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TransCanada disagrees with EPA argument regarding Keystone XL pipeline

12th February 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – The proponent of the $8-billion Keystone XL pipeline TransCanada Corp has disagreed with the US Environmental Protection Agency’s (EPA’s) recent comment that the State Department's final supplemental environmental impact statement (FSEIS) for the project should be revisited in light of the lower oil prices.

In a letter earlier this month, the EPA had suggested that, in light of the recent drop in oil prices, the State Department should revisit how big of a toll the Keystone XL pipeline would have on global warming, inferring that the slide in crude prices had created tough economic conditions for oil producers and that, in the absence of a pipeline, oil production and emissions would likely be reduced.

"TransCanada disagrees with any suggestion that the Department of State has not fully and completely assessed the environmental impacts of Keystone XL," TransCanada president and CEO Russ Girling noted in an open letter to the EPA.

"We also reject the EPA's inference that at lower oil prices, Keystone XL will increase the rate of oil sands production and greenhouse-gas emissions (GHG). This conclusion is not supported by the conclusions drawn in the FSEIS or by actual market prices and production rates since TransCanada first applied for Keystone XL in 2008,” he continued.

The proposed Keystone XL pipeline would connect with TransCanada’s existing Keystone network that delivered crude oil to the US Midwest and Gulf Coast, providing a more direct route to the Gulf by cutting diagonally from the Saskatchewan/Montana border, to Steele City, Nebraska. The pipeline would deliver 830 000 bbl/d to refineries on the Gulf Coast.

The EPA letter stated that "until ongoing efforts to reduce GHG emissions associated with production of oil sands are more successful and widespread, the FSEIS makes clear that, compared with reference crudes, development of the oil sands crude represents a significant increase in GHG emissions".

TransCanada advised that a more meaningful comparison would be the heavy crude oils from Mexico, Venezuela and Saudi Arabia that the Keystone conduit would actually displace, rather than a comparison with a basket of 'reference crudes' that included predominantly light, low-GHG crudes. The oil that would flow through the pipeline to Gulf Coast refineries would be both from the light oil plays in the US Bakken and also heavy oil from the Canadian oil sands.

The EPA also claimed that the FSEIS concluded that the construction of Keystone XL could change the economics of oil sands development and result in increased production and GHGs if oil prices remained low.

But the company argued that this statement did not accurately reflect what the State Department had concluded, namely, that "the dominant drivers of oil sands development are more global than any single infrastructure project. Oil sands production and investment could slow or accelerate depending on oil price trends, regulations and technological developments, but the potential effects of those factors on the industry's rate of expansion should not be conflated with the more limited effects of individual pipelines".

According to TransCanada, oil output in both Canada and the US was forecast to continue growing and much of the growing output was being transported by more expensive rail transport.

Rail loading capacity in Western Canada was projected to increase from 200 000 bbl/d in 2013 to about one-million barrels a day by the end of this year. In the US, Bakken rail crude transport rose from 200 000 bbl/d in 2008 to 800 000 bbl/d in 2014.

TransCanada said short- and medium-term fluctuations in oil prices did not significantly impact whether the oil sands would be developed. When TransCanada filed its initial presidential permit application for the project in 2008, oil prices were in the $40/bl range. Since then, prices had ranged "well above and below $100/bl".

"Even with price volatility, oil has been making its way to market. Oil sands and US Bakken production are both up by one-million barrels a day since 2008. So it is clear that building or not building Keystone XL will not cause production to go up or down nor does the pipeline significantly exacerbate the problem of GHG emissions,” Girling concluded.

TransCanada was also involved in building a $12-billion ‘Energy East’ pipeline. The Energy East conduit would span 4 600 km and would carry up to 1.1-million barrels of oil a day from Alberta and Saskatchewan to refineries in Quebec and New Brunswick.

However, the project’s proposed marine terminal and tank farm at Cacouna, in Quebec, had run into environmental trouble, as concern for a population of beluga whales in the St Lawrence estuary halted progress since last year.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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