a company spokesman told AMM. The company had said in the past that a rejection of the proposed Keystone XL pipeline could prompt a resale of the pipe manufactured for the project.

“The pipe that has already been manufactured is being used for both the Gulf Coast pipeline project and Keystone XL,” the company spokesman said in an e-mail, noting that the reroute to avoid environmentally sensitive areas in Nebraska will require the manufacture of more pipe. TransCanada’s Gulf Coast project runs 485 miles from Cushing, Okla., and Nederland, Texas.

A bipartisan group of senators in early March called on Secretary of State John Kerry to approve the proposed Keystone XL pipeline. The pipeline “will supply both energy from our closest friend and partner and create jobs in the United States,” said a letter to Kerry signed by 10 Democratic and 10 Republican senators. “Further delay will continue to hurt job creation and may damage our relationship with Canada.”

The proposed pipeline’s new route through Nebraska was approved by Gov. Dave Heineman in January, but the State Department “has yet to inform the public and stakeholders of a definitive process for the final decision,” according to the letter.

Sen. Mark Pryor (D., Ark.), a member of the bipartisan group, said separately that “without action, Canada will look west and we’ll miss a valuable opportunity to decrease our dependency on foreign oil and ensure our future energy security.”

The State Department concluded in its draft environmental impact statement on TransCanada’s proposed project that the building of the Keystone XL pipeline is “unlikely to have a substantial impact on the rate of development of oil sands (in Canada), or on the amount of heavy crude oil refined in the Gulf Coast area.”

But opponents of the project dispute that finding. “If this were true, why would the Canadian government and the oil industry be hell-bent on building it? They know it’s key to their expansion, and so do we,” Steve Kretzmann, executive director of Washington-based advocacy group Oil Change International, said.

The State Department’s final report is due after a 45-day comment period following the publication of the draft environmental impact study in the Federal Register.

“No one has a stronger interest than TransCanada does in making sure that Keystone XL operates safely, and more than four years of exhaustive study and environmental review show the care and attention we have placed on ensuring this is the safest oil pipeline built to date in the United States,” TransCanada president and chief executive officer Russ Girling said in a statement.

The delays caused by the environmental concerns surrounding pipeline projects such as the Keystone XL has had the unintended effect of pushing oil producers towards rail, a less environmentally friendly option, according to a company executive.

“The facts are pretty simple: For every mile you move a barrel of oil by rail, you emit three times the GHGs (greenhouse gases) than you do by moving it by pipeline, and you have an order-of-magnitude higher risk of having some sort of incident, leak or spill,” Alex Pourbaix, TransCanada’s president of energy and oil pipelines, said. “If you’re actually concerned about the environment, for long-haul movement of oil you very much want to see that moving by pipeline.

“The (Alberta) oil sands are going to get developed one way or another,” Pourbaix said at the East Coast Energy Conference in New York presented by Calgary-based FirstEnergy Capital Corp. and Paris-based Societe Generale SA. “I think it would be a real shame for everyone involved if the majority of that oil were to move by rail because I really don’t think it’s an environmental benefit and it’s certainly not in the interest of the economy.”

Transport by rail costs about two to three times as much as transport by pipeline, according to Pourbaix, with the construction of pipelines also having economic benefits.

With about $25 billion worth of projects under development, TransCanada expects growth to come mainly from oil pipelines. “I wouldn’t be surprised if that number is several billion dollars higher a year from now on the oil side,” he said.


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