environmental concern

Customers wait in Keystone wings

Support high despite delay, TransCanada says

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TransCanada Corp. says its customers are still “100 per cent” behind its proposed Keystone XL oil pipeline, despite dimming prospects that shovels will be hitting the ground any time soon.
Company spokesman Shawn Howard says there’s even a waiting list, should more room come available on the proposed $5.4-billion pipeline, which would enable oilsands crude to flow to the U.S. Gulf Coast.
“We announce and advance privately-funded projects like Keystone XL by understanding what the best business and market decisions are, not short-term political calculations. We will do the same here,” he said Monday in an e-mail, following Friday’s news that the Obama administration is unlikely to decide on the project until next year at the earliest, after a Nebraska legal challenge over the pipeline’s route is resolved.
The U.S. regulatory process for the contentious project is in its sixth year. The latest setback caused TransCanada’s shares to drop almost 4 per cent to $49.38 in Monday trading on the Toronto Stock Exchange.
TransCanada had hoped the legal dispute would not further hold up a decision at the federal level, but the State Department on Friday said it needs more time to make a recommendation in light of the uncertainty.
The Nebraska court is reviewing a case brought by three landowners who challenged a state law that gave Governor Dave Heineman the power to approve the project. A lower court invalidated the law, saying such decisions rest with a special commission established in 1885 to take politics out of the taking of land for railroads. Nebraska Attorney General Jon Bruning’s office didn’t respond to a request for comment on how quickly the court could hear the case.
“Energy infrastructure projects like Keystone XL are designed to meet a need – and that need has not has changed,” Howard added, noting the United States continues to import eight to nine million barrels daily.
While Canadian oil companies may still support the project, they’re not putting all of their eggs in the Keystone XL basket. Most are hedging their bets by committing to ship their crude on multiple proposed pipelines, as well as moving it to market by rail.
“The market’s going to continue to do what it’s been doing the last three years,” said Reynold Tetzlaff, national energy leader at PwC Canada. “The market continues to basically do a workaround where they use rail more; there have been some pipelines that have been reversed in the U.S. and some pipelines that have been added at a smaller scale.”
With the 830,000-barrel-per-day Keystone XL proposal stymied, outlets to the Gulf coast refining hub have opened over the past few years. The Seaway pipeline between the Texas coast and a major oil storage hub at Cushing, Okla., has been reversed and expanded by Enbridge Inc. and Enterprise Products Partners L.P., shipping about 400,000 barrels per day since early 2013. The companies aim to more than double that in the coming months.
Meanwhile, TransCanada started up its own Cushing-to-Texas pipeline in January, with the expectation of shipping an average of 520,000 barrels a day in its first year of operation.
The Gulf Coast line was originally pitched as part of the Keystone XL project, but the Obama administration rejected it a few years ago citing environmental concerns in Nebraska. The company decided to break the project up into two parts, going ahead with the southern leg first, as it does not cross an international border and therefore did not need the federal go-ahead to proceed.
The Gulf Coast line links up with TransCanada’s existing Keystone system, which has been delivering crude to the U.S. Midwest since 2010 and to Cushing since 2011.
John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy, predicted the project would probably win the U.S. blessing – though that could take awhile. “The Obama administration is probably looking for a way to not approve it but, given the studies, it is going to get approved,” Kilduffsaid.
“It’s just a matter of timing it right with the elections to ease the wrath of the environmentalists.”

Lauren Krugel, The Canadian Press, With Files From Bloomberg

Published: Tuesday, April 22, 2014