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Keystone XL pipeline developer asks U.S. to suspend review

November 2, 2015

TransCanada Corp. is asking Secretary of State John Kerry to pause the U.S. review of its Keystone XL pipeline project as the company seeks to win approval for the route in Nebraska.

A suspension of the review would allow Nebraska regulators to make a decision based on the final route for the $8-billion pipeline, the company told Kerry on Monday, according to a copy of a letter e-mailed by a spokesman. TransCanada decided in September to submit to an additional regulatory review of the line in Nebraska and back off from conflicts with landowners in the state.

“We are asking State to pause its review of Keystone XL based on the fact that we have applied to the Nebraska Public Service Commission for approval of its preferred route in the state,” Russ Girling, TransCanada’s CEO, said in a written statement from the Calgary-based company.

Keystone XL has become one of the most contentious energy issues of Barack Obama’s presidency, and the pause would allow him to put off a tough decision on an issue that has divided key Democratic constituencies. Supporters have argued it would help Canada develop its energy resources and create jobs, while environmentalists and top Democratic donors argue it would encourage oil-sands development and exacerbate climate change.

“It sends a signal that Canadian producers are going to have to find other ways to ship out crude than going through Keystone,” Carl Larry, head of oil and gas for Frost & Sullivan LP in Houston, in a phone interview. Canada “is realizing the U.S. isn’t going to be helpful in pushing Keystone.”

Gulf refineries

Keystone XL would span 1,179 miles from Alberta through three states, Montana, North Dakota, and Nebraska, before connecting to an existing pipeline network feeding crude to U.S. Gulf Coast refineries. The line would carry as much as 830,000 barrels of oil a day, including some from North Dakota’s Bakken shale.

White House spokesman Josh Earnest declined to comment on TransCanada’s letter, saying it was addressed to the State Department, which is conducting the review.

It’s not the worst time to push back the project, however, as energy producers in Canada aren’t as desperate for pipeline space after shelving a spate of projects to expand oil-sands production and as they reducing drilling to conserve cash amid the worst oil-price slump in decades.

No immediate need

“At this point in time there is not a need for it now or in the next three years really,” John Auers, executive vice president at Turner Mason & Co., an energy consulting firm in Dallas, said by phone. “It’s certainly possible TransCanada realizes that and they are taking their time.”

The industry has also advanced alternatives such as crude by rail, the expansion of existing lines and other conduit proposals. Canadian oil producers have backed other projects such as Kinder Morgan Inc.’s plan to almost triple the capacity of its existing Trans Mountain line to the Pacific. TransCanada’s Energy East line will transport as much as 1.1 million barrels a day from Alberta to the Atlantic, if approved and built.

Enbridge Inc. can now move more than 800,000 barrels a day of Canadian crude to the U.S. after expanding its existing cross-border Line 67 system. Exports of Canadian oil by rail averaged about 161,000 barrels a day last year as producers used trains to get volumes to the Gulf Coast, according to data from Canada’s National Energy Board.

“Other projects have stepped in the breach,” Auers said.

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