Shane Red Hawk of the Sicangu Lakota band of the Rosebud Sioux and his daughter Tshina Red Hawk wait for tribal leaders with the ‘Cowboy and Indian Alliance’ to begin a horseback ride in protest of the Keystone XL Pipeline across from the National Museum of the American Indian in Washington, DC, yesterday. The alliance of farmers, ranchers, and tribes has dubbed their week-long series of protests ‘Reject and Protect’.
Six years after applying to build the Keystone XL pipeline, Canada’s frustrated oil industry appears steadfast in its support of the plan even though Washington has again delayed a decision on whether to approve the politically charged project.
The reason is simple: A massive new pipeline to the US Gulf Coast remains the most elegant solution for producers looking to export burgeoning supplies of crude from Canada’s oil sands to the US. TransCanada Corp’s $5.4bn pipeline would seamlessly pump enough crude from Alberta to Texas to meet 4% of total US demand.
“We’re definitely supportive of the project,” said Brad Bellows, a spokesman for MEG Energy Corp, which produces crude from Alberta’s oil sands though it has not committed to ship on Keystone. “It’s good for the whole circulatory system of the energy industry.”
That is not to say the latest setback for the ambitious project sits well with its backers. And the decision could build momentum behind a host of other pipelines proposals as well as plans to expand shipments of oil by rail. But those options, as currently configured, could only supplement, not replace, the export capacity of the massive Keystone project, experts say.
“There’s never certainty that any one pipeline will be approved. We’ve made commitments to the East Coast, the Gulf Coast and the West Coast, plus rail,” said Rhona DelFrari, a spokeswoman for Cenovus Energy Inc, one of the largest developers of Alberta’s massive oil sands reserves. “There’s always a Plan B and a Plan C as well.”
Citing uncertainty over Keystone’s route because of a legal dispute in Nebraska, the Obama administration said it would allow more time for federal agencies to weigh in on the project, setting no new deadline for comments. As a result, it is likely a decision will not occur before November elections.
In response, TransCanada said it was “disappointed and frustrated” with the fresh delay, which comes more than five years after it first applied to build the pipelines.
“Another delay is inexplicable,” Russ Girling, the company’s chief executive officer, said. He pointed out that the first leg of the Keystone pipeline, which runs from Hardisty, Alberta, to Cushing, Oklahoma, took only 21 months to study and approve.
Keystone XL, which could start operating two years after it gets a final approval, would run from Alberta to Steele City, Nebraska, where it will meet the project’s southern stretch.
Despite the latest setback, none of the companies that have signed up for space on the line have backed out. Indeed, TransCanada says that it has a waiting list of companies that want to pounce on any available capacity.
The line’s shippers have remained loyal in part because they have signed contracts. More importantly, rising Canadian production means more lines are already needed, even as their options to move crude through alternative measures expand.
In 2008, when Keystone XL was first proposed, Canada’s exported 1.1mn barrels of crude per day to the US. This year, exports are nearing 2.7mn bpd on higher oil sands production and another million barrels per day is expected to be added over the next few years, according to industry data.
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