Existing Crude Oil and Refined Products (liquids) Pipelines
Posted on 11/15/2011 9:23:29 AM PST by thackney
TransCanada Corp. said Monday it expects U.S. President Barack Obama will have a recommendation over the fate of its $7-billion Keystone XL pipeline shortly after a new six-month review in Nebraska.
The Calgary firm signed an agreement with Nebraska lawmakers Monday to reroute the pipeline around environmentally sensitive lands that contain an aquifer that provides drinking water to millions.
If legislation introduced Monday is approved by state senators, the Nebraska Department of Environmental Quality will study and suggest a pipeline path.
The diversion around the state’s Sandhills region and Ogalla aquifer is a move TransCanada’s vice-president of Keystone Pipelines, Robert Jones, said lets the firm quash controversy that last week added delays to the project.
“We really believe that this provides a way for us to put the concerns of the Sandhills behind us,” Jones told the Herald from Lincoln, Neb.
The U.S. State Department last Thursday ordered a new review of alternative routes through Nebraska, pushing its final assessment on Keystone XL, initially expected before the end of the year, into 2013.
Observers warned construction delays of one to two years could kill the pipeline by potentially allowing shippers to back out of contracts in favour of competing projects.
The directive came after concerns from environmental organizations and Nebraska residents over perceived risks tied to a potential oil spill, despite a State Department final environmental impact assessment in August that said the route would pose little environmental threat.
The new review’s timeline is arbitrary, according to Jones, who noted the Nebraska department has said its assessment can be done in half a year.
Jones said the national interest determination by the State Department, which allows Obama to decide on a presidential permit necessary for construction of the 2,700-kilometre cross-border pipeline, hinges on appeasing fears in Nebraska.
“The State Department was very clear that the concern was they needed more information about a reroute around the Sandhills,” Jones said, adding he “absolutely” expects a report from the department shortly after the Nebraska review.
The company had previously said rerouting in Nebraska of the up to 830,000-barrel-per-day pipeline from Hardisty, Alta., to the U.S. Gulf Coast would add two to three years of delay to its project. Last Thursday, it conceded the process might be expedited by offering its existing examinations of alternate routes conducted during an application that goes back to 2008.
Nebraska state Senator Mike Flood, who introduced the legislation Monday, said it’s up to Nebraskans to cover the cost of a new review.“This is our land. These are our people. We will pay for this. It’s the right thing to do,” Flood said.
Monday’s development comes as senior TransCanada executives meet with investors in Toronto and New York starting Wednesday in annual forums where the fate of Keystone XL is sure to dominate discussion.
The project, a cornerstone to TransCanada’s growth in the coming years, has cost $1.9 billion to date, and the firm expects delays due to rerouting will add upwards of $1 million each day.
In a report by CIBC World Markets after the State Department announcement, research analyst Paul Lechem said rerouting Keystone XL through Nebraska could knock 89 cents off TransCanada’s share price, while an outright cancellation could shave off $2.48.
The firm’s shares closed down 30 cents Monday at $40.51 on the Toronto Stock Exchange.
Investors will want to know how easily producers committed to transport oil via Keystone XL and refiners locked in on the other end can jump ship to competing projects through contracts TransCanada is not discussing.
TransCanada spokesman Terry Cunha said Monday the company has talked with shippers and is “confident” their support will continue. The regulatory application with the National Energy Board says TransCanada is obligated to show shippers by the end of 2011 it can have Keystone XL operational by Dec. 31, 2013.
Imperial Oil Ltd. spokesman Pius Rolheiser said Keystone XL could eventually export volumes of bitumen from Imperial’s Kearl oilsands mining project to start up next year, and remains supportive of the pipeline.
“We believe the pipeline should be approved to bring Canadian oil to Gulf Coast refineries,” said Rolheiser, who wouldn’t say if Imperial has a firm shipping commitment.
Leslie Preston, an economist at TD Bank, said the new State Department review is likely heightening support for competing projects that would ease crude stockpiles in Cushing, Okla., which are pushing down prices for most Canadian crudes.
Those include the 800,000 barrel-per-day Wrangler pipeline proposed by Enbridge Inc. and Enterprise Products Partners LP, and a possible reversal of ConocoPhillips’ Seaway Pipeline, a 350,000 barrel-per-day line from Houston to Cushing, among others.
“Now that (Keystone XL) has been, potentially not cancelled but shelved, these other projects, there’s going to be a big push for them,” Preston said.
Enbridge wouldn’t say Monday whether it has received increased interest from shippers in Wrangler.
On a conference call last week before the State Department news, Enbridge CEO Pat Daniels said both the company’s Flanagan South expansion from Illinois to Cushing, and the Wrangler line received “significant” commitments from shippers during open seasons that have ended.
Existing Crude Oil and Refined Products (liquids) Pipelines
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