Keystone XL pipeline will be built, TransCanada CEO predicts

HOUSTON Tue Mar 4, 2014 7:24pm EST

Russ Girling, chief executive of TransCanada Corp, waits to speak at the annual IHS CERAWeek conference in Houston, Texas March 4, 2014. REUTERS/Rick Wilking

Russ Girling, chief executive of TransCanada Corp, waits to speak at the annual IHS CERAWeek conference in Houston, Texas March 4, 2014.

Credit: Reuters/Rick Wilking

HOUSTON (Reuters) - The controversial Keystone XL pipeline will receive President Obama's blessing and be built to transport crude oil from Canada to Texas, TransCanada Corp (TRP.TO) Chief Executive Russ Girling predicted on Tuesday.

Girling's confidence helps project a sense of inevitability around the $5.4 billion project, which supporters say would create badly needed jobs, and offset a recent unfavorable Nebraska court ruling and more than five years of political wrangling in Washington.

"It is the next pipeline that is going to be built" in the United States, Girling said in an interview at the IHS CERAWeek energy conference in Houston. "The marketplace continues to push us to build a pipeline. It's the right thing to do."

Girling sought to reassure many of the Canadian company's customers attending the conference, the largest gathering of energy companies in the world, that Keystone XL ultimately would open and be able to transport their crude oil to Texas refineries.

The project has become a lightning rod for opposition, with environmentalists saying oil spills would become common along the Keystone XL route and warning that the project could hasten climate change.

Still, the U.S. State Department issued a report in January that downplayed environmental concerns surrounding Keystone XL, rankling opponents and buoying supporters of the project.

The project's delay has perplexed some in Canada, where government officials have urged Obama to give his consent to TransCanada, the second-largest Canadian pipeline operator.

"We hope to see a resolution soon," Joe Oliver, Canada's minister of natural resources, said in an interview on Tuesday. "We hope it's a positive outcome."

President Obama told U.S. governors last month that he expects to make a decision on whether to approve TransCanada's Keystone plans in the next few months, a step that would end the long-running saga.

"There's no reason in my mind why it can't come to a conclusion," Girling said.

The project hit a snag last month when a Nebraska judge ruled the state's governor lacked authority to approve part of the project. Girling said he believes that ruling is a "solvable problem" and won't affect Obama's process for reaching a final decision on Keystone XL.

The Keystone pipeline network was designed in four phases, three of which have been built already, and TransCanada began shipping Canadian crude oil to Texas in January.

The Keystone XL portion of the network, roughly 800 miles through Montana, South Dakota and Nebraska, would increase capacity and allow Bakken crude oil from North Dakota and Montana to be shipped on the network.

RAIL POTENTIAL

While waiting for approval, TransCanada would be open to building railcar loading hubs for crude oil, depending on customer needs, Girling said.

Hubs to load and transport oil via train have become a popular second option in the energy industry as pipeline projects have encountered regulatory delays. TransCanada rival Enbridge (ENB.TO) has built its own network of rail hubs to service areas with limited pipeline capacity.

TransCanada already has a series of crude oil storage facilities in Texas, Oklahoma, Illinois and Alberta, and building loading hubs at each location to connect with rail lines could let it get crude oil to markets faster as it waits for regulatory approvals.

"If we need to bridge the gap between growing production and the time we bring pipelines online, we'll definitely do that," he said. "We've had conversations with our customers and railroads about making those kinds of things work out."

No plans have been made yet to build such hubs, though, Girling said.

(Reporting by Ernest Scheyder; Editing by Ken Wills)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (4)
RobDekker wrote:
“Girling’s confidence helps project a sense of inevitability around the $5.4 billion project, which supporters say would create badly needed jobs”

There have been many numbers thrown around about how many dollars this project would cost, and how many jobs it would create.

Let us see what the State Department report actually says :

“The U.S. portion of the proposed Project is estimated to
cost approximately $3.3 billion”

I guess the remainder (5.4 – 3.3 = 2.1 billion) is attributed to Canada.

Regarding the US part, State Department reports :

“Construction of the proposed Project would contribute approximately $3.4 billion to the U.S. GDP. This figure includes not only earnings by workers, but all other income earned by businesses and individuals engaged in the production of goods and services demanded by the proposed Project, such as profits, rent, interest, and dividends”

Now here is where it gets interesting. The “earnings by workers” can be estimated : State attributes 3,900 man-years of construction work for this project, which (at a generous average of $60,000/year for the workers in the temporary labor camps in Montana, South Dakota and Nebraska) would amount to some $ 234 million.

How did the State Department FEIS (a report written by industry contractors and paid for by TransCanada) determine the “rent, interest, and dividends” that apparently make up the bulk of the $3.4 billion in US ?

That’s not quite clear from the FEIS. In fact, that number seems to be based on a proprietary model simulation run, the same one that projects an arbitrary 42,500 jobs from this project, which uses undisclosed economic parameters and undisclosed projections.

In other words, that $3.3 billion number for the US economy (and by extension the $5.4 billion number for the overall project used here by Reuters) may be simply industry hand waving, which has no material facts to back up.

As for the “jobs” this project will create, State Department reports :

“Once the proposed Project enters service, operations would require approximately 50 total employees in the United States: 35 permanent employees and 15 temporary contractors”

Mar 05, 2014 4:56am EST  --  Report as abuse
aDDmoreJuice wrote:
This report sound like it was written by the Keystone Pipeline industry contractors. All this rose colored presentation without touching the facts.

How can anyone get excited about a 3.3 billion dollar project that will use mostly American land space, America bearing MOST of the environmental risk, but ONLY create 30 permanent jobs and 15 temporary jobs while almost ALL the benefits goes to China, EXON and Trans Atlantic. VERY BAD DEAL!!

Mar 05, 2014 1:39pm EST  --  Report as abuse
CID1000 wrote:
For those interested — the Keystone Pipeline would take the dirtiest Tar Sands oil from Canada all the way to the Gulf Coast to be refined in the US (US gets extra pollution from this dirty oil) and then the oil gets shipped outside the US mainly to Asia.

There are scenarios that make sense.
1) Originally Canada threatened to pipeline the Tar Sand oil to Canada’s West Coast to ship to Asia, but Canada didn’t want the pollution — end that.
2) Refining the Tar Sands oil in the US would be OK if we used the oil in the US. But the US is already a net exporter of refined oil — So we don’t need it. We (the US) would be refining this oil so that a few oil companies could profit.

Mar 06, 2014 9:04am EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.