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The politics of pipe: Keystone's troubled route Add to ...

Half-a-decade before TransCanada Corp.’s Keystone XL ran into a wall of political and environmental resistance, a key stretch of the route linking Canada’s oil sands to refineries in the southern U.S. emerged as a tricky, though seemingly surmountable, problem.

The route crossed a landscape of prairie and farmland, far from mountains, tundra, permafrost and other features that make it tough to dig trenches and lay pipe. But there was one obstacle.

Engineers working for another proposed pipeline project called Altex closely examined a route similar to Keystone XL’s and identified a trouble spot. Glen Perry, a pipeline entrepreneur who steered Altex, remembers the warning he received from an engineer in 2006.

“I said, ‘What are the route issues here?’ He said, ‘There’s really only one.’ I said, ‘What’s that?’ He said, ‘You have to go through the boiling sands of Nebraska.’”

Boiling sands are areas where sandy soil is so thin that groundwater can bubble up through it to the surface. In Nebraska, they are found in the Sand Hills, an ecologically sensitive region of grass-covered dunes underlain by a giant freshwater aquifer, called the Ogallala, that sustains agricultural production down the centre of America.

For TransCanada, Nebraska would come to form the heart of a fierce opposition to a $7-billion pipeline project that has now been put on hold, after a groundswell that started in Cornhusker country swept through activist environmental groups to Washington, D.C.

Before Mr. Perry could tackle the boiling sands issue, the 2008 financial crisis sank his project. But for TransCanada’s Keystone XL, which followed in the footsteps of Altex, the boiling sands of Nebraska would prove to be an immense hurdle.

TransCanada saw the Sand Hills as any pipeline builder would – as an engineering challenge, one that could be managed with special construction techniques and a tailor-made plan, drafted after speaking with local experts, to rehabilitate unearthed land.

But as TransCanada developed its Keystone XL plan, the world was changing.

Public confidence

For decades, pipeline permitting applications were fought largely on technical grounds, and they’ve virtually all been successful. Two other major cross-border oil pipelines – the first instalment of Keystone, and Enbridge Inc.’s Alberta Clipper – had been speedily approved in the years prior.

But Keystone XL was the first major pipeline to confront a country that had suddenly turned a sharp eye on the oil industry. The BP spill had erupted amidst still-simmering concerns about global warming – and in the following months, a series of pipeline spills into important U.S. rivers made headlines.

Against that backdrop, Nebraska’s boiling sands transformed from an engineering challenge into a political and social challenge – one that TransCanada, and the industry in general, was ill-equipped to handle.

“The world fundamentally changed in the last 18 to 24 months – starting with Macondo [Gulf spill] and the whole visibility of that,” said TransCanada chief executive officer Russ Girling in an interview. “It was a different kind of awareness of the oil industry than we’ve ever seen, I think, publicly.”

That, he added, “changed public awareness, and probably shook public confidence in what we do.”

TransCanada did what it could to fight back. Over the course of 2011, it spent heavily on lobbyists and advertising in an effort to sway a public that was already tilting against Keystone XL. But on Nov. 10, the U.S. Department of State announced it would delay its decision on Keystone XL until TransCanada could sort out a new route. It wanted the company to move away from Nebraska’s boiling sands. Now the fate of Keystone XL remains caught up in high-level political wrangling.

For pipeline companies, the old ways of operating are no longer good enough. Pipelines, out of sight and mind for decades, are suddenly seen as an extension of Canada’s controversial oil sands industry.

“All of a sudden we’re bad guys. And we are ill-prepared for that,” says Richard Ballantyne, an industry consultant and former chair of the Canadian Energy Pipeline Association and president of Terasen Pipelines. To date, the pipeline industry has put its energy into “making sure our pipelines are safe, making sure they’re incredibly reliable.”

Canada has big plans for the oil sands, which stand to be a prime source of employment, manufacturing demand and government revenues for decades to come. But the oil sands have already largely grown far beyond the needs of the Canadian oil markets they already serve. To grow, that oil must move elsewhere, which requires pipelines.

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