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Demonstrators carry a giant mock pipeline while calling for the cancellation of the Keystone XL pipeline during a rally in front of the White House in Washington November 6, 2011. (JOSHUA ROBERTS/JOSHUA ROBERTS/REUTERS)
Demonstrators carry a giant mock pipeline while calling for the cancellation of the Keystone XL pipeline during a rally in front of the White House in Washington November 6, 2011. (JOSHUA ROBERTS/JOSHUA ROBERTS/REUTERS)

Producers still back Keystone XL, TransCanada says Add to ...

TransCanada Corp. says customers remain committed to its stalled Keystone XL pipeline because it remains the best plan to ship growing production of crude out of Alberta.

The U.S. State Department this week forced TransCanada to re-file its application to build the controversial oil sands pipeline in the United States, likely delaying any approval until 2013.

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Russ Girling, TransCanada’s chief executive officer, said oil companies and refiners are sticking with the company, and encouraging him to hurry to produce an alternative pipeline route in a bid to satisfy the U.S. government.

Analysts say some oil producers may balk at waiting for Keystone XL to be built, but not enough to hobble the project. If shippers and refiners were to abandon the pipeline – opting for alternative routes to move crude from Canada and the northwestern United States to refineries on Texas’ Gulf Coast – the proposed Keystone XL pipeline would not be able to proceed.

TransCanada said alternative projects are unable to match Keystone XL’s capacity and progress made procuring land, and completing extensive engineering work.

“Our shippers look at that and they conclude that, even though there have been delays and they have been frustrating, this is still the project that is furthest along in its evolution,” Mr. Girling said in an interview Thursday. “Therefore they continue to be supportive of us moving forward.”

TransCanada could opt to build the pipeline in stages, beginning with the southern portion of Keystone XL first. That would help alleviate a glut of oil supply at Cushing, Okla., by sending crude to refineries on the Gulf coast.

“We are now open to amending or changing our plans to build this in segments if that's what the company and our shippers believe is the right thing to do,” Mr. Girling said at an investor conference.



Congressional Republicans in the United States forced President Barack Obama to make a decision on Keystone by Feb. 21, after he previously delayed ruling on the project until after the 2012 presidential election. Mr. Obama rejected Keystone XL because there was not enough time to review the new route he ordered TransCanada to consider through Nebraska, the government said Wednesday.

The Calgary-based company plans to re-file its application and hopes its previous environmental approvals will stand, with only the Nebraska section needing review. Under this scenario, TransCanada hopes to ship the first barrels of oil down the $7-billion pipeline by the end of 2014.

Chad Friess, an analyst at UBS Securities Inc., believes the delay will prompt some shippers and refineries to ditch TransCanada and commit to competing projects. Enbridge Inc. is considering expanding its ability to move oil from hubs in Illinois and Oklahoma to Texas.

Companies won’t leave Keystone XL “en masse, but there will be some,” Mr. Friess said. “I don’t think it will be substantial enough to actually condemn the XL project regardless of when it is actually built.”

Cenovus Energy Inc. said it still supports Keystone XL. At the same time, however, the oil sands company is mulling over alternatives, spokesperson Rhona DelFrari said. Enbridge’s expansions are on the table, and the company recently started shipping crude out of Saskatchewan by rail, where infrastructure is in short supply.

Valero Energy Corp., a refining giant on the Gulf Coast, also backs Keystone, despite this week’s setback. Bill Day, a spokesperson for the company, declined to elaborate on its contract with TransCanada.

The company’s chief executive officer, Bill Klesse, sharply rebuked Mr. Obama’s decision.

“With all the issues facing our country, it is absolutely unbelievable our federal government says no to a company like TransCanada that is willing to spend over $7-billion and put Americans to work on a pipeline,” he said in a statement. “The administration’s decision throws dirt into the face of our closest ally and largest trading partner.”

Follow us on Twitter: @smccarthy55, @CarrieTait

 
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