By BEN LEFEBVRE, PAUL VIEIRA and TENNILLE TRACY
TransCanada still expects to receive White House approval for
its 830,000-bpd Keystone XL pipeline project after President
Barack Obama's re-election, the company said Friday.
TransCanada's current Keystone pipeline runs from Western
Canada to Cushing, Okla. The proposed Keystone XL would extend
that pipeline to the US Gulf Coast, which has the largest
concentration of oil refining and shipping operations in
If Keystone XL is approved, vast amounts of heavy crude oil
flowing from the Canadian oil sands can reach the refineries
for processing and distribution around the US and the
Supporters of the project say it will create jobs, lower
gasoline prices and spur US energy independence by greatly
increasing the amount of crude and petroleum products available
to the US for domestic use and exports.
However, the project has drawn the ire of the
Sierra Club and other environmental groups, which are worried
about safety along the pipeline and the make-up of Canada's
The project remains a political powder keg, awaiting an
Obama administration decision.
The pipeline became an election issue after the State
Department, charged with approving cross-border pipelines into
the US, rejected TransCanada's permit last year, but said it
would review a revised application.
TransCanada has submitted its plan, and believes the project will be approved by the
second quarter of next year, company spokesman Michael Barnes
"We have been working with the current administration to
advance the Keystone XL Pipeline to a decision on our [permit]
application, and we will continue to do so," Mr. Barnes said.
TransCanada expects pipeline construction to take two years after
The State Department is expected to decide the fate of
Keystone XL in 2013. Unfortunately for Obama, the election
didn't simplify the thorny politics surrounding Keystone.
The energy industry wants the expansion approved and the
environmental community wants it rejected. Depending on what
Mr. Obama eventually decides, the pipeline will be viewed as a
win for North American energy independence or a victory for
climate-change activists who say Canada's crude extracted from
oil sands are dirtier than conventional oil supplies.
decision might ultimately hinge on the person who replaces
Secretary of State Hillary Clinton, who is expected to step
down in Mr. Obama's second term. One person thought to be a
candidate for her position is Sen. John Kerry (D., Mass.), one
of the more vocal lawmakers on climate change.
However, some oil industry analysts believe the most likely
outcome will be that the White House will approve Keystone XL,
but add stringent environmental safeguards that have the
potential to hinder profits.
Those analysts also worry that the unprecedented hurdles
encountered by TransCanada in what used to be a routine
approval process now will become the norm for companies wanting
to build pipelines aimed at bringing Canada's rapidly surging
oil production south.
"The bigger question is whether every southbound pipeline
will take six years to be built," Kevin Book, managing director
of energy consultancy ClearView Energy Partners.
Canadian production is expected to double to 6.2 million bpd
Environmental groups, however, remain confident that the
White House will ultimately reject TransCanada's application.
Sierra Club executive director Michael Brune added that the
effect of Hurricane Sandy on the US east coast may bring
climate change politics to the fore.
Calgary-based TransCanada originally applied for the permit
in 2009 and has signed supply contracts with Valero Energy and
other Gulf Coast refiners who want access to the heavy crude,
which is sold at a discount to other crude types because it is
more difficult to process.
Canadian oil producers hope to send their increasing oil
production south to the Gulf Coast, which is the heart of the
US refining industry and currently buys
heavy oil from Mexico and Venezuela.
The shortage of oil pipelines leading from western Canada to
the US has led to a glut on the Canadian side of the border
that is costing Canadian oil producers $20 billion/year, said
Tim Shipton, president of Western Canadian business association
Alberta Enterprise Group.
Canadian Resource Minister Joe Oliver said the Canadian
government would continue to lobby the White House to approve
the project, calling it "clearly in the
US national interest" by making the US less dependent on oil
"We believe it will ultimately be approved," Mr. Oliver
Dow Jones Newswires