Growth in North American crude production has created sufficient demand for both the Keystone XL pipeline and a competing project to move oil from storage in Oklahoma to the Gulf Coast, TransCanada Chief Executive Officer Russ Girling said.
The plan by Enbridge Inc. (ENB) and Enterprise Products Partners LP (EPD) to reverse the Seaway pipeline that flows from the Gulf of Mexico to Cushing, Oklahoma, is “not a competing project” with the Keystone XL, which would bring oil from Canada to Texas refineries, he said.
“All that oil’s got to get to a market, and the best market’s the Gulf Coast,” Girling said in an interview yesterday at Bloomberg headquarters in New York. “We’re going to need Seaway, we’re going to need our pipe, we’re probably going to need some more pipe down the road.”
The decision of the U.S. State Department to delay a ruling on the Keystone XL until at least 2013 put TransCanada at a disadvantage to its competitors and will lead Canada to seek alternative markets for its crude production, including Asia, he said.
TransCanada, based in Calgary, may seek partners for pipelines that reach non-U.S. markets, Girling said.
“There’s no way that our country and our leadership is going to not develop that resource,” he said. “They’re going to develop it responsibly, but it’s going to happen. And if it can’t access this market, it will access other markets.”
The State Department said Nov. 10 that it is postponing a decision on the project until early 2013 due to concerns in Nebraska over the pipeline’s path.
The delay represents a process that is “not necessarily a level playing field,” Girling said. “From a competitive standpoint, I don’t think that’s the fairest thing in the world.”
The reversed Seaway pipeline will initially move light crude to the Gulf Coast that is being produced in tight rock formations that have been unlocked by new drilling techniques, said John Auers, senior vice president of Turner, Mason & Co., a Dallas-based pipeline and engineering consultancy.
“Keystone is still needed,” he said in a telephone interview yesterday.
The two projects are not competitive because Keystone XL would move 700,000 barrels a day from Canada to the Gulf of Mexico, while Enbridge’s plan would not be capable of moving that volume all the way to the Gulf.
TransCanada is weighing whether it will first build a segment of the Keystone XL pipeline that would run from the oversupplied oil-storage hub in Cushing to the Gulf of Mexico, Girling said.
The company has yet to discuss the option with oil producers and refiners, and it also would need permission from the State Department, he said.
Girling said it was too soon to say what new route the Keystone XL would ultimately follow in Nebraska.
Politicians, landowners and environmentalists in the state feared a spill along the pipeline’s original path would pollute the Sandhills, a wide expanse of grass-covered dunes that sits on top of the Ogallala aquifer. The aquifer provides drinking water to 1.5 million people in Nebraska.
The pipeline will be moved away from a region in the Sandhills where the water table reaches the surface. The area involves about 35 miles, including Holt County in the Northern part of the state, he said.
As Nebraska lawmakers began a special legislative session Nov. 1 seeking to reroute the pipeline away from sensitive environmental terrain, TransCanada officials said any such law would be unconstitutional and threatened to sue the state. Girling said a reroute would “seriously jeopardize” the project.
On Nov. 14, TransCanada reversed course and said it would collaborate with Nebraska and State Department officials on a new route.
To contact the reporter on this story: Bradley Olson in Houston at firstname.lastname@example.org
To contact the editor responsible for this story: Susan Warren at email@example.com