Canadian crude now moving through Keystone XL’s southern leg

BEAUMONT — The Keystone XL southern leg has delivered its first barrels of Canadian oil to the Texas coast, even though the project still lacks its planned northern leg into Canada, TransCanada CEO Russell Girling said in an interview Wednesday.

The crude moved through TransCanada’s existing pipelines, including the original Keystone pipeline that began operation in 2010.

The oil then made its way from Cushing, Okla., to Nederland, Texas, on the recently completed $2.3 billion southern portion of Keystone XL, also called the Gulf Coast Project, he said. It arrived at the end of the line last week. TransCanada began moving oil into the pipeline on Jan. 2 and made its first deliveries to refiners on Jan. 22.

The movement of Canadian crude illustrates the capabilities of TransCanada’s Keystone pipeline system, even without the controversial northern leg that would extend from Hardesty, Alberta, and traverse the Bakken Shale region of North Dakota and Montana before connecting with other lines, Girling said.

“We just moved the first batch of Canadian oil right through the whole system from Canada right through the Gulf Coast,” Girling said. “So (refiners) know they can do that. And they know they can do that on an ongoing basis and a reliable basis, so their buying patterns will switch to being more reliant on North American supply.”

Girling spoke with FuelFix ahead of a ceremony Wednesday in Beaumont to celebrate the start of service of Keystone XL’s southern leg.

He posed for pictures with a ceremonial tap, turning a fake valve to mark the successful service of the line.

‘Bump in the road’

Girling also said a Nebraska court ruling last week that called into question the pipeline’s authority to acquire land through eminent domain was the latest “bump in the road” for Keystone XL’s northern leg.

“It’s very frustrating, the continuous sort of barrage of these things that pop up,” Girling said. The Gulf Coast Project “had its share of issues that we needed to deal with and we just dealt with them in the best, most straightforward, honest way that we could.”

Up to 700,000 barrels a day will be able to move through the Keystone XL southern leg. That increase in supply will be a benefit to refiners and consumers, even without the northern leg of the pipeline, Girling said.

Moving Canadian crude through the system will help refiners shift away from imports of heavy crude oil from overseas, he said.

“If you can get that oil to the Gulf Coast, which we can now through a conduit like this, the Gulf Coast refiners end up paying less for their oil, which means consumers pay less for their gasoline,” he said.

Northern leg

Without the northern leg, oil from Canada and the Bakken Shale in North Dakota still will move through the pipeline, he said. But it will travel by rail, a system he called inefficient.

Rail and barge shipments of oil have been rising in the absence of pipelines to move oil to refineries nationwide.

“As soon as you have a pipeline conduit, people will switch back to pipelines very quickly,” Girling said. “It’s cheaper, first of all. A lot cheaper. But probably more importantly is it’s safer and it’s less emissions.”

Rail shipments of oil can cost several dollars more per barrel than pipeline shipments.

On environmental skepticism surrounding the project, Girling referenced studies by the U.S. State Department that found that Keystone XL would not increase greenhouse gas emissions.

“We should get away from these directionless debates around infrastructure to where we should really be pouring our energy: Adjusting our systems to migrate to a less carbon intensive energy future over time,” Girling said. “But holding up these pipelines, my view is the result has been more rail traffic, more (greenhouse gas) emissions, and greater risks to public safety.”

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