| NEW YORK
NEW YORK Dec 13 Continental Resources,
one of the companies that has committed to ship crude on
TransCanada Corp's proposed Keystone XL pipeline, now
says the controversial pipeline is no longer needed.
Continental has signed on to ship some 35,000 barrels of its
own oil from the Bakken field of North Dakota on the 1,179-mile,
$5.4-billion Keystone XL line. But construction of the pipeline
has been delayed for years as TransCanada has sought regulatory
approvals, and Continental has since turned to railroads to get
its crude to oil refineries.
Harold Hamm, chief executive of the independent oil
producer, told Reuters that his company and the U.S. oil
industry in general are no longer counting on Keystone XL.
Oil companies have been strong advocates of Keystone in
order to help alleviate oil supply bottlenecks, but Hamm's
remarks raise the question of whether regulatory delays have
eroded the industry's enthusiasm for the line, which has faced
aggressive resistance from environmentalists.
When asked whether Keystone XL is still needed, Hamm said
"not for our Bakken (crude). And is it needed for the industry?
I don't think so ... not in the U.S."
"Rail has been a big factor and, you know, proven to be a
very effective way" (of getting Continental's crude to market),
he said on the sidelines of the Platts Global Energy Outlook
Forum in New York on Thursday.
Continental now ships 90 percent of its crude oil by
railcar, Hamm said. Rail transport can be more expensive, but it
allows shippers more flexibility on where the crude is shipped.
"It may be several years yet, you know, before you find out
if it (Keystone XL) is going to be built," Hamm said. "It's no
way to run your business."
Keystone XL's developer, Canadian pipeline giant
TransCanada, said the line has broad support, and there is a
waiting list of customers interested in securing capacity on the
line. Keystone XL should be operational two years after
TransCanada receives a U.S. permit to complete it.
"Rail may be a flexible, short-term solution but pipelines
and Keystone XL in particular are more efficient from a safety,
environmental and economic perspective," said company spokesman
"It's also important to look at the whole U.S. energy
picture, not just the production coming out of one field or from
one company," he said.
Howard declined comment on TransCanada's contract with
Continental, citing confidentiality.
TransCanada first applied for a U.S. permit for Keystone XL
in 2008, but the line remains under review by the Obama
If built, it would connect the Alberta oil sands in Canada
with U.S. refiners and provide an alternative route for more
crude to reach U.S. Midwest and Gulf Coast markets.
To be sure, Continental's view on Keystone may have little
or no effect on the line's prospects. Most of the crude that
would move on Keystone XL - whose capacity would be 830,000
barrels per day - would originate in Canada.
Continental is one of a handful of U.S. producers to sign up
to use the line. Their commitments are small relative to
Canadian oil sands shippers, who are counting on Keystone as a
vital outlet for their crude. Canadian crude is now heavily
discounted versus U.S. crudes due to scarce transportation
options to get more of it to end-users.
The majority of the proposed pipeline route - some 850
miles - is in the United States, crossing Montana and South
Dakota en route to Steele City in southern Nebraska, where
connections are available to the Gulf Coast via Cushing,
Oklahoma and to the Midwest.
A southern portion of TransCanada's Keystone network - known
as the Gulf Coast Project, from Oklahoma to the Texas Gulf Coast
- has already been built, and is expected to begin operating
next month. Unlike the international Keystone XL, that line
didn't require a U.S. State Department permit.
Environmental groups have opposed Keystone XL on grounds
that it would allow higher production of carbon-intensive
Canadian oil sands crude. Yet concerns have also arisen about
the safety of crude transport by rail, a booming industry. This
year, crude train derailments have caused disasters in Quebec
and rural Alabama.
The largest U.S. railroads will likely transport about
400,000 carloads of crude oil in 2013, versus just 9,500 in
2008, according to estimates from the Association of American
In 2010, Continental and other companies persuaded
TransCanada to add a $140 million extension spur to Keystone XL
to pick up and transport U.S.-produced Bakken crude beginning in
Before TransCanada agreed to ship U.S. crude down Keystone
XL, Hamm had lobbied in 2009 against the pipeline, arguing that
it could flood the U.S. Midwest with a glut of cheap Canadian
crude, hurting independent oil producers such as Continental.
Bakken producers have seen growing demand in recent years
from U.S. refiners eager to lower their costs by buying the
region's attractively priced light, sweet crude. That's made the
opportunity cost of waiting for the pipeline even higher.
It isn't clear whether Continental will ship any crude on
Keystone XL if it is eventually built. So far, Continental has
not sought to back out of its contract as a shipper on the line,