TransCanada Corp. is plowing ahead with its Keystone XL pipeline project to ship Alberta crude south to the U.S. Gulf Coast – while at the same time eagerly pursuing a proposal to ship oil from the west to eastern Canada.
TransCanada reapplied on Friday for a U.S. permit to build the 2,700-kilometre Keystone line. The company has already started construction on the Canadian side of the border for the controversial pipeline, and expects to break ground on the most southerly leg in the U.S. this summer.
The pipeline would connect Alberta's oil sands to the massive Gulf Coast refinery complex and help ensure producers receive world prices for their crude, which has recently been subject to deep discounts due to supply constraints.
The project was stalled last November when the Obama administration cited opposition in Nebraska and said the company would have to come up with a new route that avoided the environmentally sensitive Sandhills regions of the state.
The lengthy and uncertain process in the U.S. has prompted industry and governments in Canada to pursue other pipelines proposals more aggressively, particularly efforts to access rapidly-growing Asian markets through Enbridge Inc.'s Northern Gateway pipeline and a proposal by Kinder Morgan Inc. to expand its TransMountain line into Vancouver.
Now, with those projects running into staunch political opposition in British Columbia, companies are looking east, with the encouragement of the Harper government.
Natural Resources Minister Joe Oliver said Friday that he is encouraged by TransCanada's Keystone filing with the U.S. State Department, but also supports the idea of building new pipelines to deliver western oil to eastern Canada if they meet environmental standards.
TransCanada submitted a new route through Nebraska in March, and expects to win state environmental approval by early fall, though local opponents say the new plan is still unacceptable and vow to fight it. TransCanada chief executive officer Russ Girling said he hopes the U.S. government will approve the project by early 2013 – a timeline laid out by the State Department on Friday – at which point the company would begin to build the portion between the Canadian border and southern Nebraska.
But even as Nebraska officials review the environmental impact of the company's new route, TransCanada has begun building key parts of the pipeline. It expects to break ground this summer on the leg between Cushing, Okla., and Houston, a project that will help reduce the glut of oil in the U.S. mid-continent.
In Canada, the company has begun construction at several river crossings after having received a permit from the National Energy Board. While the southern leg is commercial on its own merits, the Canadian portion will only be useful if the entire Keystone XL project is approved and built.
Mr. Girling said it is a risk worth taking to ensure the pipeline project can be completed in a timely fashion once the approval is granted.
But American environmentalists remain determined to block the pipeline, arguing it will threaten an important aquifer and deepen U.S. dependence on unconventional crude oil that produces high levels of greenhouse gas emissions.
Those critics have targeted the oil sands as "dirty oil," and Sierra Club campaigner Kate Colarulli said Friday that developing the Alberta bitumen deposits would "represent an environmental Armageddon."
Meanwhile, Mr. Girling confirmed the company is talking to oil producers in western Canada and refiners in the east to determine whether there is commercial interest in transforming under-utilized parts of the west-east natural gas line into an oil pipeline.
"It's a project that I think makes some sense – in fact, it makes a lot of sense," Mr. Girling said, though he does not expect to submit a proposal to the National Energy Board this year.
At least one major company is interested in the east coast idea. Canadian Natural Resources Ltd. said the TransCanada line is likely to take shape far faster than the Enbridge's Gateway project. "It's going to be a long time before Gateway gets done," CNRL president Steve Laut said. "We should be able to go a lot faster on the TransCanada line."
But, he warned, the costs aren't known yet. "It may be totally uneconomic. We don't know."
Industry sees the eastern line as opening the door to exports, perhaps by building to a port on the St. Lawrence River.
With a file from reporter Richard Blackwell in Toronto.