As TransCanada opens the taps on a major new pipeline into the U.S., the company is already planning for ways to carry far more oil sands crude deep into the American south.
Outgoing chief executive officer Hal Kvisle used his last day atop the company to open the pipeline in Wood River, Ill., marking the start of crude delivery from the first phase of Keystone, a $12-billion (U.S.) pipeline project that includes pipes to several U.S. destinations.
The flow of oil into the U.S. Midwest is a major milestone for TransCanada, whose pipelines have traditionally transported natural gas. Now the company is using the oil sands industry as a springboard into a business once dominated by competitor Enbridge Inc.
TransCanada is staking a growing chunk of its future on delivering Fort McMurray, Alta., energy to U.S. gas tanks, even as the company faces increasingly strident foes among environmentalists and lawmakers south of the border, who have taken to accusing the Keystone project of promoting "environmental Armageddon."
TransCanada officials dismiss those concerns, saying the environmental risks are minimal. Keystone is a necessary bridge to bring oil to a country hungry for secure energy sources.
"It's a huge day for the company," Russ Girling, who takes over as TransCanada CEO Thursday, said in an interview. "It's a new business for TransCanada, and it's a very, very large business for TransCanada. … Keystone links the biggest free source of crude oil in the world to one of the most important markets in the world."
When it is completed at the end of 2011, Keystone and an expansion called Keystone XL - whose pending approval in the U.S. has stoked much controversy - will have the capacity to deliver 1.1 million barrels of Alberta crude to Illinois, Oklahoma and Texas.
That project, combined with an Enbridge-built pipeline to the U.S. called Alberta Clipper, has brought on so much new pipe that analysts now say it could be nearly a decade before it's all needed, especially since the oil sands have grown much more slowly than expected.
But Mr. Girling believes Keystone could be full as soon as 2015 or 2016, and TransCanada has already begun drafting plans to deliver even more oil into the U.S.
"We're going to need more capacity, and you have to start thinking about those things today," he said. The first step will involve expanding the Keystone system by installing additional pumping stations to push more oil through the pipe. That could bring it to 1.5 million barrels a day, enough to meet demand until 2020.
Mr. Girling said TransCanada has, however, already begun looking beyond that point.
"We can easily get through to the latter part of the decade. After that, we'll require twinning of the system and that sort of thing."
Conversations on twinning Keystone with an adjacent pipeline have already begun, Mr. Girling said. It would be a multi-billion-dollar project, but TransCanada has provided no details yet.
First, however, TransCanada must convince Americans to accept oil sands crude which, despite the black stain now tarnishing the U.S. offshore industry, remains a bête noire for environmental groups. Keystone XL has yet to receive a presidential permit allowing it to be built, and 50 members of Congress have asked the State Department to block it.
President Barack Obama overrode similar concerns last year when he granted a permit to Enbridge to build Alberta Clipper, but criticism of Keystone XL has become pitched. At hearings this week, Sierra Club executive director Michael Brune told U.S. legislators that by providing an outlet for oil sands crude Keystone XL will damage the global climate and "drive expansion of the environmental Armageddon occurring in Canada."
Mr. Girling, however dismissed the concerns, arguing that Canadian crude is no more greenhouse gas-intensive than Venezuelan oil.
"This project is entirely logical. … We're moving the world's largest and most secure source of crude oil to a nation that needs that crude oil, and what we're backing out is crude oil from places like Venezuela," Mr. Girling said.
"Is there risk in this? There always is. But I think the facts would dictate that those environmental concerns are unfounded. That they're not based on truth."Report Typo/Error