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Rail cars arrive in Milton, N.D., loaded with pipe for an earlier phase of the Keystone pipeline.

Eric Hylden/The Associated Press

TransCanada Corp. is raising the amount of crude it plans to pump through its Keystone XL pipeline, after receiving a boost in support from companies who hope to ship oil on the controversial project.

TransCanada itself had raised doubt about whether its shippers might stick around when the U.S. State Department last month delayed its decision on approving Keystone XL, asking for a change in route around the environmentally sensitive Sand Hills in Nebraska.

Now the company says there is increased demand to ship oil through the pipeline, which is planned to link Canada's oil sands with oil refineries on the Texas Gulf coast. TransCanada said it has won additional shipping commitments of 125,000 barrels a day, bringing its total to more than 1.1 million barrels a day for the entire Keystone system, which includes the XL project and an already built pipe.

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As a result, TransCanada plans to build an extension of the pipe to Houston, where it can secure access to a major refining complex, and increase throughput to 830,000 barrels a day from 700,000.

The changes will add $600-million to the $7-billion project cost – and underscore the degree to which industry continues to want a pipeline that has stoked controversy across the continent. Keystone XL is unlikely to see an approval decision before early 2013.

Those who support the pipeline are "not blinking" despite the delays, TransCanada chief executive officer Russ Girling said Thursday. "Production is growing in the United States and in Canada, and it has to get to market." Keystone XL has already undergone more than three years of environmental review, which places it "further ahead than any other alternative in the marketplace," he said.

But in an interview, Mr. Girling said TransCanada does not know how substantially it will have to alter the Keystone XL route in Nebraska.

The State Department and Nebraska's Department of Environmental Quality have yet to tell the company "what they want to see in a reroute," Mr. Girling said. "Once they define that, we'll be able to respond with alternatives."

He also declined to comment on how much those alternatives – which will entail both building a longer pipe and securing more land for it to cross – might add to the price tag. "It's going to cost us a fair bit of money," he said. However, TransCanada believes it has set aside sufficient contingency funds to avoid escalations that could force, for example, renegotiation of pipeline tolls, which could prove difficult.

Meanwhile, the company continues to examine other places to build new pipelines. It is, for example, looking at the need for new pipe to carry natural gas from northeastern British Columbia gas fields to that province's west coast, where at least four different projects have been proposed to export gas to Asia.

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"We're engaged in all of those conversations," Mr. Girling said.

TransCanada is "willing" to participate in construction of actual export terminals, but believes it has more to offer in technical expertise, building pipes through B.C.'s tricky mountainous terrain. The company also believes it has a broader advantage, since it already has pipes that take B.C. gas east. Those pipes can be used to carry growing gas supplies until export terminals are ready to operate to the west, smoothing the transition.

Mr. Girling, however, expressed caution over how much Canadian gas will eventually move to Asia. In the past few years alone, North America's natural gas business has experienced several momentous changes, making it difficult to predict the future, he warned.

Major factors include how much liquefied natural gas Asian buyers will want from North America; how much of its own gas China is able to produce; how much new gas demand will crop up in the United States and Canada on the heels of coal policies; and what sort of industrial demand growth will be stoked by low gas prices.

The company remains far more confident in its Keystone XL pipeline.

"As long as the decision is based on fact, which it will be, we'll get a positive conclusion," Mr. Girling said.

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About the Author
Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More

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