Keystone pipeline gets U.S. nod; Half-million barrels a day will flow from Alberta to Oklahoma by 2009

Shaun Polczer, March 15, 2008, Calgary Herald -- The final pieces of TransCanada Corp.'s integrated North American oilsands strategy fell into place Friday after the company received formal approval from the U.S. State Department for the American portion of the Keystone pipeline.

The so-called "Presidential" permit is the final hurdle to allowing more than half a million barrels per day (bpd) of Alberta oil to flow across the Canadian border.

"The presidential permit is a significant regulatory approval required to proceed with construction of the Keystone pipeline, which will move a growing supply of Canadian crude oil to key U.S. markets," said Hal Kvisle, TransCanada's president and CEO.

The 3,500-kilometre link from Hardisty, 140 kilometres southeast of Edmonton, to Cushing, Okla., will come into service in late 2009. Construction is expected to start in the second quarter of this year.

Keystone received National Energy Board (NEB) approval late last year to build and operate the Canadian portion of the project and has also received various state-level approvals in 2007 and early 2008.

Meanwhile, TransCanada has secured firm long-term contracts for 495,000 bpd of the system's overall capacity of 590,000 bpd.

But labour groups immediately protested the decision, urging the Canadian government to halt the proliferation of cross-border pipes.

The Communications, Energy and Paperworkers union said it has petitioned the federal cabinet to stop Keystone in addition to Enbridge Inc.'s Alberta Clipper project, which would ship an additional 450,000 bpd to U.S. markets.

In addition, the CEP is also demanding that the Harper government quash Enbridge's Southern Lights diluent pipeline from the U.S. to Canada, which it said facilitates a "bitumen export machine."

Diluents are chemicals used to thin heavy oil and bitumen to allow it to flow.

After factoring in future expansions, Canada could be shipping 1.5 million bpd of raw bitumen out of the country, the CEP charged.

Such high export levels will inevitably cause the cancellation or postponement of Canadian upgrading projects that would otherwise be capable of handling Alberta's entire oilsands output through 2015, it argued.

"These pipeline approvals undermine our energy security and make Canada's tarsands little more than a giant open pit to extract bitumen on behalf of American refineries," said CEP president Dave Coles.

"These pipelines put at risk Canadian upgrading in Alberta and refinery expansions in Ontario and Quebec."

But a TransCanada representative said the appeals were unlikely to have any impact on the company's plans.

"It's a moot point," said Shela Shapiro, TransCanada's media spokeswoman, who indicated past appeals to the federal cabinet have been denied.

TransCanada has touted Keystone as the centrepiece of the company's strategy to ship Canadian oilsands production all the way to the U.S. Gulf Coast, and Shapiro said Keystone opens new markets for Canadian production.

"It means Canadian crude can compete with other sources, including Mexican and Venezuelan," she said.

TransCanada's shares fell 65 cents in Toronto on Friday, to close at $39.46.