Keystone XL southern leg launches as safest pipeline ever, CEO says

HOUSTON — TransCanada on Wednesday started delivering oil to the Texas coast through the southern leg of the Keystone XL pipeline, a move that will bolster the Canadian company’s case for building a controversial northern connection, the company’s CEO said.

“Showing people that this isn’t an export pipeline, that it can be operated safely, should provide the base underpinning and evidence that the Keystone XL is at the end of the day just another piece of energy infrastructure,” TransCanada CEO Russ Girling said in a conference call with reporters Wednesday morning. “It’s just a pipeline and it can be built and operated safely.”

The $2.3 billion southern leg runs 487 miles and has the capacity to transport up to 700,000 barrels of oil per day from Cushing, Okla., to Nederland, Texas, where it can be moved to refineries along the U.S. Gulf Coast. It started moving oil at 11:45 a.m. Central time at a rate of about 300,000 barrels a day. The line will slowly increase its rate in 2014, with an average of 520,000 barrels of oil per day moving through the pipeline this year, Girling said.

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The controversial northern leg of the Keystone XL line, which would move oil from Canadian oil sands fields and through TransCanada’s network to the Cushing oil storage hub, is awaiting presidential approval to move hydrocarbons across an international border.

Safest ever

Girling said TransCanada incorporated advanced technology that makes the pipeline the safest ever built. The carbon steel pipe is capable of withstanding the impact of a 65-ton excavator with 3.5 inch teeth and it has advanced corrosion-resistant coating, he said.

Still, environmentalists said Wednesday that the pipeline’s operation would increase production of oil sands crude, which generates more emissions than extraction of other crude types and is more difficult to clean when spilled.

“At a time when America is making huge strides on wind and solar power, this dangerous and unnecessary tar sands pipeline is a step backward when we should be moving forward on clean energy,” Sierra Club executive director Michael Brune said in a written statement.

Northern leg

Without being able to draw on a large flow of oil sands crude from Canada that would be available with the northern leg of the pipeline, the southern leg will deliver mostly oil produced from U.S. shale plays, including the Eagle Ford Shale in Texas.

The southern leg, also called the Gulf Coast Pipeline, is one component of the $8 billion Keystone XL project, which will also include the 1,179-mile northern leg extending from Hardisty, Alberta, to Steele City, Neb., if it is approved for construction. The line will then connect with an existing TransCanada pipeline that will move oil to Cushing. If the project is fully completed and expanded, it will be able to move 830,000 barrels of oil per day to the U.S. Gulf Coast.

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Even without the northern connection, refineries along the Gulf Coast have been looking forward to the southern leg’s startup, which will bring more oil to the coast. The U.S. Gulf Coast is the nation’s largest refining center, with more than half of national capacity for transforming oil into gasoline, diesel, jet fuel and other products, according to the U.S. Energy Information Administration.

“The Gulf Coast refiners can now access cheaper domestic crude instead of relying upon oil from other countries that have weaker or no environmental standards,” Girling said.

Refiners benefiting

Valero and LydondellBasell have made changes to accommodate more of the kind of light crude from U.S. shale plays that Keystone XL will make increasingly available to refineries.

Still, most refineries along the Gulf Coast are best suited for processing heavy crudes, which currently come from South America. If Keystone XL’s northern link is completed, the pipeline would offer another source of heavy crude, giving refineries more options and likely lower prices.

Because of concerns about the environmental damage caused by producing oil sands crude, and because of the risks associated with an oil spill, activists launched a series of protests over the last two years to block construction of Keystone XL in Texas. In some cases, they succeeded, forcing contractors to halt work on the line as demonstrators stood in front of heavy machinery or camped out in trees along the pipeline route.

In one instance, TransCanada opted to alter its route around a group of protesters that refused to descend from tree encampments, cutting out trees around the demonstrators’ tree village.