Keystone XL director: Mandate on Obama delayed pipeline

A 60-day mandate that President Obama make a decision on Keystone XL in 2012 unnecessarily delayed the pipeline, the director of the project said Wednesday.

Republicans in late 2011 proposed and pushed the mandate into law, forcing Obama to make a decision on the pipeline within a 60-day time frame. Les Cherwenuk, director of TransCanada’s Keystone XL project, did not specifically name Republicans, but said “political maneuvering” that led to the “60-day limit” delayed the pipeline’s approval.

And while the southern leg of the pipeline is nearly complete, the northern segment of the line that would allow more oil to move from Canada to the Texas coast is still awaiting approval as competing projects pick up steam, Cherwenuk said.

Cherwenuk, who spoke at a Hart Energy Executive Energy Club event in downtown Houston, said the 485-mile southern leg of Keystone XL is 95 percent complete and will begin moving oil from Cushing, Okla. to the Gulf Coast by the end of the year.

Asked about concerns that the southern leg had fallen behind schedule, Cherwenuk said construction on that portion of Keystone XL has encountered delays, mostly related to weather in Oklahoma.

“The storms that traveled through Oklahoma this year were tremendous,” he said. “The schedule has slipped. There’s no doubt about that.”

Political maneuvering

TransCanada submitted its application in 2008 for the northern portion of the pipeline, which requires presidential approval since it crosses an international border. The company was anticipating approval early last year, he said.

“But, as you recall, 2012 was an election year and politics began to weigh heavily into that process and some political maneuvering occurred,” Cherwenuk said.

Republicans then pushed a mandate through Congress requiring that Obama make a decision on the pipeline.

But all of the materials Obama needed to consider were not yet complete because of environmental concerns from Nebraska that required changes to the route, Cherwenuk said.

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“He couldn’t [approve the project] fundamentally , since the work had not been completed and he had no choice but to deny the permit,” he said.

Obama rejected the plan and TransCanada had to submit its application again and restart the process, resulting in a further delay of its approval.

Cherwenuk credited regulators for thoroughly reviewing comments from supporters and opponents of the pipeline.

“There are thousands and thousands of those,” he said. “So the process, I guess, is taking the time it needs.”

Growing competition

While the nearly $8 billion Keystone XL project will help move more of the huge amounts of oil sands crude expected to be produced in Canada in the coming years, other projects are also in the works to move that oil without crossing international borders, said Laura Atkins, Hart Energy’s executive director of upstream research.

TransCanada itself is working on a line that would move up to 1.1 million barrels per day from the oil sands and other Canadian and northern United States fields to Canada’s east coast. If approved, the pipeline would have a higher capacity than Keystone XL, which could potentially reach 830,000 barrels per day.

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Others are working on pipelines that will move oil from oil sands fields in Alberta to refineries along Canada’s west coast, with the potential to export products to Asia, Atkins said.

“The pipeline to Vancouver will probably go forward,” Atkins said.

TransCanada’s Canadian rival Enbridge, in partnership with Houston-based Enterprise Products Partners, has successfully reversed a 400,000 barrel-per-day line that is already bringing more than 100,000 barrels per day of oil sands crude to Texas. Enbridge and Enterprise are currently working on expanding that line, which already crosses the Canadian-U.S. border, to 850,000 barrels per day by adding another pipeline parallel to the companies’ existing one.

Moving by rail

Oil companies also are pursuing an option to move oil sands crude by rail, which could end up being relatively competitive with pipeline transportation of crude, she said.

That’s because oil sands crude is primarily made up of bitumen, a solid, hydrocarbon-bearing substance. To move bitumen in pipelines, it has to be diluted, at a cost of about $30 per barrel, she said.

But companies are finding ways to move undiluted bitumen in rail cars, saving money on the cost of diluent altogether, Atkins said.

“It might make up for the additional cost of transporting Canadian crude by rail,” she said.

Cherwenuk said the transportation options are all needed, since Canadian oil sands crude production is expected to grow rapidly.

Atkins said dozens of oil sands projects are in development or planned, with exports to the United States expected to nearly triple to more than 3 million barrels per day by 2020.

Opponents of Keystone XL have argued that it would encourage oil sands crude production, which emits more carbon into the atmosphere than conventional oil production. They also argue that it raises the possibility of a damaging spill of diluted bitumen, which is more challenging to clean than conventional crude.

A 2010 spill of about 20,000 barrels of diluted bitumen into Michigan’s Kalamazoo River has taken more than three years and $800 million to clean.

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