Tuesday, November 8, 2011

Pipe stall could be grim: CEO--Obama as decider? Jobs, energy, yes or no!

Pipe stall could be grim: CEO


With his company under siege over its Keystone XL pipeline project, TransCanada Corp. chief executive Russ Girling painted a grim picture Tuesday of what a delay could mean for his company, the United States and Canada.

Mr. Girling offered in a conference call to discuss TransCanada's third-quarter results an unusually candid assessment of the consequences of a delay. He did so on the same day as the State of Nebraska started a special session to alter the pipeline's route away from environmentally sensitive areas, and U.S. President Barack Obama suggested it could be "several months" before he decides whether to approve the pipeline. Mr. Obama said environmental concerns would weigh just as significantly in his ruling as U.S. energy security or economic growth.

Mr. Girling's assessment confirms what the environmental movement has been saying all along about Keystone XL, which links deposits in Alberta to U.S. Gulf Coast refineries: Stalling it restrains the growth of the oil sands. Among the consequences of a delay:

? There is no backup plan that meets shippers needs and deadlines. This means refiners and producers at both ends of the line will be in a scramble to ramp up alternative transportation. "They will be looking at things like offshore crude oil, they will be looking at tankers moving down the Mississippi River, they will be looking at other avenues by which to source their crude," he said.

? Shippers could back out, threatening the entire project. Shipping contracts have sunset clauses that could be triggered by a long delay, despite years of planning and $2-billion in costs to get the project to this stage. "They're with us to the extent that we can get through this process in a reasonable time frame. But if the administration delays the project long enough that it becomes a low probability that they will ever get it through in a time frame that meets their needs, they are not going to support us anymore," Mr. Girling said.

? No Keystone XL could mean gasoline shortages. TransCanada said it has binding contracts in place to ship 975,000 barrels a day of oil from Canada and from the United States, and expects to sign additional contracts in the next few months that will fill the entire Keystone pipeline system capacity of 1.3 million barrels a day. This oil replaces imports from Mexico and Venezuela under contracts that are set to expire. The shipments would account for a significant portion of the oil consumed and imported by the United States. Mr. Girling said denial of Keystone will not change the demand for oil in the United States, which consumes 15 million barrels a day and imports 10 million to 11 million a day.

? Thousands of jobs hang in the balance. As the largest infrastructure project planned for the United States, Keystone would employ 13,000 construction workers over two years, and another 7,000 manufacturing workers in almost every state.

"These jobs will be filled by hard-working Americans. They are not actors or professional environmentalists, they are just ordinary hard-working people," Mr. Girling said.

? TransCanada expects legal challenges to continue even if Keystone XL gets a permit. The company expects to start construction in the second half of 2013 even if the project is in the courts and unless it is legally barred. Mr. Girling noted that similar challenges against competitor Enbridge Inc.'s Alberta Clipper, which carries Alberta crude to Superior, Wis., or objections to the base Keystone project, failed to halt work.

? Rerouting of the pipeline could delay construction by two to three years. TransCanada expects Keystone to be subject to another environmental review process if the pipeline is moved. The current route was picked after consideration of eight other routes through Nebraska.

? A delay would be bad for the environment. If Keystone XL doesn't move ahead, Canadian oil sands developers and U.S. refiners will have to rely on tankers for transportation, increasing offshore traffic and greenhouse-gas emissions because tankers run on bunker fuel.

It's for all these reasons that Mr. Girling remains hopeful reason will prevail and Mr. Obama will approve the project in the next two months.

"We believe this project is very much in the national interest of the United States, it will be the safest crude oil pipeline ever built in North America, it will enhance U.S. national and energy security, it will create jobs and we do expect to receive a presidential permit by the end of the year," he said.
ccattaneo@nationalpost.com

http://www.nationalpost.com/news/Pipe+stall+could+grim/5642613/story.html

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